Q1 2015 EARNINGS RELEASE April 21, 2015 PENTAIR Q1 2015 Earnings - PowerPoint PPT Presentation

Q1 2015 EARNINGS RELEASE April 21, 2015 PENTAIR Q1 2015 Earnings Release

FORWARD-LOOKING STATEMENTS C AUTION C ONCERNING F ORWARD -L OOKING S TATEMENTS This communication contains statements that we believe to be “forward - looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995. All statements, other than statements of historical fact are forward- looking statements. Without limitation, any statements preceded or followed by or that include the words “targets,” “plans,” “believes,” “expects,” “intends,” “will,” “likely,” “may,” “anticipates,” “estimates,” “projects,” “should,” “would,” “positioned,” “strategy,” “future” or words, phrases or terms of similar substance or the negative thereof, are forward-looking statements. These forward-looking statements are not guarantees of future performance and are subject to risks, uncertainties, assumptions and other factors, some of which are beyond our control, which could cause actual results to differ materially from those expressed or implied by such forward-looking statements. These factors include the ability to achieve the benefits of planned cost take-out actions, the ability to successfully complete the disposition of our Water Transport business on anticipated terms and timetable; overall global economic and business conditions; competition and pricing pressures in the markets we serve; the strength of housing and related markets; volatility in currency exchange rates and commodity prices; inability to generate savings from excellence in operations initiatives consisting of lean enterprise, supply management and cash flow practices; increased risks associated with operating foreign businesses; the ability to deliver backlog and win future project work; failure of markets to accept new product introductions and enhancements; the ability to successfully identify, complete and integrate acquisitions; the impact of changes in laws and regulations, including those that limit U.S. tax benefits; the outcome of litigation and governmental proceedings; and the ability to achieve our long-term strategic operating goals. Additional information concerning these and other factors is contained in our filings with the U.S. Securities and Exchange Commission, including in our 2014 Annual Report on Form 10-K. All forward-looking statements speak only as of the date of this communication. We assume no obligation, and disclaim any obligation, to update the information contained in this communication. 2 PENTAIR Q1 2015 Earnings Release

KEY DEFINITIONS • Except as Otherwise Noted All References to 2015 and 2014 Represent Our Results from Continuing Operations for the Period Indicated Presented on an Adjusted Basis • “Core Sales” Refers to GAAP Revenue from Existing Operations Excluding (1) the Impact of Currency Translation and (2) the Impact of Revenue from Acquired Businesses Recorded Prior to the First Anniversary of the Acquisition Less the Amount of Sales Attributable to Divested Product Lines Not Considered Discontinued Operations • Segment Income (Loss) Represents Operating Income (Loss) from Continuing Operations Exclusive of Certain Acquisition Related Expenses, Costs of Restructuring Activities, “Mark -to-Market" Gain (Loss) for Pension and Other Post-Retirement Plans, Impairments and Other Unusual Non-Operating Items • See Appendix for GAAP to Non-GAAP Reconciliations 3 PENTAIR Q1 2015 Earnings Release

EXECUTIVE SUMMARY • Markets Throughout Q1 Were Significantly Below Forecast … We Expected Energy to be Weak, but Industrial Contraction was a Surprise • Planning on Continued FX Translation Impact and Very Little Recovery in our End Markets in 2015 • Adjusting Cost Structure Accordingly to Reflect FX and Core Revenue Decline • Balance Sheet and Cash Flow Remain Strong … Will Continue to Invest in M&A Where Appropriate While Executing the Cost Playbook • 2015 Adjusted EPS Guidance now at ~$3.80 Economic Challenges Persist … 2015 a “Pause” Year 4 PENTAIR Q1 2015 Earnings Release

2015 KEY FORECAST ASSUMPTIONS 4/21/15 12/17/14 2/3/15 Q1 Earnings December Q4 Earnings Update Outlook Call Update FX Headwind (EPS) ~($0.10) >($0.20) >($0.25) Core Sales Growth ~2 - 4% ~2 - 3% ~(2 - 3%) Op. Margin Expansion ~110bps ~90bps ~50bps Share Buyback $200M Forecasted $200M Completed $200M Completed 2015 / 2016 Modest More Aggressive $40M / $100M+ Repositioning Benefit (cumulative) Balance Sheet Capacity >$1B >$1B ~$0.8B External Headwinds Continue to Worsen … Focusing on Cost Actions 5 PENTAIR Q1 2015 Earnings Release

Q1'15 PENTAIR RESULTS FINANCIAL HIGHLIGHTS (YoY) Q1‘15 Q1'14 $1.48B $1.64B Sales Core Sales Down 4% (Sales Down 10% including FX) • Valves & Controls Down 11% Op Income (Rpt.) $171M $182M • Flow & Filtration Solutions Down 7% Op Income (Adj.) $171M $201M • Water Quality Systems Up 4% ROS (Adj.) 11.6% 12.2% • Technical Solutions Up 1% EPS (Rpt.) $0.65 $0.63 Adj. Op Income Down 15% EPS (Adj.) $0.65 $0.71 SUMMARY Adj. Op Margins 11.6% … Down 60 bps • Continued Growth in Food & Beverage • FX Headwind Significant … Volume Weakness in Adj. EPS Down 8% Energy and Industrial • Effective Tax Rate of 23% • Productivity and Price Not Enough to Offset • Net Interest of $18M; Share Count 183M Volume Shortfall Q1 Free Cash Flow Usage of $159M • Completed $200 Million Share Buyback Consistent with Seasonality Disappointing Start to the Year … Corrective Actions Underway 6 PENTAIR Q1 2015 Earnings Release

