WE ARE DRIVEN BY PURPOSE … LED BY VISION WHAT WE STAND FOR … PURPOSE VISION We Improve the Quality of Life of People Be the Next Great Industrial Company Around the World Destination Company for Customers, Top Talent, and Shareholders GUIDED BY PROCESS STRATEGIC PRINCIPLES OPERATING PRINCIPLES (PIMS) Invest in Attractive Markets: Where We Compete Growth Methodology Control our Destiny: How We Compete Talent Management Lean Enterprise UNITED BY OUR WIN RIGHT VALUES WIN RIGHT Customer First Positive Energy Respect and Teamwork Accountability for Performance Absolute Integrity Innovation and Adaptability One Pentair … Aligned and Driving High Performance 13 2015 Investor & Analyst Day PENTAIR
DRIVING HIGH PERFORMANCE HOW WE DIFFERENTIATE PENTAIR • Purpose, Vision & Strategic Priorities STRATEGY • Value Proposition & Competitive Advantage A • Controlling Our Destiny L I G HOW WE EXECUTE N PROCESS & • Standard Operating Model … PIMS M STRUCTURE Organization Design … Corporate, GBUs, Platforms, Regions • E • Functional Excellence … Standards & Practices N T HOW WE WIN RIGHT CULTURE & • Win Right … Pentair Values TALENT • Leadership Behaviors … Top Talent How We Work Together • Three Levers … Aligned To Achieve Our Goals 14 2015 Investor & Analyst Day PENTAIR
“RIGHT TO LEFT” THINKING Current State Future State 2015 2020 Facing Market Challenges Next Great Industrial Company • 2 Segments Performing, 2 Not • Finding the Best Growth Opportunities • Accountable Performer • Culture Work Sound, Talent Depth in Growth & Business Leadership Needed • Reliably Growing • Demonstrated Lean Enterprise • Focused Priorities and Sales Excellence to Drive Differentiated Growth World Class Team with Depth and Diversity • • Metrics • Need Presidents to Manage Resources ‒ +1-2 pts of Differentiated Growth to Grow Core Businesses and Prepare ‒ +8-10% Segment Income Growth for Acquisitions ‒ +9-11% “Core” EPS Growth ‒ FCF >100% of Adjusted Net Income ‒ Plus: Capital Allocation Building a High Performing Business 15 2015 Investor & Analyst Day PENTAIR
WHAT YOU WILL HEAR TODAY • We Have a History of Delivering Shareholder Value Through Active Portfolio Management and Adding Business Excellence • We Expect Our Shareholder Value Creation Skills to See us Through Short-Term Market Demand Challenges • We Have Attractive Businesses with Differential Growth and Margin Opportunities • We Seek to Deliver on Those Opportunities to Create Shareholder Value and Build a Better Company Growth + Margin Expansion + Capital Allocation = Shareholder Value 16 2015 Investor & Analyst Day PENTAIR
PENTAIR CORPORATE STRATEGY PIMS and Culture Build Capability Acquisitions Manage Allocate People Corporate and the Resources and Strategy Portfolio Effectively Divestitures Dollars Support Execution Enable Segments A Strong Framework that is Tested 17 2015 Investor & Analyst Day PENTAIR
PENTAIR: KEY ENABLING STRATEGIES Continue to Establish PIMS as Differentiating Capability and Core of Operating Rigor • Customer Excellence Margin Growth • • Cash Flow • Talent Development Leverage Advantaged Capital Structure • Creative Structures • Movement of Cash Active M&A • Build Strength to Fund Key Platform Growth • Cash Flow • Balance Sheet Keep Simple, Lean Corporate Structure Use Win Right Culture to “Grow” and “Get” Talent … and Win in M&A Common Values and Strategies to Enable Growth 18 2015 Investor & Analyst Day PENTAIR
OUR STANDARD OPERATING MODEL Pentair Integrated Management System PIMS L EAN E NTERPRISE AND S TANDARDIZATION T ALENT G ROWTH Manufacturing Excellence ERP Management Talent Management Rapid Growth Process • Four Wall Lean • Larger ERP Platforms • Acquisition • Rigorous 2X Funnel ‒ Strategy Deployment • Tax Efficient Processes • Deployment • Alpha Test ‒ Transformation Planning 3D Innovation Organization Development ‒ 5S Shared Service Centers • Discover, Develop, Deploy • Structure ‒ Standard Work • Scale Efficiency Sales Excellence • Processes ‒ Creating Continuous Flow • Process Excellence ‒ Opportunity Segments ‒ Material Flow Pay for Performance ‒ Coverage Design ‒ Visual Management/MDI • Incentive Plans ‒ Sales Process Process Digitization • Supply Chain ‒ Job Design and • Rewards and Recognition • Standard Tools Organization Structure Logistics Optimization • Electronic Transactions Win Right Values ‒ Resource Deployment • Distribution Network • Customer First ‒ Sales Talent & • Lead Time Reduction Management • Accountability for ‒ Productivity Metrics Performance Service Excellence ‒ Performance Management • Innovation • Project Management & Compensation • Positive Energy • Global Work Sharing • Respect and Teamwork • Absolute Integrity Standard Operating Model Across the Enterprise 19 2015 Investor & Analyst Day PENTAIR
LEAN JOURNEY SINCE 2000 2000 Lean Assessment Based on a 4.0 Scale Introduction to Continuous Lean Concepts Improvement 2005 Initial Lean Technical Solutions Deployments 3.3 Water Quality Material Flow Systems 3.1 2010 Lean Becomes an Operational Process Flow & Filtration Valves & Controls Solutions 2.5 2015 Continuous Flow 2.3 Lean Operations is in Our DNA 2020 Stabilization Optimized Business Value Streams Pentair’s 15 Year Journey in Lean Continues to Deliver Value 20 2015 Investor & Analyst Day PENTAIR
FAST LEAN EXECUTION (FLOW CONTROL ACQUISITION) PNR / Flow Control PNR / TYC Merger Announcement LEAN Services Applied to Expansion and Sales of “4 Wall” Offices Two Value 42 Sites CCF / MMF Legacy Lean to 12 LEAN LEAN Lean Plans Streams OpEx / SIOP Enterprise Focus Sites Begins 6Sigma Mar 12 Jun 12 Sep 12 Jan 13 Apr 13 Jul 13 Jan 14 Jan 15 Aug 15 Trained 500+ Flow Developed and Developed and Moved XX PNR Moved 32 PNR Legacy Control Employees Deployed a Lean Deployed a Lean Legacy Employees to Flow and Completed Playbook and Online Playbook and Employees to Control 20,000+ eLearning Lean Training Online Lean Flow Control Modules Training Modules Modules Quick Adoption of Lean in Flow Control Overdriving Productivity Goals 21 2015 Investor & Analyst Day PENTAIR
PIMS SUCCESS STORIES ENCLOSURES AQUATICS Revenue Growth ROS Expansion Revenue Growth ROS Expansion ~$1.0B 22%+ ~$750M 20%+ $600M $400M 10% 8% 1998 2015F 1998 2015F 2006 2015F 2006 2015F • Housing Downturn Created a “Crisis” and • Introduced LEAN in 1998 PIMS Adoption was Accelerated • Focus on Delivery, Cost, and Cash Drove • Margins have Doubled and Continue to Early Margin Improvement have Room for Further Improvement Cyclicality Exists, but Each Cycle We Have • • Innovation Investment Helped Create an Emerged Stronger than Before Industry Leader • Much of Our LEAN Talent has been • Has Become a Source of Talent that can Developed and Deployed from Here be Deployed to Other Businesses PIMS Working with More Opportunities Still to Come 22 2015 Investor & Analyst Day PENTAIR
