Electrical Products Group 2019 Conference May 20, 2019 1 Safe - - PowerPoint PPT Presentation

Electrical Products Group 2019 Conference

May 20, 2019

1

Safe Harbor

This presentation includes “forward-looking statements” which are statements that are not historical facts, including statements that relate to the proposed transaction between Gardner Denver Holdings, Inc. and the Company; the mix of and demand for our products; performance of the markets in which we operate; our share repurchase program including the amount of shares to be repurchased and timing of such repurchases; our capital allocation strategy including projected acquisitions; restructuring activity; supplier disruption and our expectations for resolving the disruption; our projected 2019 full-year financial performance and targets including assumptions regarding our effective tax rate and other factors described in our guidance. These forward-looking statements are based on our current expectations and are subject to risks and uncertainties, which may cause actual results to differ materially from our current expectations. Such factors include, but are not limited to, the factors outlined in our presentation and webcast regarding the proposed transaction, global economic conditions, the outcome of any litigation, demand for our products and services, and tax law changes and

• interpretations. Additional factors that could cause such differences can be found in our Form 10-K for the year ended

December 31, 2018, as well as our subsequent reports on Form 10-Q and other SEC filings. We assume no obligation to update these forward-looking statements. This presentation also includes non-GAAP financial information which should be considered supplemental to, not a substitute for, or superior to, the financial measure calculated in accordance with GAAP. The definitions of our non-GAAP financial information are included as an appendix in our presentation and reconciliations can be found in our earnings releases for the relevant periods located on our website at www.ingersollrand.com. All data beyond the first quarter of 2019 are estimates.

2

Executing a Consistent Strategy that Delivers Profitable Growth

Transaction Benefits for Ingersoll Rand and Our Shareholders

4

Transaction Benefits for Current Ingersoll Rand Shareholders

5

§ Reverse Morris Trust structures transaction to be tax-free to both companies’ shareholders § At close, 50.1% of IndustrialCo owned by existing Ingersoll Rand shareholders, 49.9% owned by existing Gardner Denver shareholders § $5.8B1 in equity value § $1.9B in cash proceeds to ClimateCo § $7.7B1 total implied consideration for Ingersoll Rand Industrial, or ~11x 2019 Adj. EBITDA pre-synergies § Continued 100% ownership of ClimateCo § Ingersoll Rand to use cash proceeds for debt reduction, dividends, share repurchases, M&A and other corporate uses Creates Pure-Play Global Leader in Climate Company Stronger Combined Industrial Company Significant Value Creation From Combination § $250M annualized savings expected Strong Cultural Fit and Operational Excellence Focus Between Both Companies § Minimizes integration risk § Good fit for Ingersoll Rand employees Cash Proceeds to ClimateCo Enhance Capital Allocation Opportunities

Terms of the Transaction

1 Based on the 5-day VWAP of $27.75 as of 4/26/19.

Note: Information as of April 30, 2019 --- NOT AN UPDATE OR REAFFIRMATION

Global Sustainability Megatrends Play to Strengths of Pure Play ClimateCo

6

URBANIZATION RESOURCE CONSTRAINTS 60% of the population, or 5 billion people will be living in cities1* Expected 30-35% increase in food production2 1 billion new air conditioners installed3* ~15-60% increase in annual CO2e emissions (57-80B) metric tons with current practices2* CLIMATE CHANGE

Our solutions for buildings, homes and transportation reduce greenhouse gas (GHG) emissions and energy intensity of the world through:

• Innovation with low-GWP refrigerants
• Highly engineered efficient equipment & controls
• Electrification of heating and transport
• Predictive analytics and strong services
• Global reach and channel excellence

Well positioned to address up to 2%

• f world’s GHG emissions by 2030

*Timing: By 2030.

1 UN – “The World’s Cities in 2016” 2 World Bank 3 Economist, International Energy Agency

Note: Information as of April 30, 2019 --- NOT AN UPDATE OR REAFFIRMATION

ClimateCo Becomes Pure-Play Global Leader in Climate Control Solutions for Buildings, Homes, and Transportation

7

Pro Forma FY2019E

~$12.9B ~$2.0B

Revenues

• Adj. EBITDA

§ Complete portfolio of energy-efficient equipment, controls and services, continuing to generate top- tier growth and high recurring revenue streams § Proven business operating system designed to deliver strong top-line growth, incremental margins and powerful free cash flow § Above-GDP growth driven by global sustainability megatrends

Segment Mix1 Revenue Streams1

Commercial HVAC Equipment Transport Refrigeration Residential HVAC Commercial HVAC Service, Parts & Contracting 32% 68% Parts and Services Equipment

Regional Mix1

Latin America Asia Pacific Europe, Middle East, Africa North America 4% 71% 10% 15%

• World leader in HVAC

HVAC

• World leader in refrigerated

transportation

Transport Refrigeration

1 Reflects ClimateCo standalone pro forma FY2018A.

Note: Information as of April 30, 2019 --- NOT AN UPDATE OR REAFFIRMATION

ClimateCo Pro Forma Financials (Based On January 2019 Guidance)

8

~$12.9B ~$2.0B ~15.7% Less than 21% to 22% 3% to 4% 1% to 2% of Revenue >= 100% Adj. Net Income ~1.2x BBB $2.12 per Share ~$150M – $200M

ClimateCo FY2019E Pro Forma Metrics1

ClimateCo to mitigate $100M in estimated stranded costs from the transaction by the end of 2021 through complexity reduction, streamlining the organization, other costs Climate Revenue Climate Adj. EBITDA Climate Adj. EBITDA Margin Net Debt / EBITDA Annual Dividend Tax Rate Working Capital Target Free Cash Flow Capex

1

Revenue and EBITDA based on midpoint of January guidance.

