Baird Industrial Conference November 2016

Transcription

1 Baird Industrial Conference November 2016

2 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-looking statements. Accordingly, we caution you not to place undue reliance on these statements. All statements other than statements of historical fact could be deemed forward-looking, including, but not limited to, any projections of financial information; any statements about historical results that may suggest trends for our business; any statements of the plans, strategies and objectives of management for future operations; any statements of expectation or belief regarding future events, technology developments or enforceability of our intellectual property rights; and any statements of assumptions underlying any of the foregoing. These statements are based on estimates and information available to us at the time of this presentation and are not guarantees of future performance. Actual results could differ materially from our current expectations as a result of many factors, including but not limited to: the impact of our substantial indebtedness; the effect of local, national and international economic, credit and capital market conditions on the economy in general, and on the industries in which we operate in particular; access to available and reasonable financing on a timely basis and the availability of financing for our customers; our competitive environment; dependence on independent distributors; general economic and business conditions, market factors and our dependence on customers in cyclical industries; the seasonality of our sales; impact of weather on the demand for our products; changes in technology and manufacturing techniques; loss of key personnel; increases in cost of our raw materials and our possible inability to increase product prices to offset such increases; the loss of any significant customer; inability to make necessary capital expenditures; risks associated with international operations, which have increased in size due to our recent acquisitions; the costs of environmental compliance and/or the imposition of liabilities under environmental, health and safety laws and regulations; the costs of asbestos claims; a potential impairment of goodwill and intangible assets; changes in governmental laws and regulations, or the interpretation or enforcement thereof, including for environmental matters; viability of key suppliers; reliance on intellectual property; potential product liability claims; work stoppages by unionized employees; the costs related to strategic acquisitions or divestitures or the integration of recent and future acquisitions into our business; performance, and potential failure, of our information and data security systems; changes in pension funding requirements and costs of maintaining healthcare insurance and benefits; and anti-takeover provisions in our charter documents. These and other risks and uncertainties associated with our business are described in our Annual Report on Form 10-K for the year ended March 31, We assume no obligation and do not intend to update these forward-looking statements. In addition to U.S. GAAP financials, this presentation includes certain financial measures on a non-gaap basis as defined in the Form 8-K filed with the Securities and Exchange Commission on November 2, These historical and forward-looking non-gaap measures are in addition to, not a substitute for or superior to, measures of financial performance prepared in accordance with GAAP. Our SEC filings contain additional information about these non-gaap measures, why we use them, and why we believe they are helpful to investors, and contain reconciliations to GAAP data. 1

3 Agenda 3:00-3:05 Introductions Rob McCarthy VP Investor Relations 3:05-3:45 Rexnord Overview & Strategy Todd Adams President & CEO 3:45-4:20 Process & Motion Control Platform Kevin Zaba Group Executive & President PMC 4:20-4:40 Water Management Platform Matthew Stillings 4:40-5:00 Questions & Answers Team Group Executive & President WM 2

4 Rexnord Overview Rexnord (RXN) Multi-Platform Industrial Engineered Products for Specification-Driven Applications Revenue: $1.9 billion Adjusted EBITDA: $366 million (19%) FCF: $167 million Water Management Provide and enhance water quality, safety, flow control, and conservation in nonresidential construction, water & wastewater infrastructure Revenue: $0.8 billion Adjusted EBITDA Margin: 20% Process & Motion Control Be the leading global provider of high-value, mission-critical solutions that help customers safely, reliably and productively keep their goods & assets moving Revenue: $1.1 billion Adjusted EBITDA Margin: 21% Note: All figures are FY16. Platform margins exclude corporate expenses. Free cash flow and Adjusted EBITDA are non-gaap metrics and are defined in our SEC filings. 3

5 Rexnord Core Values Our goal is to consistently create value for our customers, shareholders and associates. We put our customers first We strive to be recognized as their very best supplier & partner Integrity in everything we do We have the highest ethical standards & treat people with dignity and respect We believe in total associate engagement The strength of our company is our associates & we enable our associates to do the right thing We are committed to continuous improvement We strive for world-class performance in safety, quality, delivery, cost & growth We have a culture of winning We are as passionate about recognition and rewards as we are about results 4