VALUE STREAM SIMPLIFICATION LEAN Driving Simplification and Customer Satisfaction 23 2015 Investor & Analyst Day PENTAIR
HOW WE WILL MEET OUR 2020 TARGETS Four Wall Lean Process Lean Footprint Rationalization 2015 • Develop Lean Training • Key Systems Must be Factories: 102 Centers Transformed Distribution Ctr.: 66 • Continue to Invest in - Sales Excellence Service Ctr.: 90 Talent Upgrades - Front End Standardization Offices: 173 • Consistent Use of RCCM • Payables Reduction by 2020 to Problem Solve • Accounting Centers Factories: >30% • Accelerate CCF and MMF • Select HR Processes Distribution Ctr.: ~30% • Deploy a Standard SIOP Process Across GBU’s Service Ctr.: ~20% Offices: ~20% Core Footprint Building Out Lean Capability Optimization Accelerating PIMS to “Bulletproof” Commitments 24 2015 Investor & Analyst Day PENTAIR
TALENT JOURNEY 2001 - 2012 2013 - 2016 Build Strong Deployed to Current Objectives Bench TFC Merger Focus • Recruited and Developed • Doubled Size of Company • Rebuilding Functional • Reliable and Accountable Leadership Cadre • Deployed 63 Legacy Bench Performance - 2/3 Internal and PNR Leaders • Training • Build Capability for More 1/3 External • COO Retired • External Upgrades Growth - 20% Executive • Elevated Presidents to • Deeper Bench for Senior Population Upgraded COOs of Their Segments Roles - Strength in Operations, Finance, and HR We Doubled Company and Stretched … Rebuilding Bench 25 2015 Investor & Analyst Day PENTAIR
KEY TECHNOLOGY OBJECTIVES … Aligned To Enable PNR’s Vision & GBU Strategies Advance & Standardize The 3D Process Advance & Standardize The 3D Process To Drive New Product Development Efficiency To Drive New Product Development Efficiency Advance Pentair’s Technology Leadership Advance Pentair’s Technology Leadership Position Position to Drive Differentiated Growth to Drive Differentiated Growth Advance Global Technical Capabilities Advance Global Technical Capabilities to Enable Engineering Productivity to Enable Engineering Productivity Process, Technology & Talent … Essential Cornerstones of Growth 26 2015 Investor & Analyst Day PENTAIR
TECHNOLOGY ALIGNED ACROSS ALL SEGMENTS Valves & Flow & Filtration Water Quality Technical Controls Solutions Systems Solutions FOOD & BEVERAGE Solutions: � � � � Beer & Wine � � � � Dairy � � � � � � � � Aquaculture RESOURCE SCARCITY Solutions: � � � � � � � � Point of Use Filtration � � � � Waste Water Reuse � � � � � � � � � � � � Petrochem & LNG SMART & CONNECTED Solutions: � � � � � � � � Pumps & Pump Systems � � � � � � � � Valves & Valve Systems � � � � Thermal Management Solutions Water Treatment Solutions � � � � � � � � � � � � - Food Service � � � � � � � � � � � � - Food & Beverage � � � � � � � � � � � � - Pools Technology Investments Focused on High Impact Opportunities 27 2015 Investor & Analyst Day PENTAIR
PENTAIR SALES EXCELLENCE Objective Why it Matters Impact Deliver Differentiated Help Drive More Consistent Refocusing Resources on • • • Growth and Predictable Growth the Right: Three Areas of Focus: Standard Tool Kit Added to 1. Customers • • PIMS 1. Strategy 2. Markets Leverage Best Practices • 2. Structure 3. Products Across Pentair 3. Management Raising the Growth Skills • Level of Our Customer Facing Teams 8 Step Process STRATEGY STRATEGY STRUCTURE STRUCTURE MANAGEMENT MANAGEMENT 1 2 3 4 5 6 7 8 Customer Customer Job Design & Job Design & Performance Performance Opportunity Opportunity Coverage Coverage Resource Resource Sales Talent & Sales Talent & Productivity Productivity Contact Contact Organizational Organizational Management & Management & Segments Segments Design Design Deployment Deployment Management Management Metrics Metrics Continuum Continuum Structure Structure Compensation Compensation The Next Tool in the PIMS Toolbox 28 2015 Investor & Analyst Day PENTAIR
SALES EXCELLENCE – KEY TALENT FOCUS AREAS Key Focus Areas for Talent Strategy STRATEGY STRUCTURE MANAGEMENT 4 6 8 1 2 3 5 7 Performance Customer Customer Job Design & Opportunity Opportunity Coverage Coverage Resource Resource Productivity Productivity Sales Talent & Management Contact Contact Organization Segments Segments Design Design Deployment Deployment Metrics Metrics Management & Continuum Continuum Structure Compensation � Job Design – � Recruiting & � Compensation Responsibilities, On-Boarding Philosophy, Focus, Competencies Guidelines, and � Training and Governance � Job Profile Mapping Development � Plan Design, Key Elements � Management / � Coaching and Documentation, and Organizational Mentoring Communication Structure � Career Development � Performance and Succession Management Process Planning Deepening Sales Talent Capabilities 29 2015 Investor & Analyst Day PENTAIR
WHAT YOU WILL HEAR TODAY • We Have a History of Delivering Shareholder Value Through Active Portfolio Management and Adding Business Excellence • We Expect Our Shareholder Value Creation Skills to See us Through Short-Term Market Demand Challenges • We Have Attractive Businesses with Differential Growth and Margin Opportunities • We Seek to Deliver on Those Opportunities to Create Shareholder Value and Build a Better Company Growth + Margin Expansion + Capital Allocation = Shareholder Value 30 2015 Investor & Analyst Day PENTAIR
SEGMENT & MAJOR PLATFORM STRUCTURE Four External Reporting Segments Valves & Controls Flow & Filtration Solutions Water Quality Systems Technical Solutions (2015F Revenue ~$1.8B) (2015F Revenue ~$1.4B) (2015F Revenue ~$1.4B) (2015F Revenue ~$2.2B*) 10 Strategic Business Groups Aftermarket/MRO Water Technologies Aquatic & Environ. Systems Enclosures (Revenue ~$900M) (Revenue ~$800M) (Revenue ~$825M) (Revenue ~$950M) Engineered Projects Fluid Solutions Water Filtration Thermal Management (Revenue ~$935M) (Revenue ~$430M) (Revenue ~$560M) (Revenue ~$700M) Process Filtration Eng. Fastening Solutions (Revenue ~$200M) (Revenue ~$550M*) *Pro Forma Including ERICO Alignment to Increase Focus on Key Priorities 2015 Investor & Analyst Day 31 PENTAIR