Transaction Costs Target Credit Rating

Note: Information as of April 30, 2019 --- NOT AN UPDATE OR REAFFIRMATION

ClimateCo Pro Forma Financials (Based On January 2019 Adj. EPS Guidance)

9

~($1.75) ~($0.20) ~$0.30 ~$0.35

FY19 Guidance (With Industrial) Industrial Separation FY19 ClimateCo (Before Deployment of $1.9B Cash Proceeds) Interest on 2019 Borrowing Use of $1.9B Cash Proceeds ~$100M Stranded Cost Reduction FY19 ClimateCo (Pro Forma) $6.15 to $6.35 $4.40 to $4.60 $4.85 to $5.05 $0.6 to $1.0B debt pay down $0.9 to $1.3B share repurchase and M&A

1 2

Stranded costs eliminated by 2021 Illustrative full-year impact

1

Excludes pending PFS acquisition. Assumes 23.5% tax rate on Industrial operations.

2

Reflects $1.5B borrowing primarily for pending PFS acquisition.

3

Value shown assumes impact of share repurchase only. Assumes $1.9bn cash proceeds fully deployed 1/1/19 for illustrative purposes. 3

Note: Information as of April 30, 2019 --- NOT AN UPDATE OR REAFFIRMATION

First-Quarter 2019 Results

10

• Top-tier EPS growth driven by solid execution

−

• Adj. cont. EPS up 27% yoy
• Robust revenue growth led by Climate segment despite tough yoy comps

− Enterprise organic rev up 8% against 8% PY growth; Climate up 10% vs. 8% comp, Industrial up 3% vs. 9% comp

• Strong underlying bookings growth in most major businesses

−

CHVAC N.A., Europe, Res HVAC and Compression Tech N.A. organic bookings all up MSD to HSD

−

105% book to bill drove record backlog in Q1 2019

• Transport bookings significantly lower yoy, as expected, negatively impacting overall Climate / Enterprise bookings

−

2018 was an extraordinary year; 1.5 years of N.A. trailer and 2 years of APU booked in 2018

−

Transport backlog sufficient to meet 2019 targets; booking into 2020

• Effectively managing inflation and tariff headwinds; 90 bps adj. op. margin expansion

−

70 bps positive price versus cost − Operating leverage of 26% in-line with full year expectations

• Europe, China markets largely as expected with trade, Brexit uncertainty

− Continue to closely monitor

• Dynamic Capital Allocation

− ~$380M in dividends and share repurchases

• Exiting the quarter, remain bullish on strategy, end markets and execution

− Increasing EPS guidance to high end of prior range − ~$6.35 from ~$6.15 to ~$6.35

11

First Quarter 2019 Summary: Strong Start to the Year

* Includes certain Non-GAAP financial measures. See the company’s Q1 2019 earnings release for additional details and reconciliations.

Note: Information as of April 30, 2019 --- NOT AN UPDATE OR REAFFIRMATION

Healthy End Markets - No Significant Change to Expectations

12

• HSD order growth; LSD revenue growth against tough compares (low-teens) in Q1 ‘18
• Entering cooling season, solid demand outlook led by replacement market
• Economic indicators point to cont’d healthy mkts in Resi in 2019; LSD – MSD mkt growth

Residential HVAC

• Major CHVAC markets remain positive – cont’d solid bookings and revenue growth
• N.A. and Europe growth strong, outlook remains healthy
• China demand strengthened throughout qtr, flat-ish growth against tough prior year comps
• 2019 CHVAC global outlook strength continues w/ LSD - MSD mkt growth expected; key

economic indicators remain broadly supportive

Commercial HVAC

• Global Transport business diversified and resilient across trailer, truck, APU, aftermarket
• Transport backlog remains very high; sufficient backlog to meet growth objectives in 2019
• N.A. mkt remains strong; healthy outlook into 2020
• European transport markets soft as expected, closely monitoring; Brexit uncertainty
• LSD - MSD mkt revenue growth expected in 2019

Transport

Note: Information as of April 30, 2019 --- NOT AN UPDATE OR REAFFIRMATION

Healthy End Markets - No Significant Change to Expectations

13

Note: Information as of April 30, 2019 --- NOT AN UPDATE OR REAFFIRMATION

Continued Execution of Balanced Capital Allocation Strategy

14

Note: Information as of April 30, 2019 --- NOT AN UPDATE OR REAFFIRMATION

Summary: Expect Cont’d Strong Rev, EPS and Free Cash Flow in 2019

15

• Strategy tied to attractive end markets supported by global mega trends
• Franchise brands and businesses with leadership market positions
• Sustained business investments delivering innovation and growth,
• perating excellence and improving margins
• Experienced management and high performing team culture
• Operating model delivers powerful cash flow
• Capital allocation priorities deliver strong shareholder returns

Strategy Brands Innovation Performance Cash Flow Capital Allocation

Note: Information as of April 30, 2019 --- NOT AN UPDATE OR REAFFIRMATION