6 Rexnord Strategic Vision We Advance the Efficient Use of Resources through Smarter Solutions. 5

7 Rexnord Value Creation Model Focus. Execution. Value. 6

8 Rexnord Value Creation Model businesses not collections superior value prop strategic flexibility global installed base serve fundamental needs reliability & productivity Focus. Execution. Value. 7

9 Rexnord Value Creation Model continuous improvement businesses not collections Rexnord Business System superior value prop strategic flexibility global installed base process focus expanding total addressable market operational excellence leverage best practices proprietary funnels serve fundamental needs reliability & productivity our engine Focus. Execution. Value. 8

10 Rexnord Value Creation Model continuous improvement businesses not collections Rexnord Business System superior value prop process focus act as partner expanding total addressable market leverage best practices strategic flexibility global installed base operational excellence proprietary funnels discretionary effort competing for the long term serve fundamental needs reliability & productivity our engine drives our strategies Focus. Execution. Value. 9

11 Rexnord Business System Integrated Strategic Planning & Operational Management System Creates Operational Alignment with Strategic Objectives Quantifies specific objectives and key performance indicators Clearly defines responsibilities and creates accountability Connects Strategy Deployment to Daily Management Promotes Continuous Improvement Common language enables sharing of best practices Disciplined approach to root cause analysis & counter-measures Drives resource allocation Replicable & Scalable Structured approach to 20 core business processes Supported by RBS specialists within each business unit Foundation to enable step-function growth 10

12 Continuous Improvement is Our Culture 11

13 Rexnord Development Future Owner BTR/Invensys Carlyle Apollo PE/Public Hybrid 100% Public Status Division LBO Company Platforms Re-Investment Culture Defining Portfolio Change Conglomerate Carve Out / Stand Up Grind / Recession LT Positioning Commodity Recession Falk Zurn VAG MP/RHF Exits Best In Class Industrial Accelerated Performance RBS Launch Re-Launch Establish Deepen Optimize Management Prior Prior New Information Technology Legacy Systems Legacy Systems Internal Investment Facilities Single-Product Consolidate Transition to Scalable Internal Deployment SCOFR Plan & Launch Revenue $718 $1,081 $1,882 $2,082 $1,924 Current DiRXN TM SCOFR Completion Gross Margin 30% 31% 31% 37% 35% EBITDA Margin <18% 18% 19% 20% 19% > 20% Leverage 3.9x 6.1x 3.8x 3.8x < 3.0x Average FCF $32 $104 $113 $182 > $200 Source: Company reports. Note: Except Average FCF, all figures are from last year in range (USD millions). 12

14 Mar-10 Sep-10 Mar-11 Sep-11 Mar-12 Sep-12 Mar-13 Sep-13 Mar-14 Sep-14 Mar-15 Sep-15 Mar-16 Sep-16 Mar-17 Mar-10 Sep-10 Mar-11 Sep-11 Mar-12 Sep-12 Mar-13 Sep-13 Mar-14 Sep-14 Mar-15 Sep-15 Mar-16 Sep-16 Mar-17 Industrial Operating Environment IMF All-Commodities Index & US Industrial Production US IP Yr/Yr (LHS) Commodities Index (RHS) 8% 150 6% 125 4% 100 FY12-15 Commodity prices broadly stable, excepting mined materials Modest growth in US industrial production 2% 0% (2%) (4%) FY16 Broad collapse in global oil and natural gas prices Industrial production enters period of contraction Commodity Prices & US MPT Distribution ADS US MPT Dist ADS (LHS) Commodities Index (RHS) 20% % % 100 5% 75 0% 50 (5%) 25 (10%) 0 FY12-15 Commodity prices broadly stable, excepting mined materials Modest growth in US MPT distribution channel ADS FY16 Broad collapse in global oil and natural gas prices Declines in US distribution channel compounded by de-stocking source: IMF, US Federal Reserve, Rexnord estimates 13