STRATEGIC BUSINESS GROUP DESCRIPTION Aftermarket / MRO Aquatic & Environmental Systems V&C’s Reliable Products and Lifecycle Services Enable Us to We Provide Advanced, Efficient Technology and Expertise Timely Support our Customers’ Infrastructure to the Swimming Pool and Aquaculture Industries to Maintenance, Efficiency, and Safety Requirements Around Ensure Their Profitable Operations the World Engineered Projects Water Filtration V&C’s Engineered Solutions for Pressure Protection and We Provide Innovative Solutions that Improve Water Severe Isolation in Critical Applications Enable Our Quality and Beverage System Efficiency in a World with Customers to Solve Their Most Relevant Infrastructure Limited Access to Healthy Sources of Drinking Water Challenges Water Technologies Enclosures We Protect Mission-Critical Electrical and Electronics We Provide a Full Range of Best in Class Solutions for Equipment with the Widest Range of Innovative Standard Water Supply and Disposal Through a Dedicated Global Products and Custom Solutions Network Fluid Solutions Thermal Management We Protect Processes with Products and Services to We Provide Domain Expertise and Solutions to Ensure the Maintain Temperature or Prevent Freezing in Industrial, Quality, Efficiency, and Yield of Crops, Food, Dairy, and Commercial, or Residential Applications Beverages Process Filtration Engineered Fastening Solutions We Provide Filtration and Separation Solutions for our We Protect Electrical and Civil Installations Through Customer’s Most Challenging Water, Process, and Energy Innovative Engineered Fastening Solutions that Drive Needs Productivity by Reducing Installation Time Attractive Value Propositions Across All of our Businesses 32 2015 Investor & Analyst Day PENTAIR
KEY PRIORITIES BY BUSINESS • Adjusting to New Reality – Lowering Cost Structure Valves & • Still Opportunities to Grow – Aftermarket, LNG, Petrochemical Controls • PIMS Adoption – Aligning into Two Value Streams; Sales Excellence Flow & • Well Positioned Portfolio to Grow with Macro Trends Filtration • Evolving from Products to Solutions • PIMS Application to Drive Margin Expansion Solutions • Well Positioned in the Residential & Commercial and Food & Beverage Verticals Water Quality • Proven Growth Culture Built on Innovative Technology and Customer Intimacy Systems • Extending PIMS Expertise to Water Filtration • Well Positioned to Drive Growth and High Profitability Technical • Focus on Differentiated Growth – Sales Excellence, Smart Products, Global Expansion Solutions • ERICO Integration Diversification Allows Each Segment to Contribute in Any Given Year 33 2015 Investor & Analyst Day PENTAIR
WHAT YOU WILL HEAR TODAY • We Have a History of Delivering Shareholder Value Through Active Portfolio Management and Adding Business Excellence • We Expect Our Shareholder Value Creation Skills to See us Through Short-Term Market Demand Challenges • We Have Attractive Businesses with Differential Growth and Margin Opportunities • We Seek to Deliver on Those Opportunities to Create Shareholder Value and Build a Better Company Growth + Margin Expansion + Capital Allocation = Shareholder Value 34 2015 Investor & Analyst Day PENTAIR
DRIVING SHAREHOLDER VALUE Organic Growing > Overall Segments • • Predictable & Sustainable Growth Margin Free Cash Flow & Capital Allocation Expansion • Lean Operations • Working Capital Performance • Lean Enterprise (Back Office) Growth Investments • • PIMS • Dividends, Accretive Acquisitions, and/or Buybacks • Sustainable Performance • Accelerating ROIC Top Talent • All Three are Important to Driving Shareholder Value 35 2015 Investor & Analyst Day PENTAIR
TOP GBU SALES GROWTH PRIORITIES 2015-2020 Expand Installed Base and Aftermarket Sales Valves & Controls >$400M Enhance Focus on Process Industry (Triple Offset Valves) Valve Automation Integrated Solutions Flow & Filtration Grow Global Commercial/Industrial Fire and Pro-Channel (2-Step) Solutions >$250M Become a Leading Global Player in Food & Beverage Processing Expand Industrial Water Solutions and Adoption of Membrane Technology EcoSelect Pool Solutions Penetration and Recirculating Aquaculture Systems Water Quality Systems Innovative Solutions for Point of Use Drinking Water Purification >$300M Further Develop Foodservice in Fast Growth Regions Grow Electrical Enclosures Outside North America Technical Solutions >$400M Thermal Building Infrastructure Penetration and Portfolio Diversification Smart Products: Integrating with Building/Factory Information Systems; Heating Controls Combined Top Estimated Sales Growth Priorities >$1B by 2020 36 2015 Investor & Analyst Day PENTAIR
IMPROVED CASH GENERATING CAPABILITIES STATEMENT OF STRENGTH FREE CASH FLOW ($Ms) Free Cash Flow has Greatly Improved • >100% of Adjusted • Working Capital Opportunities Provide Net Income $1,000 Additional Upside the Next Several Years • Committed to Our Investment Grade Rating $800 • Dividend Increase for 39 Consecutive Years $600 Continue to Fund Businesses that have • “Earned the Right to Grow” $400 • Our Structure Remains an Advantage as We Look at Strategic $200 Acquisitions $0 '06 '07 '08 '09 '10 '11 '12 '13 '14 '15F'20F 2012 Free Cash Flow is Adjusted to Exclude Accelerated Pension Funding of $193M, Deal-Related Payments of $126M, and Repositioning Payments of $20M Expecting Continued Strong Free Cash Flow and Disciplined Capital Allocation 37 2015 Investor & Analyst Day PENTAIR
CREATING SHAREOWNER VALUE (2015 – 2020) Core Sales PIMS Capital Performance Performance Allocation • Volume Growth • Acceleration of Lean • Maintain Investment Productivity at Grade – Expect Most Verticals to Manufacturing Sites Stabilize in Late 2016 • Dividend Increase Growth & Volume – • Optimize Manufacturing (39 Straight Years) Leverage Expected to be a Footprint • Organic Growth Major Component of EPS • Reduce Complexity – ERPs, Expansion Through 2020 • Deploy Free Cash Flow Accounting Centers, etc. • Sales Excellence − Debt Reduction • Accelerate Process Lean – Transformation Plans in – Front-end of Sales Process − Acquisitions Place for all Platforms − Buybacks – Dashboards & Comp model in progress +8-10%* Seg. Income and +2-4% Core Sales CAGR UPSIDE +9-11%* Adj. EPS CAGR Includes ERICO in 2015 Base *Includes Benefit of ERICO Growth + PIMS + Capital Allocation by 2020 38 2015 Investor & Analyst Day PENTAIR
KEY TAKEAWAYS • Strategic Business Groups to Drive Differentiated Growth … Investing in Most Attractive Long-Term Opportunities and Prioritizing Investments • Build Upon Our Enabling Strategies: ‒ PIMS as a Differentiating Capability and Core of Operating Rigor ‒ Leverage Our Advantaged Capital Structure ‒ Use Our “Win Right” Culture to “Grow,” “Get” Talent, and “Win” in M&A • Substantial Value Creation from Our Core Business by Delivering on Organic Growth, EBITA Expansion, and Free Cash Flow • Disciplined Capital Allocation to Drive Additional Value Creation Through Strategic M&A and/or Share Repurchases Driving Long-Term Shareholder Value by Executing Against Our Commitments 39 2015 Investor & Analyst Day PENTAIR
AGENDA 7:30 Registration/Breakfast 8:15 Opening Remarks Jim Lucas 8:20 PNR 2020 Randy Hogan 8:50 Technology and R&D Phil Rolchigo 9:10 Valves & Controls John Stauch 9:35 Flow & Filtration Solutions Beth Wozniak 10:00 Break 10:15 Water Quality Systems Karl Frykman 10:40 Technical Solutions Alok Maskara 11:05 Financial Update John Stauch 11:30 Q&A 40 2015 Investor & Analyst Day PENTAIR
TECHNOLOGY PHIL ROLCHIGO, Ph.D Vice President, Technology November 6, 2015 41 2015 Investor & Analyst Day PENTAIR
