ITG Midwest Industrials August 2015
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, 2015. 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 August 4, 2015. 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 and why we use them. 1
Rexnord Overview FY15 Revenue: $2.05 billion FY15 Adjusted EBITDA: $396 million EBITDA Margin 20% PROCESS & MOTION CONTROL WATER MANAGEMENT FY15 Revenue: $1.23 billion FY15 Revenue: $0.82 billion EBITDA Margin 25% EBITDA Margin 15% Provide highly engineered mechanical Provide and enhance water quality, components used in complex systems safety, flow control and conservation in where reliability is critical and cost of specification-driven end markets downtime is high Note: Platform margins exclude corporate expenses. 2
Rexnord Historical Summary Adj EBITDA Ent Value ($millions) ($millions) 500 5,000 Adj EBITDA $ 4720 $ 3920 Enterprise Value 400 4,000 300 3,000 $ 1825 200 2,000 $ 907 100 1,000 0 0 FY03 FY04 FY05 FY06 FY07 FY08 FY09 FY10 FY11 FY12 FY13 FY14 FY15 Carlyle Apollo IPO Trade* Valued by Key Falk Zurn GA VAG Precision Euroflex Acquisitions source: Company reports, Capital IQ. * 52-w eek high. Consistent Focus on Value Creation 3
Rexnord Business Model Focus. Execution. Value. 5
Rexnord Value Creation 10-Year Revenue Growth ($mm) 2500 WM $2,050 PMC 2000 $820 1500 1000 $1,230 500 $811 0 10-Year Adjusted EBITDA Growth ($mm) 500 WM $396 PMC 400 $121 300 200 $307 100 $135 0 FY05 FY15 Note: EBITDA adjusted to exclude certain non-recurring items per SEC filings. CAGR calculated w ith consolidated EBITDA, including corporate expenses. 5
Process & Motion Control Profile FY15 Sales by End Market Serves $13+B fragmented global market Broad product portfolio of engineered products for General Food & Industrial Beverage heavy-duty applications in process industries, aerospace 31% 15% Transport Aerospace Reliability critical to avoid costly user downtime + 3% 14% Paper & small share of user system cost = Forest Products Bulk 80%+ like-for-like replacement 4% Material Const Energy Agri/Farm Handling Materials 8% 5% 12% & Eqpt 8% ~50/50 OEM & End User / Aftermarket FY15 Sales by Geography Shift to vertical market organization IT investments improve EODB, customer satisfaction US & Canada Focus resources on first-fit opportunities 63% Grow the installed base globally Invest in new products & complementary acquisitions ROW 12% Invest in faster-growing markets Latin Europe America Rationalize cost structure, supply chain 16% 9% Important Progress in FY15 6
Water Management Profile FY15 Sales by End Market Serves $5+B fragmented global market Broadest offering for water safety, conservation, and flow Nonresidential: Commercial control in specification-driven applications in building Water & & Industrial Wastewater construction, water & wastewater treatment & supply 29% Infrastructure 37% Nonresidential: Small share of user project cost Institutional but critical to system performance and reliability 22% Residential 12% ~60/40 New Construction / Replacement & Retrofit FY15 Sales by Geography Leverage go-to-market scale Focus resources on driving specification share with US & Canada owners, architects, engineers 71% Facilitate changing sourcing & construction practices Invest in new products & complementary acquisitions ROW 14% Expand presence, relevance in adjacent channels Europe Rationalize cost structure, supply chain 13% Latin America 2% Leveraging Competitive Advantages 7
Supply Chain Optimization & Footprint Repositioning Access New Enable More Product Repositioning Lower Cost Segments, Structural COGS Growth in Key / Market Manufacturing Channels, Markets Reduction Product Lines Competitiveness Strategy or Geographies Supply Chain Optimization & Footprint Repositioning Plan: Enable the long-term profitable growth of Strategic product lines Operations Commercial Structural COGS Reduction Sustainable & Profitable Growth Relocation to LCR locations / increased Access New Segments (General variable manufacturing model Purpose) / Channels (OEM) COGS Reduction Targets (from JOP) Growth Targets (from JOP) PL #1 $4M PL #4 $3M Growth in Key Product Lines PL #2 $5M PL #5 $10M +$X.XM (GP) PL #3 $3M Tax Benefit $5M $30 million savings exiting FY17 Permanent Fixed Cost Reductions & Growth Enabler 8
Repositioning Future Global Footprint North America FY15 Europe FY15 Rest of World FY15 5.5 million sq ft 2.4 million sq ft 1.0 million sq ft CURRENT FUTURE North America FY18E Europe FY18E Rest of World FY18E ~4 million sq ft ~2 million sq ft ~1 million sq ft Targeting 20+% Net Reduction of FY15 Footprint 9
Strategic Acquisition Process Process Characteristics Target Characteristics RBS-directed = rigorous & standardized Accretive to core growth Integrated into strategic planning process Attractive margin, cash flow profile Proprietary funnel Sustainable competitive advantages Experienced internal teams ROIC > WACC within 12-36 months Recent Acquisition Activity Strategic Rationale Add Diversify Grow Strengthen Adjacent End Non-NA Acquisition Year Platfom Core Product Market Geography Comment P P P P Euroflex FY15 PMC India manufacturing P P P P Tollok FY15 PMC Product line extension P P Green Turtle Technologies FY15 WM Leading product technology P P Precision Gear Holdings FY14 PMC Aerospace & energy focus P P LWG FY14 WM Australia distribution P P P Micro Precision FY14 PMC Airframe diversification Scalable Capital Deployment 27
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