15 Rexnord Historical Summary Rexnord Revenue ($mm) 2,400 2,000 1,600 FY12-15 Rexnord continuing operations grew 11% Water Management averages 4% annual core growth Process & Motion Control roughly flat 1, FY 12 FY 13 FY 14 FY 15 FY 16 Divestitures WM - Continuing PMC - Continuing FY16 Rexnord continuing operations declined 6% Water Management grew 1% Process & Motion Control fell 10% Rexnord Adjusted EBITDA ($mm) & Margin % 20.8% 20.9% 20.2% 19.4% (100) FY 12 FY 13 FY 14 FY 15 FY 16 source: Company reports, Rexnord estimates Corporate Divested WM - Continuing PMC - Continuing FY12-15 Rexnord continuing ops margins in narrow range Water Management adjusted EBITDA grew 35% Process & Motion Control adjusted EBITDA was flat FY16 Rexnord adjusted EBITDA fell 10% Water Management margin increased 360 bps Process & Motion Control margin fell 370 bps 14

16 Another Perspective PMC & WM Reported Revenue ($mm) FY12 Revenue FY17E Revenue 1,600 PMC - Continuing 1,400 WM - Continuing 1,200 1, % 69% 41% 59% FY12 FY13 FY14 FY15 FY16 FY17E PMC - Continuing WM - Continuing PMC - Continuing WM - Continuing PMC & WM Adjusted EBITDA ($mm) 400 PMC - Continuing 350 WM - Continuing FY12 Adjusted EBITDA 24% FY17E Adjusted EBITDA 39% % 61% FY12 FY13 FY14 FY15 FY16 FY17E PMC - Continuing WM - Continuing PMC - Continuing WM - Continuing Source: Rexnord estimates, company reports. FY17 Est Adjusted EBITDA consistent with midpoint of Adjusted EPS guidance, as of November 2, All periods reflect FY17 continuing operations/product lines. 15

17 Internal Execution FY12-FY17 Information Technology Product Portfolio Updated business unit ERP systems = Visibility, Timeliness, Comparability Deployed salesforce.com across platforms Deployed customer design software tools Deployed on-line order entry, tracking = Improved customer satisfaction Refocused product management resources Simplified product portfolios Deployed stage-gate NPD process Accelerated NPI at PT, Zurn Institutionalized Value Add Value Engineering = Cum VAVE savings >$80 million Operational Excellence Commercial Excellence Expanded RBS staff within business units Consolidated multiple facilities Final stages of SCOFR = $30 million targeted annual savings PMC platform margins peaked >25% WM platform margins achieved 20% target CI Blog fosters connections Expanded benchmarking scope = Commercial Excellence initiative Restructured customer service & support = Improved Ease of Doing Business Zurn spec share increased by 20 points PMC First Fit strategy refocused Expanded shipset content with aero OEMs 16

18 More Balanced Portfolio PMC: Aero + Consumer 29% FY15 Adjusted EBITDA Water Manageme nt 28% PMC: Aero + Consumer 36% FY17E Adjusted EBITDA Water Manageme nt 39% PMC: Process Industries 43% PMC: Aero + Consumer 29% Water Management 28% PMC: Process Industries 42% source: Company reports, Rexnord estimates. PMC: Process Industries 25% PMC: Aero + Consumer 36% Water Management 39% PMC: Process Industries 25% Primary Geographic Exposure Typical Cyclical Strength North Early Mid Late Platform Vertical Major Market America Europe APAC Cycle Cycle Cycle Comment PMC Process Materials Handling & Processing P P P P High Volatility PMC Consumer Food & Beverage Production P P P P P P Low Volatility PMC Aerospace Large Commercial Aircraft P P P P Long Order Cycles WM Plumbing Nonresidential Buildings P P P P New Construction & Retrofit WM Infrastructure Municipal Water & Wastewater P P P P P Low Correlation with Cycle 17

19 Supply Chain Optimization & Footprint Repositioning Progress Update 60 days added to 2-year execution timeline Four plant consolidations announced (three completed), plus exit of non-strategic product line Mexico facility made first commercial shipments in 1Q FY17 Reducing internal foundry capacity, selectively increasing outsourcing Incremental opportunities identified FY17 Execution FY18 New Current State Complete SCOFR Implementation Launch Initial Mid-Tier PT products FY17 earnings guidance includes est. $15 million nonrecurring expenses, $3 million pretax benefits FY17 est. restructuring expenses $16-18 million, capex $14-16 million Transition to new supply chain structure Launch initial Mid-Tier PT Products Structural Cost Savings Realized Substantial Cash Investment Complete FY18 net year/year benefit to Adjusted EBITDA est. $25 million FY18 net year/year benefit to Free Cash Flow est. $50 million Tax savings est. $5 million Lower fixed costs = more flexible cost structure, reduced maintenance capex 18