KEY TECHNOLOGY OBJECTIVES … Aligned To Enable PNR’s Vision & GBU Strategies Advance & Standardize The 3D Process Advance & Standardize The 3D Process To Drive New Product Development Efficiency To Drive New Product Development Efficiency Advance Pentair’s Technology Leadership Position to Advance Pentair’s Technology Leadership Position to Drive Differentiated Growth Drive Differentiated Growth Advance Global Technical Capabilities Advance Global Technical Capabilities to Enable Engineering Productivity to Enable Engineering Productivity Process, Technology & Talent … Essential Cornerstones of Growth 42 2015 Investor & Analyst Day PENTAIR
DRIVE GROWTH BY NEW PRODUCT DEVELOPMENT NEW PRODUCT PERFORMANCE METRICS SUMMARY 43 2015 Investor & Analyst Day PENTAIR
The 3D Product Development Process … Based on Lean Enterprise Principles DISCOVER Identify, Evaluate & Key Performance Indicators Prioritize DEVELOP • Vitality Doubled Since 2010 Optimize & • Funnel Value +25% Since 2013 Validate Design • Project Pipeline +60% Since 2013 DEPLOY • 1-2 % CAGR Projected Execute Launch from New Products Process Rigor Driving Results … Growth Opportunities Ahead 44 2015 Investor & Analyst Day PENTAIR
ADVANCE PNR’S TECHNOLOGY LEADERSHIP POSITION TECHNOLOGY ROADMAP & KEY EXAMPLES 45 2015 Investor & Analyst Day PENTAIR
SOCIETAL NEEDS & TECHNOLOGY DRIVING CHANGE Convergence Growth Opportunities • Growing Global Societal Needs Middle Class ADVANCED Products: • Corrosion Resistant Pumps & Valves • Unconventional • Energy Efficient Pumps & Systems Energy Sources • Separation, Filtration & Disinfection Technologies • Urbanization & SMART Products Industrialization Application Advanced Electronics Service Technology Advancements Focused • Micro Sensors & Electronics Model Focused • Wireless Communications Information FOOD & BEVERAGE Monitoring & Controls Solutions • Cloud Computing & Predictive Analytics CONNECTED Advanced Materials Solutions • Corrosion Resistant Coatings • Inorganic Alloys & Polymers Advanced RESOURCE SCARCITY Manufacturing Processes Solutions • Atomic Layer Deposition & 3D Printing Market Back & Technology Forward Driven Innovation Opportunities 46 2015 Investor & Analyst Day PENTAIR
TECHNOLOGY ALIGNED ACROSS ALL SEGMENTS Flow & Valves & Water Quality Technical Filtration Controls Systems Solutions Solutions FOOD & BEVERAGE Solutions: � � Beer & Wine � � � � Dairy � � � � � � Aquaculture � � � � RESOURCE SCARCITY Solutions: � � � � Point of Use Filtration � � � � � � Waste Water Reuse � � � � � � � � Petrochem & LNG � � � � � � SMART & CONNECTED Solutions: � � � � Pumps & Pump Systems � � � � � � � � Valves & Valve Systems � � � � � � � � Thermal Management Solutions Water Treatment Solutions � � � � � � � � � � � � - Food Service � � � � � � � � � � � � - Food & Beverage � � � � � � � � � � � � - Pools Technology Investments Focused on High Impact Opportunities 47 2015 Investor & Analyst Day PENTAIR
ADVANCED MEMBRANE TECHNOLOGIES Material Science Is The Key To Continued Innovation Nano to Micro Polymer Structures Proprietary Polymer Formulations & Advanced Casting Methods Molecular Chemical Structures Advanced Coating & Synthesis Technologies Critical Material Properties Creating Customer Value •Strength & Flexibility •Lower Energy Requirements •Porosity •Low Fouling & Improved Separation Efficiency •Pore Size & Distribution •Longer Membrane Life •Surface Chemistry •New Applications Filtration Innovations Enable Many Hygienic & Resource Scarcity Solutions 48 2015 Investor & Analyst Day PENTAIR
NANO FILTRATION MEMBRANE PLATFORM New to Market Hollow Fiber Format with Breakthrough Chemical Stability …. A $500M Addressable Opportunity 2015 2016 2017 HF-s HF-c HF-de HF-ds Nano MBR Applications Applications Applications Applications Applications • Silica Removal for • Color Removal • Removal of Endocrine • Sulphate • Industrial Boilers & Power Disrupting Compounds, Removal for Waste • THM Removal Generation Pesticides & Herbicides Reinjection Water reuse • Biopharmaceutical Water in O&G and Energy • Protein Recovery in • Pharmaceutical Recovery Separations Production Recovery Food & Beverage & Concentration • Food & Beverage Solutions Processing • Water Softening Process • Biopharmaceutical Separations • Cleaning Fluid Recycling Separations Proprietary Technology Platform … A Pipeline of Diverse Applications 49 2015 Investor & Analyst Day PENTAIR
TECHNOLOGY ALIGNED ACROSS ALL SEGMENTS Flow & Valves & Water Quality Technical Filtration Controls Systems Solutions Solutions FOOD & BEVERAGE Solutions: � � Beer & Wine � � � � Dairy � � � � � � Aquaculture � � � � RESOURCE SCARCITY Solutions: � � � � Point of Use Filtration � � � � � � Waste Water Reuse � � � � � � � � Petrochem & LNG � � � � � � SMART & CONNECTED Solutions: � � � � Pumps & Pump Systems � � � � � � � � Valves & Valve Systems � � � � � � � � Thermal Management Solutions Water Treatment Solutions � � � � � � � � � � � � - Food Service � � � � � � � � � � � � - Food & Beverage � � � � � � � � � � � � - Pools Technology Investments Focused on High Impact Opportunities 50 2015 Investor & Analyst Day PENTAIR
BEER MEMBRANE FILTRATION… Consistent Beer Quality & Improved Taste Stability Consistent Beer Quality & Improved Taste Stability Pentair’s ... by a More Sustainable Process ... by a More Sustainable Process Beer Membrane ... with Increased Flexibility & Modularity ... with Increased Flexibility & Modularity Deliver ... in a Safe Working Environment ... in a Safe Working Environment Filtration Solutions ... at Lower Costs ... at Lower Costs BMF … Generation 1 BMF Flux+ … Gen 3 From Commercial Breweries To Craft Breweries • Replaced Old Unsustainable Kieselgurh Process • New Module & Process Design - Footprint Reduced by ~50 % • Improved Shelf Life & Stability - Increased Uptime by +20 % • Reduced Water to Beer Production Ratio • Cost per HL of Beer Reduced by +20 % Expanding the Opportunity with Continuous Innovation 51 2015 Investor & Analyst Day PENTAIR
TECHNOLOGY ALIGNED ACROSS ALL SEGMENTS Flow & Valves & Water Quality Technical Filtration Controls Systems Solutions Solutions FOOD & BEVERAGE Solutions: � � Beer & Wine � � � � Dairy � � � � � � Aquaculture � � � � RESOURCE SCARCITY Solutions: � � � � Point of Use Filtration � � � � � � Waste Water Reuse � � � � � � � � Petrochem & LNG � � � � � � SMART & CONNECTED Solutions: � � � � Pumps & Pump Systems � � � � � � � � Valves & Valve Systems � � � � � � � � Thermal Management Solutions Water Treatment Solutions � � � � � � � � � � � � - Food Service � � � � � � � � � � � � - Food & Beverage � � � � � � � � � � � � - Pools Technology Investments Focused on High Impact Opportunities 52 2015 Investor & Analyst Day PENTAIR
