Zurn Elkay Water Solutions Corporation · NYSE:ZWS
Zurn Elkay Water Solutions — Rexnord — Barclays Industrial Select Conference 2020
18 slides from Zurn Elkay Water Solutions's conference presentation, Feb 20, 2020
Slide 1: Barclays Industrial Select Conference
BARCLAYS INDUSTRIAL SELECT CONFERENCE 20 February 2020 Rexnord Corporation 1
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 $5.0 $2.05 21.6% 113% Enterprise Value Revenue Adjusted EBITDA Free Cash Flow ($B) ($B) Margin Conversion Concentrated Multi-Platform Industrial Sustainable Competitive Advantages Rexnord Business System Solving Smarter Note: Data are Fiscal Year 2019 Continuing Operations. Adjusted
Slide 4: Platform Approach
PLATFORM APPROACH Process & Motion Control 1600 26% 1200 24% The best provider of digi-mechanical productivity and reliability solutions 800 22% • Amplifying competitive advantages in scale & scope 400 20% • Expanding in product adjacencies, consumer-driven markets 0 18% • Accelerating innovation, d
Slide 5: Rexnord Platform Profiles
REXNORD PLATFORM PROFILES PROCESS & MOTION CONTROL WATER MANAGEMENT Digi-Mechanical Power Transmission Solutions Specification-Grade Commercial Plumbing Products • IIoT Enabled Solutions for First Fit and Retrofit Applications • IIoT Enabled Solutions for New Construction and Retrofit Applications •
Slide 6: Solving Smarter
SOLVING SMARTER We Advance the Efficient Use of Resources through Smarter Solutions • Highly-engineered components • Specification for the application by end user • Minor contribution to total system cost • Critical contribution to system reliability, productivity, safety • Distribution channel comp
Slide 7: Rexnord Value Creation Model
REXNORD VALUE CREATION MODEL Rexnord Corporation 7
Slide 8: Financial Progress
FINANCIAL PROGRESS Note: Percentage changes are FY19 versus FY16. Substantial tariff and inflation impacts fully offset in FY19 Rexnord Corporation 8
Slide 9: Strategic Progress
STRATEGIC PROGRESS FY 2019 Accomplishments ✓ Expanded digitally-connected solutions portfolio ✓ Launched SCMS and connected backflow retrofit solutions ✓ Completed SCOFR 2.0 initiatives with $15 million structural cost reduction ✓ Launched 8020 simplification strategy ✓ Completed integration of Cent
Slide 10: Rexnord's Underlying Return on Invested Capital
REXNORD’S UNDERLYING RETURN ON INVESTED CAPITAL(1) $ millions Dec-18 Mar-19 Jun-19 Sep-19 Dec-19 2006 LBO change-of-control premium resulted in $1.723 billion of goodwill & intangibles Total Debt 1,312 1,238 1,265 1,251 1,149 1 Adjust debt by unamortized portion of intangible assets Goodwill Intangi
Slide 11: DiRXN = 'Direction' = Digital Rexnord
DiRXN = ‘DIRECTION’ = DIGITAL REXNORD • Enterprise-wide initiative to enable improved customer productivity via digitally-connected tools, products and services. • Differentiate by digitally connecting traditional mechanical solutions to user control systems, engineering & asset management software
Slide 12: PMC Smart Condition Monitoring System
PMC SMART CONDITION MONITORING SYSTEM • Pragmatic solution connects seamlessly into existing factory automation control systems • Retrofit solution addresses large installed base • Easy to install – enhances system reliability and safety within 24 hours Rexnord Corporation 12
Slide 13: Zurn Connected Products
ZURN CONNECTED PRODUCTS Zurn Connected Flood Control System • Detects and calculates discharge flow rate/volume in relief valve in real time Sensor • Water shut-off occurs automatically to prevent catastrophic flooding Flush • Secure, real-time notifications when operating metrics deviate from targe
Slide 14: Capital Allocation Strategy
CAPITAL ALLOCATION STRATEGY Internal reinvestment to enhance core growth, productivity, financial returns • Plan to operate longer-term with capital expenditures below 2% of revenue Maintain net debt leverage ratio in 2x – 3x range • Strong free cash flow profile supports moderate financial leverage
Slide 15: Cash Flow & Balance Sheet Update
CASH FLOW & BALANCE SHEET UPDATE Net Debt Leverage Ratio (1) Free Cash Flow ($ millions) (2) 3.5 250 3.1x 200 3.0 Target Range 2.7x 150 2.5 100 213 188 2.1x 2.0x 141 119 149 2.0 1.9x 50 1.5 0 Mar-17 Mar-18 Mar-19 Sep-19 Dec-19 FY17 FY18 FY19 9Mos FY19 9Mos FY20 (1) Net Debt Leverage is defined as th
Slide 16: Rexnord Acquisitions
REXNORD ACQUISITIONS Proprietary Internal RBS Strategic Identification & Negotiation & Integration Planning Cultivation Transaction Process • Strategic process focuses on leveraging competitive advantages Acquisition History Year Platform • Proprietary cultivation process benefits both buyer and sel
Slide 17: Non-GAAP Reconciliations
NON-GAAP RECONCILIATIONS FYE March 31, US$ in millions 2016 2017 2018 2019 Q3 2020 Net income from continuing operations $ 86.9 $ 91.7 $ 206.6 $ 189.0 $ 48.4 Interest expense, net 90.8 88.3 75.1 69.9 14.4 Provision (benefit) for income taxes 27.8 15.6 (19.5) 53.4 13.4 Equity method investment income
Slide 18: Non-GAAP Reconciliations
NON-GAAP RECONCILIATIONS Q3 FY 2020 Q3 FY 2019 US$ in millions (except per share amounts) Net Income EPS Net Income EPS Net income (loss) attributable to common stockholders $ 45.7 $ 0.37 $ 19.6 $ 0.16 Amortization 8.8 0.07 8.4 0.07 Restructuring Expense 3.6 0.03 2.6 0.02 Earnings from equity method