20 SCOFR Implications for Value Creation Leaner & More Flexible Cost Structure Lower Fixed Asset Investment Enhanced Free Cash Flow Reduced Maintenance Capex Enhanced Earnings Power Enhanced Returns on Invested Capital 19

21 Mar-10 Sep-10 Mar-11 Sep-11 Mar-12 Sep-12 Mar-13 Sep-13 Mar-14 Sep-14 Mar-15 Sep-15 Mar-16 Sep-16 Mar-17 Installed Base & Normalizing MRO Commodity Prices & US MPT Distribution ADS 20% Mar-10 to Sep-16 Avg US MPT Dist ADS (LHS) Apr-11 to Dec-14 Avg Commodities Index (RHS) % % 5% 0% Assuming normal growth in 3% range, installed base MRO can generate $30 million of EBITDA growth over a 3 to 4 year period (5%) 25 (10%) 0 source: IMF, US Federal Reserve, Rexnord estimates 20

22 Investments in Growth Process & Motion Control Water Management Market Share First Fit Aerospace Shipsets Market Expansion PT Select Food Industry Europe Expansion Related Products DiRXN TM Digital Rexnord Market Share Lean Construction Pre-Fab Expansion Spec Share Market Expansion Solid Surfaces Dubai Facility VAG NPD Zurn Adjacencies DiRXN TM Digital Rexnord 21

23 Measuring 3-to-5 Year Organic Opportunity Peak Adjusted EBITDA (FY14) $ 412 FY17 Est Adjusted EBITDA ~ $350 Foreign Currency Translation ($ 20) (@ recent exchange rates) + SCOFR $ 30 Normalized Peak Adjusted EBITDA $ MRO Normalization $ 30 Since then, Adjusted EBITDA from: Process Industries (40%-50%) + Organic Breakthroughs $ 40 + Industrial Capex Recovery?? Water Management +25%-30% = Organic Opportunity Aerospace + Consumer Industries +20%-30% FY17 Est Adjusted EBITDA ~ $350 Source: Rexnord estimates, company reports. FY17 Est Adjusted EBITDA consistent with midpoint of Adjusted EPS guidance, as of November 2, FY14 Adjusted EBITDA excludes exited Mill Products, RHF product lines. All figures $millions, except percentages. Plus... ~$1B of free cash flow 22

24 Rexnord Acquisitions Product Life Cycle Management Operational Excellence Planning Strategic Planning Proprietary Identification & Cultivation Internal Negotiation & Transaction RBS Integration Process Strategic process focuses on market leadership, leveraging competitive advantages Accelerates penetration of adjacent product categories, targeted vertical markets Proprietary process benefits both buyer and seller Target ROIC > WACC within months Strategic Rationale Add Diversify Diversify Strengthen Adjacent End Geographic Acquisition Year Platform Core Product Market Footprint Comment Cambridge FY17 PMC P P P P Food processing expansion Euroflex FY15 PMC P P P P India engineering & manufacturing Tollok FY15 PMC P P P P Product line extension Green Turtle FY15 WM P P Leading product technology Source: Company reports 23

25 Enhancing Growth Acquired Divested Cambridge Expands position in food industry Innovation, customer service leader Euroflex Share gains in weak EPG market Low-cost manufacturing, engineering center Mill Products Jumbo gears & pinions for crushing/rolling mills Limited replacement and/or service potential Rodney Hunt Fontaine Increasingly commoditized flow-control gates Limited replacement and/or service potential Tollok Expands position in windpower market Efficient manufacturing leveraged with SCOFR Green Turtle Fiberglass displacing sheet metal/concrete Specifiable product for site works 24