POINT OF USE TREATMENT (POU) SOLUTIONS A Big Opportunity with Many Challenges The Need Total Systems & Developing World is the Largest Opportunity • Consumables: $2.1 B Disinfection & Removal of Harmful Chemicals • The Challenge SE Asia China 3-Step Process Often Needed: • 9% USA 21% 1) Filtration to Remove Suspended & 24% USA China Organic Matter 30% 16% 2) Reverse Osmosis (RO) to Remove Harmful Minerals & Organic Chemicals India 3) Ultraviolet (UV) Light to Disinfect 22% ROW The Current Situation 23% Little Product Differentiation • Current Products are Often Uncertified & Do • Not Meet NSF Standards or Work as Advertised Source of Data : Baytel Associate, 2015 Edition Innovating at Each Process Step to Address These Challenges 53 2015 Investor & Analyst Day PENTAIR
PROPRIETARY FILTRATION TECHNOLOGIES Carbon Fiber Technology Ultrafiltration (UF) Technology Premium Performance Superior Performance “Best Cost to Install” “Best Total Cost of Ownership” Certified to NSF/ANSI Standard 53 Certified to NSF/ANSI Standard p231 • • > 3 Log Reduction of Cryptosporidium > 4 Log Reduction of Viruses & > 6 Log of • • & Giardia Bacteria, Cryptosporidium & Giardia Certified Technology Delivering Enhanced Performance 54 2015 Investor & Analyst Day PENTAIR
PROPRIETARY POU RO TECHNOLOGY High Efficiency RO Module Design Produced By Proprietary Manufacturing Method Patent Pending Design Increases Feed Velocity Across the Membrane Standard Module Design Pentair’s GRO Design Design Innovation Design Innovation Great Quality, but • < 50% Water Wasted • < 50% Water Wasted …. > 80% Water Wasted • Reduces POU RO System Costs by +25% • Reduces POU RO System Costs by +25% Patented Technology Delivering Breakthrough Performance 55 2015 Investor & Analyst Day PENTAIR
PROPRIETARY UV TECHNOLOGY Pentair’s Reflective Design Geometry Enables Unique Sensing Feature Water Flows +++ Inside Quartz Tube UV Light Counterfeit Source UV Lamp Cylindrical Reflector Counterfeit Flow Tube Design Innovation Design Innovation • Improved Safety & Efficiency • Improved Safety & Efficiency • Sensor Design Ensures • Sensor Design Ensures Performance Performance Technology Innovation Targeting Differentiating Benefits 56 2015 Investor & Analyst Day PENTAIR
INNOVATIVE POINT OF USE SOLUTIONS Residential & Food Service Point of Use Solutions Advanced Products Multiple Innovations Enabling Differentiating Solutions 57 2015 Investor & Analyst Day PENTAIR
TECHNOLOGY ALIGNED ACROSS ALL SEGMENTS Flow & Valves & Water Quality Technical Filtration Controls Systems Solutions Solutions FOOD & BEVERAGE Solutions: � � Beer & Wine � � � � Dairy � � � � � � Aquaculture � � � � RESOURCE SCARCITY Solutions: � � � � Point of Use Filtration � � � � � � Waste Water Reuse � � � � � � � � Petrochem & LNG � � � � � � SMART & CONNECTED Solutions: � � � � Pumps & Pump Systems � � � � � � � � Valves & Valve Systems � � � � � � � � Thermal Management Solutions Water Treatment Solutions � � � � � � � � � � � � - Food Service � � � � � � � � � � � � - Food & Beverage � � � � � � � � � � � � - Pools Technology Investments Focused on High Impact Opportunities 58 2015 Investor & Analyst Day PENTAIR
RE-IMAGINGING THE WATER TREATMENT CYCLE From To Waste Water Treatment Plants Resource Recovery Facilities Treated & Returned to the Water Ecosystem Waste Water But Wastewater is a Rich Resource But Wastewater is a Rich Resource that could Help Address that could Help Address the Water-Food-Energy Challenges the Water-Food-Energy Challenges Energy Nutrients Society Faces Today Society Faces Today Accelerating Nature’s Processes … Helping to Ensure a Sustainable Future 59 2015 Investor & Analyst Day PENTAIR
RE-IMAGINGING THE WATER TREATMENT CYCLE Anaerobic Membrane Bioreactor … Advanced Treatment Technology Methane Used to Waste from A Dairy Offset the Natural Processing Plant Gas supply X-Flow UF Membrane UF Treated Water Systems Suitable for Reuse after Nano-Filtration or RO Innovative Technologies … Innovative Technologies … 20 to 30% Higher Methane Production Than Conventional Treatment 20 to 30% Higher Methane Production Than Conventional Treatment While Producing Water Suitable For Reuse While Producing Water Suitable For Reuse From Waste to a Source of Energy & Water … New Opportunities Possible 60 2015 Investor & Analyst Day PENTAIR
MODULE DESIGN INNOVATIONS … ADVANCED HYDRODYNAMICS Tubular Membrane Modules Helical Tubular Membranes • Challenging Industrial WW & Process Applications • The Process Benefits of Tubular Membranes • Self Supporting Tubes w/ 5 – 8 mm ID • Breakthrough Efficiency Due to Spiral Flow Pattern Excellent Process Performance … but Advanced Hydraulic Design Enables: Advanced Hydraulic Design Enables: • Up to 2X Increase in Capacity per • Up to 2X Increase in Capacity per CAPEX & OPEX Challenged due to Energy Membrane Area Membrane Area Requirements • Up to 50% Reduction in OPEX & CAPEX • Up to 50% Reduction in OPEX & CAPEX Helical Tubular Module … A Significant Breakthrough for Industrial Reuse 61 2015 Investor & Analyst Day PENTAIR
MODULE DESIGN INNOVATIONS … ADVANCED HYDRODYNAMICS Helical Tubular Module … A Significant Breakthrough for Industrial Reuse 62 2015 Investor & Analyst Day PENTAIR
TECHNOLOGY ALIGNED ACROSS ALL SEGMENTS Flow & Valves & Water Quality Technical Filtration Controls Systems Solutions Solutions FOOD & BEVERAGE Solutions: � � Beer & Wine � � � � Dairy � � � � � � Aquaculture � � � � RESOURCE SCARCITY Solutions: � � � � Point of Use Filtration � � � � � � Waste Water Reuse � � � � � � � � Petrochem & LNG � � � � � � SMART & CONNECTED Solutions: � � � � Pumps & Pump Systems � � � � � � � � Valves & Valve Systems � � � � � � � � Thermal Management Solutions Water Treatment Solutions � � � � � � � � � � � � - Food Service � � � � � � � � � � � � - Food & Beverage � � � � � � � � � � � � - Pools Technology Investments Focused on High Impact Opportunities 63 2015 Investor & Analyst Day PENTAIR
ADVANCED INDUSTRIAL PROCESSING PRODUCTS FCT Cryogenic Ball Valve for LNG Processing Compact ¼ Turn Hydraulic Actuator for LNG Tankers • Compact Design • Temperatures Reduces Actuator to -196 o C Horizontal Footprint • Certified to New ISO by 70% Cryogenic Standards • Space Savings Key in Marine Applications Short Face Double Flanged Butterfly Valve ICOT 6000 - Explosion Proof Valve Positioner • Innovative Design for • Multiple Applications Hazardous Applications from O&G to Power & in Chemical, Mining Petrochemical, and O&G • Compact Design • Non-Contact Hall Effect Enables Efficient Sensor for Remote Designs & Reduces Mounting, Calibration & Costs Monitoring Addressing Key Needs for LNG & Petrochem Processing 64 2015 Investor & Analyst Day PENTAIR