Q1'15 PENTAIR PERFORMANCE SALES OPERATING INCOME $1.64B ($75M) $9M ($103M) $201M ($46M) $1.48B $39M $171M ($23M) (10%) (15%) YoY YoY Core (4%) ROS ROS ROS (5 pt) 1 pt (6 pts) (10 pts) 12.2% (1.7%) (1.4%) 2.5% 11.6% Q1'14 Q1'14 Volume Price FX Q1'15 Prod./ Q1'15 Vol/FX Infl. Adjusted Price Adjusted Operating Margins / Productivity Highlights Sales Highlights (by Vertical) Core Sales Down 4% Adjusted Operating Margins 11.6% • Industrial Down 5% • Volume Shortfall and FX Deleverage Negatively Impacted Margins • Residential & Commercial Down 1% • Inflation Headwinds Remained • Energy Down 9% Consistently Modest • Food & Beverage Up 3% • Lean, Sourcing Actions, and G&A Reductions • Infrastructure Down 5% Drove Productivity Gains Productivity Unable to Offset Volume Shortfall 7 PENTAIR Q1 2015 Earnings Release

Q1'15 VALVES & CONTROLS PERFORMANCE SALES SEGMENT INCOME $531M ($59M) $61M ($27M) ($43M) $0M $429M $14M $42M ($6M) (19%) (31%) YoY YoY Core (11%) ROS ROS ROS (11 pts) 0 pt (8 pts) (19 pts) 11.5% (3.7%) (1.1%) 3.1% 9.8% Q1'14 Volume Price FX Q1'15 Prod./ Q1'14 Vol/FX Infl. Q1'15 Price Sales Highlights (by Vertical) Segment Margins / Productivity Highlights Backlog Including FX Down 4% Sequentially Segment Margins 9.8% to $1.2B … Orders of $437M; Core Down 15% YoY • Volume Drop Significantly Impacted Margins Core Sales Down 11% YoY • OMT Investment Continued to Read Out • Industrial – Process Down 10% • Energy – Oil & Gas Down 11% • Lean, Sourcing Actions, and G&A Reductions Drove Productivity • Energy – Power Down 6% • Energy – Mining Down 26% Weakness Across All Verticals … North America Only Area of Growth 8 PENTAIR Q1 2015 Earnings Release

VALVES & CONTROLS BACKLOG (Includes Impact of FX) INDUSTRIAL - Process ENERGY - Oil & Gas Backlog ($ Millions) Backlog ($ Millions) 564 557 550 549 545 543 530 600 600 508 482 500 500 413 396 388 391 390 376 370 349 344 400 400 300 300 200 200 100 100 0 0 Q1 13 Q2 13 Q3 13 Q4 13 Q1 14 Q2 14 Q3 14 Q4 14 Q1 15 Q1 13 Q2 13 Q3 13 Q4 13 Q1 14 Q2 14 Q3 14 Q4 14 Q1 15 • 2014: Revenue ~40% • 2014: Revenue ~35% • First Quarter Core Orders Down 13% Y-o-Y • First Quarter Core Orders Down 17% Y-o-Y ENERGY - Power ENERGY - Mining Backlog ($ Millions) Backlog ($ Millions) 600 600 500 500 374 371 373 364 368 353 345 328 400 400 310 300 300 200 200 90 87 77 70 71 63 50 52 49 100 100 0 0 Q1 13 Q2 13 Q3 13 Q4 13 Q1 14 Q2 14 Q3 14 Q4 14 Q1 15 Q1 13 Q2 13 Q3 13 Q4 13 Q1 14 Q2 14 Q3 14 Q4 14 Q1 15 • 2014: Revenue ~15% • 2014: Revenue ~10% • First Quarter Core Orders Down 11% Y-o-Y • First Quarter Core Orders Down 19% Y-o-Y FX Hurts Backlog and Order Weakness Reflective of Global Capital Strike 9 9 PENTAIR Q1 2015 Earnings Release

Q1'15 FLOW & FILTRATION SOLUTIONS PERFORMANCE SALES SEGMENT INCOME $401M ($32M) $35M ($17M) $6M ($25M) $350M $17M $29M ($6M) (13%) (16%) YoY YoY Core (7%) ROS ROS ROS (8 pts) 1 pt (6 pts) (13 pts) 8.7% (3.6%) (1.3%) 4.5% 8.3% Q1'14 Volume Price FX Q1'15 Prod./ Q1'14 Vol/FX Infl. Q1'15 Price Sales Highlights (by Vertical) Segment Margins / Productivity Highlights Core Sales Down 7% Segment Margins 8.3% • Volume and Mix Dragged on Margins • Residential & Commercial Down 11% • Food & Beverage Down 2% • Price Initiatives Offset Inflation • Infrastructure Down 14% • Productivity Read Through as Lean and Sourcing • Industrial Down 1% Accelerated and Gained Traction Weak Demand and Destocking Impacted Top Line 10 PENTAIR Q1 2015 Earnings Release