26 FY12 FY13 FY14 FY15 FY16 FY17E FY12 FY13 FY14 FY15 FY16 FY17E FY12 FY13 FY14 FY15 FY16 Rexnord Free Cash Flow & Leverage Free Cash Flow ($ millions) 250 Cumulative Unlevered Free Cash Flow ($ millions) SCOFR SCOFR 1000 $1.3B Free Cash Flow Conversion Outstanding Debt ($ millions) & Leverage Ratio 140% Total Debt Net Debt Net Debt / Adj EBITDA 120% 3, x 100% 2, x 80% 2, x 60% 1, x 40% 1, x 20% x 0% 0 FY12 FY13 FY14 FY15 FY16 3.0x Free Cash Flow = Cash Flow from Operations - Capital Expenditures Unlevered FCF = FCF less impact of cash interest FCF Conversion = Adjusted FCF / Adjusted Net Income source: Company reports, Rexnord guidance (11/2/16) Total Debt adjusted for new market tax credit receivable Net Debt = Total Debt - Cash & Equivalents Leverage Ratio = Net Debt / Adjusted EBITDA 25

27 Rexnord Capital Allocation FY12-1H FY17 Sources of Cash Operating Free Cash Flow 68% Beginning Cash 23% Divestitures & Other 9% Sources of Cash Operations have been the primary source of capital Divestitures have made incremental contribution Strategic Acquisitions Strategic acquisitions have been the primary use of capital Base case assumes reinvestment of annual free cash flow FY12-1H FY17 Uses of Cash Debt Reduction Covenant-light term debt, no required payments before 2020 maturity Target to reduce Net Debt / Adjusted EBITDA ratio to 3.0x Acquisitions 52% Debt Reduction 41% Share Repurchase & FX 7% Share Repurchases Offsets prospective dilution from employee compensation programs $200-million authorization with $160 million unused Acquisitions 52% source: Company reports 26

28 Rexnord Summary Rexnord Business System & Continuous Improvement Organization Aligned for Success Improved Portfolio Balance Organic Growth Initiatives Supply Chain Optimization & Footprint Repositioning Strategic Portfolio Changes Cyclical Opportunity 27

29 28

30 Process & Motion Control Agenda Kevin Zaba Group Executive & President Process & Motion Control Strategy & Profile Core Business Model & Competitive Advantages More Than Process Industries Solutions Core Growth Initiatives Digital Rexnord for PMC Executive Summary 29

31 Process & Motion Control Platform Vision: Be the leading global provider of high value, mission-critical solutions that help customers safely, reliably, and productively keep their goods and assets moving. Target: $25-billion global market opportunity PMC Reported Revenue ($mm) 1,800 Divestitures 1,600 PMC - Continuing 1,400 1,200 1, PMC Adjusted EBITDA ($mm) 450 Divestitures 400 PMC - Continuing FY12 FY13 FY14 FY15 FY % 25.1% 25.9% 25.0% 21.3% FY12 FY13 FY14 FY15 FY16 source: Company reports source: Company reports 30

32 Process & Motion Control Profile Broadly diversified across process, consumer/discrete, & aerospace markets Consumer/discrete & aerospace applications to account for ~45% of FY17 revenue Global installed base generates long-tail MRO demand Regional manufacturing & assembly capacity to serve local markets Distribution partners play critical role in customer service & support Total MRO demand drives >50% of revenue with high L4L replacement 31

33 PMC Major End Markets Industry Applications Representative Products Food & Beverage Commercial Aerospace Bulk Material Handling Beverage Filling Food Handling Food Processing Case Handling Container Making Flight Control Systems Aircraft Doors Airframe Structures Engine/APU/Gearbox Landing Gear Conveying Equipment Processing Machinery Hard Rock & Coal Mining Potash Mining Fertilizer Production Energy & Power Generation Electrical Power Generation Oil & Gas Compression Process Equipment Wind Turbines Construction Materials Cement Production Aggregates Processing Asphalt Production & Paving Lumber/Wallboard Prod. 32

34 PMC Power Generation Solutions 33

35 PMC Consumer Industries Solutions 34

36 PMC Aerospace Industries Solutions 35

37 PMC Commercial Execution Model High Customer Satisfaction New Application Engineering & Specification Long-Lived Customer Assets Rapid Fulfillment Capability High Rates of Like-for-Like Replacement Voice of Customer First Fit Installation Reliable & Predictable Service Life Component Replacement or Rebuild Event World-Class Customer Service & Support Components Wear in Use Proven model... strengthening execution efficiency across PMC 36