ADVANCED INDUSTRIAL PROCESSING PRODUCTS TraceTek TT-TS12 Leak Detection System Down Hole Heating System • Patented Sensors • Designed for Corrosive for Water & and High-Pressure Hydrocarbon Environments of Down Detection Hole Applications • Capacity to • Improved Materials & Remotely Monitor Electrical Connections ` Up to 250 Sensors Enable this Innovation ZONEX Terminal Box ROCC Heat Management System Controller • Innovative Design for • Digital Design & Hazardous Locations Touch Screen in O&G, Interface Simplifies Petrochemical & Calibration & Grain Processing Operation • Certified to IEC Ex e • Intrinsic Safety and ATEX Safety Option for Location Standard in Hazardous Areas Addressing Key Needs for LNG & Petrochem Processing 65 2015 Investor & Analyst Day PENTAIR
COALESCING FILTRATION TECHNOLOGY Coalescing Technology Widely used in O&G Processing & Petrochemical Industries Standard How They Work Coalescer Small droplets adhere to the media and merge into larger ones as the fluid carries the particles through the media As the Droplets Become Larger & Migrate Through the Media, They Release from the Media and Fall Under the Force of Gravity as the Droplet Carrier Fluid Flows in the Opposite Direction Advanced Coalescing Technologies is ~ $500M Addressable Opportunity 66 2015 Investor & Analyst Day PENTAIR
APEX ZENITH … A BREAKTHROUGH IN COALESCING TECHNOLOGY Proprietary Design Lobed Shaped Coalescer Enables Major Performance Benefits Higher Packing Efficiency 40,000 Proprietary Coalescing Traditional Design Projected Processing Rate (CFM) 35,000 Media APEX Zenith 30,000 Higher Flow per Element Zenith + Advanced Media 25,000 20,000 15,000 + 10,000 5,000 0 24 36 48 Vessel Diameter (inches) 2x to 10x Increase in Flow per Vessel 2x to 10x Increase in Flow per Vessel Significant Footprint Reductions Significant Footprint Reductions CAPEX & OPEX Reductions CAPEX & OPEX Reductions True Breakthrough in Performance … Major Reductions in CAPEX & OPEX 67 2015 Investor & Analyst Day PENTAIR
TECHNOLOGY ALIGNED ACROSS ALL SEGMENTS Flow & Valves & Water Quality Technical Filtration Controls Systems Solutions Solutions FOOD & BEVERAGE Solutions: � � Beer & Wine � � � � Dairy � � � � � � Aquaculture � � � � RESOURCE SCARCITY Solutions: � � � � Point of Use Filtration � � � � � � Waste Water Reuse � � � � � � � � Petrochem & LNG � � � � � � SMART & CONNECTED Solutions: � � � � Pumps & Pump Systems � � � � � � � � Valves & Valve Systems � � � � � � � � Thermal Management Solutions Water Treatment Solutions � � � � � � � � � � � � - Food Service � � � � � � � � � � � � - Food & Beverage � � � � � � � � � � � � - Pools Technology Investments Focused on High Impact Opportunities 68 2015 Investor & Analyst Day PENTAIR
SMART PRODUCTS & CONNECTED SOLUTIONS ROADMAP CONNECTED Solutions SMART Products SYSTEM Solutions ENTERPRISE Solutions • Valves & Actuators • Pumps & VFD’s • Heating Cables & Controllers • Cooling Filtration & Pump Systems Technologies & Controllers • Filtration Products Pipe & Valve Freeze • Sensors & Protection Systems Instrumentation (e.g., Flow Meters, Examples: CO2 Sensors, • Aquaculture Systems Thermistors, Leak - • Building Services Detection, etc.) • Residential Water Solutions Valve Control Systems SMART Products: CONNECTED Solutions: Devices with Advanced Features to Enable Solutions Integrating SMART Products to Enable Component & System Level Component Level Diagnostics, Preventative Performance Monitoring, Diagnostics, Preventative Maintenance & Asset Maintenance & Asset Management Services Management Services, as well as Simplify Integration into an Enterprise Solution 2015 2017 2018 2016 SMART Products … A Key Step to Executing Our Roadmap 69 2015 Investor & Analyst Day PENTAIR
SMART PRODUCT EXAMPLES IntelliFlo 2 … Next Gen Energy Efficient Pool Pump Intelli-Boost … SMART Flow Management System • A Proprietary • Increased Total Pump Algorithm Maintains Efficiency via SMART Constant Pressure Controls over a Wide Range of • Enhanced User Flow Rate Demands Experience with • Multiple Enhanced Remote Communication Monitoring & Control Methods for Features Monitoring & Control MBSP-3 … SMART Sump Pump with Battery Back-up Intelli-Drive … SMART Submersible Pump Controller • Proactive Text & Email • Proprietary Algorithm Alerts Delivered to Maintains Constant Homeowner, Plumber, Pressure over a Wide or Service Provider Range of Flow Rate Demands • Communications Platform Designed to • Remote Monitoring Connect Multiple Home and Predictive Water Products Maintenance Algorithms Built-in The Product Pipeline of SMART Products is Increasing 70 2015 Investor & Analyst Day PENTAIR
SMART PRODUCT EXAMPLES Slim Line SMART Industrial Electrical Cabinets Digital EPIC Smart Valve Position Transmitter • Smart Controller • Exida Safety Award Maintains Constant • Full & Partial Stroke Temperature Test Curves for • Fault Diagnostics Performance Communicated via Diagnostics & Trending Multiple Protocols to • Broad Applications Enable Predictive Service Cycles SMART Residential Floor Heater Thermostat SMART Electro-Hydraulic Valve Actuator • Touch Screen Design • Used in Critical, Fail Enables User Friendly Safe Applications Interface • SMART Control & • Smart Logic Helps Predictive Optimize Heating Maintenance Schedule Diagnostics The Product Pipeline of SMART Products is Increasing 71 2015 Investor & Analyst Day PENTAIR
CONNECTED SOLUTIONS SMART Flow Control System Valve System Diagnostics Communication Master (DCM) - A Gateway to The Industrial IoT • Project Objective – A Modular Communications Gateway Between the Host SCADA & PNR’s Valve Systems – Simplifies Connectivity and Control Between HOST Valves, Other Field Devices & the Host – Enables a PNR Industrial IoT Service Solution » Performance Optimization LAN » Predictive Maintenance DCM » Asset Life Cycle Management • Status & Next Steps – 2016 Launch LOOP A LOOP B LOOP X PNR . . . . Smart Service Centers A SMART, Flexible Product That Can Enable an Industrial IoT Service Solution 72 2015 Investor & Analyst Day PENTAIR
CONNECTED SOLUTIONS SMART CO 2 Recovery Monitoring System A Data Collection, Analytics & Service Solutions Platform • Project Objective – Process & Asset Performance Management » Visualize & Collect Data Across Multiple Breweries, Real-Time » KPI’s Include: CO 2 Generation, Uptime, Water & Energy Consumption » Data Analytics to Optimize Performance » Data Analytics to Identify Asset & Performance Issues and Perform Predictive Maintenance – Gain New Product Innovation Insights • Status & Next Steps – Being Implemented at 5 Breweries » Cambodia, Russia, Spain, St. Lucia, Ethiopia A SMART Service Solution Creating Real Time Value & Enabling Growth 73 2015 Investor & Analyst Day PENTAIR
CONNECTED SOLUTIONS The SMART Fish Farm … Enabling Novice Farmers to Become Expert A 24/7 Remote Monitoring, Control & Analysis Service • Project Objective – 24/7 Remote Monitoring & Control – Process & Asset Performance Management » Visualize & Collect Data Across Multiple Facilities, Real-Time » KPI’s Include: Water Quality, O 2 Levels, Water Quality, Water & Energy Consumption » Data Analytics to Optimize Performance » Data Analytics to Predict Asset & Performance Issues – Gain New Product Innovation Insights • Status & Next Steps – In Alpha Test at Multiple Facilities Imagine The Standardization of Urban Farming & Its Impact on the Food Chain 74 2015 Investor & Analyst Day PENTAIR
KEY TECHNOLOGY OBJECTIVES … Aligned To Enable PNR’s Vision & GBU Strategies Advance & Standardize The 3D Process Advance & Standardize The 3D Process To Drive New Product Development Efficiency To Drive New Product Development Efficiency Advance Pentair’s Technology Leadership Position to Advance Pentair’s Technology Leadership Position to Drive Differentiated Growth Drive Differentiated Growth Advance Global Technical Capabilities Advance Global Technical Capabilities to Enable Engineering Productivity to Enable Engineering Productivity Significant Progress Made … An Exciting Roadmap Forward 75 75 2015 Investor & Analyst Day PENTAIR
AGENDA 7:30 Registration/Breakfast 8:15 Opening Remarks Jim Lucas 8:20 PNR 2020 Randy Hogan 8:50 Technology and R&D Phil Rolchigo 9:10 Valves & Controls John Stauch 9:35 Flow & Filtration Solutions Beth Wozniak 10:00 Break 10:15 Water Quality Systems Karl Frykman 10:40 Technical Solutions Alok Maskara 11:05 Financial Update John Stauch 11:30 Q&A 2015 Investor & Analyst Day 76 PENTAIR
VALVES & CONTROLS JOHN STAUCH Acting/Interim President November 6, 2015 77 2015 Investor & Analyst Day PENTAIR
WHAT YOU WILL HEAR TODAY 1. Valves & Controls is Adjusting to the New Reality : • Lower Oil Prices & Less Demand • More Responsive to Our Customers • Lower Cost Structure 2. There are Still Opportunities to Grow: • Aftermarket/MRO • LNG • Petrochemical 3. Adoption of PIMS is Key to Our Success: • Aligning the Business into Two Value Streams • Sales Excellence Adjusting to Industry Reality … Focus on Installed Base & Cost 78 2015 Investor & Analyst Day PENTAIR
VALVES & CONTROLS SEGMENT 2015 Forecasted Financials Strategic Business Groups Aftermarket/MRO Aftermarket/MRO Revenue ~$1.8B (Revenue $900M) (Revenue $900M) Engineered Projects Segment Margin ~13% (Revenue $935M) Vertical Distribution* Geographic Distribution* Other Dev., ~14% Industrial, Fast Growth, ~41% ~36% Dev. Europe, Energy, ~24% ~59% North America, ~26% *2015F Revenue A Global Leader with Fragmented Opportunities 79 2015 Investor & Analyst Day PENTAIR
CURRENT ECONOMIC LANDSCAPE Brent Oil Price per Barrel (Since 2010) Global Rig Count (Since 2010) • Brent Below $50 per Barrel • Rig Count <1000 • Expected to Stay Between $40-$60 • Expected to Stay at Lower Level • Down > 55% Since 2014 • Down > 55% Since 2014 • Down > 60% Since the Prior Peak • Down > 60% Since the Prior Peak Rig Count Tracking Oil Price … Not Expected to Recover in Near-Term 80 2015 Investor & Analyst Day PENTAIR
KEY TRENDS: CHEM & PETROCHEM Trend Industry Impact V&C Impact • U.S. Natural Gas Feedstock • NA has Returned as a Chemical & Advantage Competitive Supplier with Increased Demand for Petrochemical Increasing Capacity • Enabler of Modern Living: V&C Products “Wellhead to Wal-Mart” • Asia and ME Continue to and Services Opportunity: $7B Build as Planned • Largest Demand Growth in Sales: $0.5B Asia Projected CAGR 6.6% 927 864 Global 809 Chemicals and 753 CAGR 3.3% Petrochem 701 675 673 661 Capex 1 633 ($B) 2012 2013 2014 2015 2016 2017 2018 2019 2020 1 Nominal values Source: IHS Energy Data Chemicals are Critical and Growing; Expected at a Rapid Pace 81 2015 Investor & Analyst Day PENTAIR
ALIGNING THE BUSINESS TO THE CUSTOMER NEED Customer Engagement Align Support to Selling Model Aftermarket/MRO Engineered Projects and Appropriate Value Stream: Standard Product & EPC’s and Selling Organization Service for MRO Specifications Standard Products with Engineering Quoting & Product Selection “Immediate” Quotes Intensive Quotes Low Intensity with Focus High Intensity with Engineering/Product Management on Application Focus on Specifications Start with Long Cycle Application and Focus Service/Lifecycle Management on Services/Installed Value Propositions Short Lead Times & 9 to 12 Months Project Operations/Sourcing Local Support Management & Global Processes Optimized by Function Finance, IT, HR, & Legal in Support of the Business & Customer Breakthrough Opportunity with Customer Centric Support Model 82 2015 Investor & Analyst Day PENTAIR
ADJUSTING V&C COST STRUCTURE Revenue: $2.4B Revenue: ~$1.8B $295M ~($300M) ~$315M ~$233M Amortization ~$53M Adj. Op Inc. ROS ROS 12.3% ~12.7% ~($75M) 2015F 2012PF Productivity & Volume/FX Inflation Cost-Out ~$315M (13 pts.) of Cost Out/Productivity & Still Not Enough 83 2015 Investor & Analyst Day PENTAIR
OUR PORTFOLIO OF PRODUCTS Aftermarket/ Projects/ Applications/ % of V&C 2015F Sales MRO Eng. To Order Vertical Pressure • Petrochemical/ Chemical Management ~56% ~44% • LNG • Power ~30% Triple Offset • Petrochemical/ Chemical Valves ~21% ~79% • LNG • Downstream O&G ~10% Butterfly • Petrochemical/ Chemical Valves • General Process ~58% ~42% • Mining ~16% Actuation • Petrochemical/ Chemical & Controls ~42% ~58% • Upstream O&G • Pipeline O&G ~10% Ball • Petrochemical/ Chemical Valves ~37% ~63% • Upstream O&G • Downstream O&G ~11% Gate, Globe & • Fossil Power Check ~46% ~54% • Nuclear Power • Mining ~23% Pressure, TOV, Butterfly & A&C Make up ~2/3 of Our Portfolio 84 2015 Investor & Analyst Day PENTAIR
AFTERMARKET/MRO KEY METRICS VALUE PROPOSITION 2015F Sales ~$900M • V&C’s Reliable Products and Lifecycle 2015-2020 CAGR Est. ~3-5% • Services Enable the Timely Support of 2010-2015 CAGR ~3% • our Customers’ Infrastructure Maintenance, Efficiency, and Safety Verticals (2015F): • Requirements Around the World Industrial ~40% Energy ~60% BRANDS APPLICATIONS Crosby Anderson Greenwood KTM Keystone Mining Pressure Relief Valves Large Global Installed Base … Opportunity is Expected to Grow 85 2015 Investor & Analyst Day PENTAIR
AFTERMARKET GROWTH OPPORTUNITY “TODAY” “FUTURE” • Global Installed Base • Improved Projects and Aftermarket Mix • Cross-Functional Organization not Aligned to Customer Buying • Project and Aftermarket Patterns Opportunities Linked • Fragmented Service Footprint • Organization Aligned to Customer and Capability Across a Wide Buying Patterns Portfolio • Structure, Organization, Goals & • Generalist Sales Force Metrics Linked to Customer Needs • Limited Aftermarket Specific • Improved Configuration & Metrics Pricing Tools Significant Opportunity to Grow Sales with Existing Installed Base 86 2015 Investor & Analyst Day PENTAIR