38 PMC Competitive Advantages New Application Engineering & Specification Established global brand with massive installed base Deep end-market expertise creates customer value & new product innovation First Fit Installation Total cost of ownership advantages drive strong end-user specification Dedicated technical & commercial teams for OEMs and End-Users World-Class Customer Service & Support Top-rated customer satisfaction amongst OEM, End-Users, & Distributors Tiered technical support model and self-serve tools = Ease of doing business Component Replacement or Rebuild Event Highly predictable, recurring product replacement / repair lifecycles Leading market share position with top-tier mechanical distributors High Rates of Like-for-Like Replacement Long history of market leading product performance, reliability, and breadth Like-for-like replacement commonly exceeds 80% Market leader with high margins & free cash flow 37

39 PMC Strategic Road Map PMC Growth Blue Print Rexnord Core Values Mission Critical Specified with High L4L MRO Deep Applications Expertise RBS & Continuous Improvement Amplify Rexnord Core Values Mission Critical Specified with High L4L MRO Deep Applications Expertise RBS & Continuous Improvement Product Market Leadership Product Centric Product-Defined SC & Footprint North America Focus Adjusting to Functional Org Structure Transition Platform Market Leadership Industry Centric Optimized & Integrated SC & Footprint Global Focus Leveraging Functional Org Structure Large Process & Aero Installed Base Premium Mechanical Components Operational Excellence Aftermarket / MRO Focus Historic & Respected Brands Compound Large Consumer Industries Installed Base Premium Tech-Enabled Solutions Commercial Excellence First-Fit Driven Digital Customer Experience Commercial & Operational Excellence + Innovation & Diversification 38

40 PMC Growth Initiatives 3 to 5 Years Commercial Excellence & Organic Portfolio Diversification First Fit Share Growth $50M+ sales impact goal Focuses commercial resources on critical initial specifications Builds installed base & future like-for-like MRO demand Leverages expanding LCR manufacturing (India, Mexico, Czech Republic) Consumer Goods / Food Portfolio Expansion $50M+ sales impact goal Enabled by Cambridge builds on beverage industry leadership Strong product development pipeline includes digitally-enabled Establishing Cambridge local presence in Europe PT Select Mid-Tier Products $35M+ sales impact goal Expands addressable market Strong value proposition for OEM machine builders Benefits from Rexnord brand, distribution & product support Commercial Aircraft Shipset Growth $20M+ sales impact goal Increased shipset share on current platforms Incremental shipset share on new platforms Expanded Europe-based presence 39

41 PMC Growth Initiatives Inorganic Portfolio Diversification - Example Strategy Level I Expand Total Addressable Market Balanced Sustainable Growth Strategy Level II Proprietary M&A Cultivation Leverage Competitive Advantages Strategy Level III Expand Foothold in Food Industry Acquire Leadership Position Cambridge Heritage of Innovation, Customer Service Synergies Within Multiple Vectors Focus on proprietary acquisitions in attractive adjacencies 40

42 PMC Growth Enabler Operational Excellence Supply Chain & Footprint (SCOFR) Clinton, Tennessee Monterrey, Mexico SCOFR & RBS deliver improved cost, workflow, productivity 41

43 Digital Rexnord DiRXN ( Direction ) Rexnord enterprise-wide initiative to enable improved customer productivity via digitally-connected tools, products, and services Differentiates by digitally connecting traditional mechanical solutions to control systems, engineering & asset management software, and IIoT Encapsulates our deep application knowledge into digital components for easy customer & partner use at each stage of their lifecycle Leverages common digital infrastructure across Business Platforms Unique deliverables to match end-market requirements Generating incremental value by digitizing mechanical connections across the customers operating lifecycle 42

44 DiRXN for Industrial Solutions Wave 1 WAVE 1 New! Digital Product Aids New! E-Commerce Capabilities New! Digitally-Connected Products Launching January $50M+ sales impact goal for Wave 1 43

45 PMC Executive Summary Expanded PMC Strategic Roadmap Strengthening our Robust Execution Model Gaining Traction with Growth Initiatives Enhancing Differentiation and Value with DiRXN Supply Chain & Footprint Optimization Benefits are On-Track Aggressively Deploying RBS and Continuous Improvement 44

46 Water Management Agenda Matthew Stillings Group Executive & President Water Management Strategy & Profile Core Business Model Competitive Differentiation & Value Creation Core Growth Initiatives Executive Summary 45

47 Water Management Platform Vision: Set the industry standard for the most efficient and safe management of water & wastewater with the greatest reliability and lowest total cost of ownership. Target: $15-billion global market opportunity Water Management Reported Revenue ($mm) 1,200 Divestitures 1,000 WM - Continuing Water Management Adjusted EBITDA ($mm) 250 Divestitures WM - Continuing % 17.0% 16.4% 16.7% 20.3% 0 FY12 FY13 FY14 FY15 FY16 (50) FY12 FY13 FY14 FY15 FY16 source: Company reports source: Company reports 46

48 Water Management Profile US nonresidential markets account for ~50% of sales Expanding specification share expands total addressable market Water & wastewater solutions sold primarily in EAME, APAC markets Regional manufacturing & assembly capacity to serve local markets Multiple channels to market, including direct sales in global markets Water efficiency & safety drive retrofit demand 47

49 Water Management Major End Markets 48

50 Building Specification & Construction Cycle 49

51 Zurn Competitive Differentiation Ease of Design / Fit Aesthetics Function Reduced cost/time Complexity reduction Uptime Water efficiency Lower cost of ownership BIM models Design visualization tools Web tools Solid surface integrated wash basins Lean Construction - Pre-fabrication - Weight-reduced products - Pre-tagging - Integrated bundles - Service Centers - Single point accountability - Complete content package Extended product life Water-saving fixtures & plumbing - Paired fixture & carrier LEED Certification 50

52 Architect / Engineer Value Creation Zurn In-Building Water Distribution Scope Maximizes Content One Zurn Solutions - single-source plumbing content Intuitive specification tools BIM visualization Application engineering pre-sale support Reps and Field Service team on site BIM (Building Information Modeling) 51

53 Contractor Value Creation Extensive Plumbing Installations Orlando Citrus Bowl Stadium Zurn enabled us to cut the installation time in half for water closets, urinals and lavatories. Feedback we received from other members of the project team indicated they were impressed by the speed of installation a week to two days, a day to a few hours. Jim Tharp, Owner/CEO Tharp Plumbing Systems, Orlando, FL 50% Labor Reduction 2,330 Hours Eliminated $102K Saved 52

54 Owner Value Creation Faucets: Ceramic disc cartridge $50 / faucet / year lower cost of ownership Flush Valves: Thermoplastic elastomers $25 / valve / year lower cost of ownership Carriers: Optimized for low flow fixtures 50 of line 1.1 gpf Less clogging 53

55 Zurn Value Delivery Global headquarters established in Milwaukee s Reed Street Yards Reed Street Yards is a governmentsupported global water technology hub New Zurn Customer Experience Center enhances training capabilities National Service Center Network Single purchase order for plumbing package Product delivered to site in one shipment Regional training 54

56 VAG Profile Powerful Family of Brands GLOBAL PRESENCE 7 Production Sites 10 Sales Entities 200 Agents 130 Countries 55

57 VAG Long-Term Growth Developed Economies: Aging infrastructure Environmental protection standards Pressure on established water supply Emerging Economies: Urbanization & industrialization Population growth Rising water stress Developing Economies: Water scarcity Inadequate wastewater treatment Inadequate electrical power gen 56

58 VAG Value Creation Big Silver Creek Hydropower Plant British Columbia, Canada Run-of-river power station located near Canada s southwestern coast supplies 20,000 households with electric power VAG Value Creation: Engineering Expertise Computational Flow Dynamics (CFD) Optimal Solution Selection Optimized System Design Anti-cavitation cylinders Downstream venting equipment Orifice plates in downstream pipeline sections Hydraulic brake & lift units for fast actuation CFD flow simulation of the system Problem: Fast-action bypass valve needed in case of turbine failure High pressure drop requirements Limited space available Cavitation-free operation Solution: Turbine bypass valve used in case of turbine failure 116-meter water column pressure reduction Two seconds to fully open Cavitation-free operation 40 VAG RIKO Plunger Valves installation on site 57

59 VAG Value Creation Eemshaven Power Plant Eemshaven, Netherlands Ultramodern coal-fired power plant provides reliable and affordable baseload power in the Netherlands VAG Value Creation: Application Engineering Studied accelerated corrosion in seawaterexposed bearing bushings Identified bacterial growth as root cause Developed special anti-bacterial material Developed process to line valve & bearing bushings with anti-bacterial material VAG RIKO Plunger Valve with internal rubber lining Problem: Valve bushing failures Accelerated corrosion in sea water application Valve must fit within existing infrastructure Retrofit must happen within 3 weeks Solution: All valves retrofitted with new bearing bushings within 3 weeks Supplied VAG EKN Butterfly Valves from 28 to 80 Supplied VAG RIKO 56 Plunger Valve VAG EKN Butterfly Valve with bearing section cut-away 58