PENETRATION OF INSTALLED BASE 3 4 Capture Expansion New Wins • Ensure New Installation Capture • Develop Value Proposition Installed Base Growth • Develop Aftermarket Lead Funnel • Implement Global Service and for Aftermarket Sales Growth Maintenance Agreements Existing Installations 1 2 Penetration Conversion • Prioritize Sales Actions to • Convert Existing Competitor Proactively Target Opportunities Installations • Service and Aftermarket Coverage • Utilize Channel Partner Network Pentair Competitors Existing Installed Base A Focused Set of Priorities with a Dedicated Sales Team 87 2015 Investor & Analyst Day PENTAIR
$250M of Estimated AFTERMARKET STRATEGY Sales Growth by 2020 1 Primary Growth Area 2 3 Tertiary Growth Area Wallet Share Growth Product Opportunity Pressure Management High Actuation & 3 1 Quarter Turn Medium Pressure Management 2 & Quarter Turn Gate, Globe & Low Check Valves Low Medium High Conventional Power Conventional Power O&G-Upstream O&G-Downstream Nuclear Power Metals & Mining Chemicals Application Vertical Opportunity Product and Application Vertical Attractiveness to Drive Prioritization 88 2015 Investor & Analyst Day PENTAIR
OPTIMIZING THE VALUE STREAM “ TODAY ” “ FUTURE ” 3rd Product Party Distribution Selection, Our Global Quoting Customer Sales & Offices Sales Office Project Mgmt. Factory KEY PERFORMANCE INDICATORS 3 rd Party • On Time Delivery: Quote to Customer Request • Quote Accuracy Project • Customer Value/Price & Pentair Margin Teams • Quote Complexity/Productivity 2015 2016+ Simplify and Standardize with Customer Focused KPIs 89 2015 Investor & Analyst Day PENTAIR
ENGINEERED PROJECTS KEY METRICS VALUE PROPOSITION 2015F Sales ~$935M • V&C’s Engineered Solutions for 2015-2020 CAGR Est. ~1-2% • Pressure Protection and Severe 2010-2015 CAGR ~Flat • Isolation in Critical Applications Verticals (2015F): • Enable Our Customers to Solve Their Energy ~60% Most Relevant Infrastructure Industrial ~40% Challenges BRANDS APPLICATIONS Vanessa FCT Crosby Clarkson Fasani Petrochemical/ Chemical Actuated TOV Valve LNG Cryogenic TOV Refining Knifegate Valve Valve Strong Technical Application Expertise … Focus Needed 90 2015 Investor & Analyst Day PENTAIR
PROJECTS PRIORITIZATION PROCESS - CRITERIA TOP DOWN AND BOTTOM UP KEY CRITERIA PRIORITIZATION OUTCOME Project Product Pursue TOP Investment Strength HIGH Pursue Segment Aftermarket MID Attractiveness Potential (Further Qualification Required) Do not Customer LOW Pursue • Specified by Customer? • Good Position with the EPC? Pursue MID • Strength of End User Relationship? Do not Pursue Prioritization Based on Strategic Attractiveness and Customer Intimacy 91 2015 Investor & Analyst Day PENTAIR
PROJECT GROWTH OPPORTUNITY $100M Estimated Sales 1. Triple Offset Valves in Growth Opportunity By 2020 in Midstream / Petrochemical $100M Estimated Sales 2. Automation Growth Opportunity By 2020 Focused Opportunities 92 2015 Investor & Analyst Day PENTAIR
TOV ADDITIONAL ADDRESSABLE OPPORTUNITY Value Proposition Increasing the Size of the Triple Offset Valve Opportunity 1) Lower Cost of $1.3B Ownership to the $0.6B Customer Compared to $0.7B $100M of Traditional Gate, Ball, Estimated and Other Valve Sales Growth by 2020 Designs Current TOV Ball & GGC Total Opportunity Conversion Opportunity 2) Handling Isolation Largest Opportunities: with Improved Safety • Grow Sales in Standard Applications Compared to Butterfly • Expand Coverage in Severe Applications Valves • Cryogenic Penetration • Accelerate Penetration in Up & Midstream TOV has a Strong Value Proposition in Replacing Other Valve Designs 93 2015 Investor & Analyst Day PENTAIR
$100M of AUTOMATION Estimated Sales Growth by 2020 Control Room V&C FOCUSED STRATEGIES: Access Data • Connectivity of Actuated Automation Connectivity Valves and Controls and Integrated Solutions Other Industrial Strategy Components to the HOST System Services Wireless Monitoring connectivity • Providing Valve, Actuation, Package Valve Actuation and Control Packages Strategy Component • Focused on a Global Offering of Highly Valve Strategy Engineered and Automation Capable Valves Substantial and Growing Opportunity 94 2015 Investor & Analyst Day PENTAIR
SALES EXCELLENCE TRANSFORMATION Rest of Industry Indirect Rest of Industry Global Key Regional EPC – High Touch Channel – Low Touch Current State: End of 2015/2016: Geography-Based, Generalist Segmented, Customer-Centric Covered by: Global Account Manager National Account Rep Project Sales Rep EPC Technical Sales Rep Territory Sales Rep Channel Sales Rep Inside Sales Dedicated Aftermarket/MRO Coverage Covered by Territory Sales Rep Customer Supported by a Dedicated, Capable Sales Force 95 2015 Investor & Analyst Day PENTAIR
V&C MARGIN OPPORTUNITY V&C Cost Structure ~$2.2B ~$1.8B • Revenue Growth: Aftermarket/MRO: ~+3-5% – Material 32-33% – Engineered Projects: ~+1-2% 33% • Value Stream Optimization • More Variable Project 31-32% Related Cost Structure 34% OCOGS • Less Complexity • Lower Cost Footprint 14-15% 15% R&D/Selling 4% 5% G&A 17-18% 13% Segment Income 2015F 2020T Customer Focus and Complexity Reduction Drive Margin Expansion 96 2015 Investor & Analyst Day PENTAIR
FINANCIAL PERFORMANCE SALES SEGMENT INCOME $2.5B $2.4B ~2-4% ~$1.8B $1.8B 5 YR CAGR ~7-10% 5 YR CAGR $399M $350M ~1% ~$233M 5 YR CAGR 2010 2013 2014 2015F 2020T 2013 2014 2015F 2020T ROS 14.3% 16.8% ~13% +60-90 bps per Year Revenue Performance (2015-2020) Segment Income Expansion • Aftermarket/MRO: +$250M by 2020 (~4% CAGR) • Execute 2015 Cost Out • Engineered Projects: • Simplify the Business Value Streams – Oil & Gas: Flat to Down • Reduce Complexity LNG/Process: + $50M • Deliver ~40%+ “Incremental” Margin on Growth – – Triple Offset Valves: +$100M • Drive for 17-18% ROS Levels – Automation: +100M Stabilization + Cost Out + Growth Drives Value 97 2015 Investor & Analyst Day PENTAIR
EXECUTIVE SUMMARY • We have Accepted the Economic Reality of the Oil & Gas Industry and Re-Prioritizing the Business to Better Serve the Customer • We are Prioritizing Projects Based on Aftermarket Annuity • We are Driving a Growth Culture and We Believe We will have the Best Sales Team in the Industry • We are Standardizing the Support Resources Around the Two Value Streams and the Customers • We are Making Valves & Controls Worthy of Further Investment and We are Committed to Delivering Superior Returns V&C is Committed to World Class Performance 98 2015 Investor & Analyst Day PENTAIR
AGENDA 7:30 Registration/Breakfast 8:15 Opening Remarks Jim Lucas 8:20 PNR 2020 Randy Hogan 8:50 Technology and R&D Phil Rolchigo 9:10 Valves & Controls John Stauch 9:35 Flow & Filtration Solutions Beth Wozniak 10:00 Break 10:15 Water Quality Systems Karl Frykman 10:40 Technical Solutions Alok Maskara 11:05 Financial Update John Stauch 11:30 Q&A 2015 Investor & Analyst Day 99 PENTAIR
FLOW & FILTRATION SOLUTIONS BETH WOZNIAK President November 6, 2015 100 2015 Investor & Analyst Day PENTAIR
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