60 Water Management Growth Initiatives Market Share Capture $40-60M sales impact goal Increase specification share BIM, Visual Design Tools, Web Tools Leverage Customer Service Center single delivery model Pre-fabrication, pre-tagging for Lean Construction One Zurn complete content packaged solutions Repeatable footprint account conversion Market Expansion / Adjacencies $50M+ sales impact goal Integrated solid surface products Zurn Dubai facility Water & wastewater geographic expansion 59

61 Water Management Summary Expand Specification Share Differentiate on Installation Cost with Products & Services Deliver Highest Reliability & Lowest Cost of Ownership Leverage & Expand Global Water Infrastructure Footprint Executing Market Share & Market Expansion Initiatives Disciplined RBS Execution 60

62 Questions & Answers Solving Smarter. 61

63 Appendix 62

64 Non-GAAP Reconciliations FYE March 31, FQE Sep 30, US$ in millions Net income from continuing operations $30.6 $47.3 $25.0 $91.8 $68.9 $24.6 Interest expense, net Provision (benefit) for income taxes (10.0) Depreciation and amortization EBITDA $326.0 $326.9 $231.0 $308.7 $292.8 $76.1 Adjustments to EBITDA: Actuarial loss on pension and post retirement benefit obligations $9.1 $5.5 $2.7 $59.4 $12.9 $ Impact of RHF product line exit (1) Loss on divestiture (2) 6.4 Loss on extinguishment of debt Restructuring and other similar charges (3) Stock-based compensation expense Acquisition-related fair value adjustment LIFO expense (income) (4) (1.7) (0.8) Zurn PEX loss contingency 10.1 Other expense (income), net (5) (3.1) 0.7 Subtotal of adjustments to EBITDA Adjusted EBITDA $376.2 $390.1 $404.7 $405.0 $365.5 $90.3 LTM Adjusted EBITDA $354.6 LTM pro forma adjustment for acquisitions 13.0 LTM pro Forma Adjusted EBITDA $367.6 (1) During fiscal 2016, the Company announced its decision to exit the Rodney Hunt-Fontaine ( RHF ) flow control gate product line within its Water Management platform. The operating loss (excluding restructuring and related charges) is not included in Adjusted EBITDA in accordance with our credit agreement. RHF results have not been excluded for FY (2) The loss on divestiture is the result of the Company's sale of a non-core subsidiary to a third party. (3) Represents restructuring costs comprised of work force reduction, lease termination, and other facility rationalization costs, including impairment charges. (4) Last-in first-out (LIFO) inventory adjustments are excluded in calculating Adjusted EBITDA as permitted by Rexnord s credit agreement. (5) Other expense (income), net includes the impact of foreign currency transactions, sale of property, plant and equipment, other miscellaneous expenses and recovery under the Continued Dumping and Subsidy Offset Act. 63

65 Non-GAAP Reconciliations (Continued) Q2 FY 2017 Q2 FY 2016 US$ in millions (except per share amounts) Net Income EPS Net Income EPS As reported, from continuing operations $24.6 $0.24 $22.6 $0.22 Amortization Restructuring Expense Acquisition-Related Fair Value Adjustment Supply Chain Optimization & Footprint Repositioning Program (1) Impact of RHF Product Line (2) All Other Non-Operating (3) Tax Impacts on Adjustments (4) (7.0) (0.07) (7.8) (0.08) As Adjusted $39.6 $0.38 $37.4 $0.36 (1) Represents accelerated depreciation associated with our strategic supply chain optimization and footprint repositioning initiatives. (2) Operating loss of RHF product line, excluding restructuring and other nonrecurring items. (3) Other income, net includes the impact of foreign currency transactions, sale of property, plant and equipment, and other miscellaneous income and expense. (4) The tax rates used to calculate adjusted net income and adjusted earnings per share are based on a transaction-specific basis at the applicable jurisdictional rate. 64