Pentair Electrical Products Group Conference John L. Stauch Chief - - PowerPoint PPT Presentation

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Pentair Electrical Products Group Conference John L. Stauch Chief - - PowerPoint PPT Presentation

Pentair Electrical Products Group Conference John L. Stauch Chief Financial Officer May 21, 2014 PENTAIR 2014 Electrical Products Group Conference FORWARD-LOOKING STATEMENTS C AUTION C ONCERNING F ORWARD -L OOKING S TATEMENTS This


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PENTAIR 2014 Electrical Products Group Conference

Pentair

Electrical Products Group Conference

John L. Stauch

Chief Financial Officer May 21, 2014

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PENTAIR 2014 Electrical Products Group Conference

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FORWARD-LOOKING STATEMENTS

CAUTION CONCERNING FORWARD-LOOKING STATEMENTS 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,” “goals,” “plans,”

“believes,” “expects,” “intends,” “will,” “likely,” “may,” “anticipates,” “estimates,” “projects,” “should,” “would,” “positioned,” “strategy,” “future,” "outlook," "opportunity" 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 successfully complete the Redomicile and achieve the expected benefits from the Redomicile; the ability to successfully integrate the Flow Control business and achieve expected benefits from such combination; 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 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 2013 Annual Report on Form 10-K. All forward-looking statements speak only as of the date of this communication. Pentair Ltd. assumes no obligation, and disclaims any

  • bligation, to update the information contained in this communication.
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PENTAIR 2014 Electrical Products Group Conference

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KEY DEFINITIONS

  • All References to 2015, 2016, and 2017 Represent Our Long Term

Strategic Goals

  • Except as Otherwise Noted, and Except for Sales, All References to

2014 Represent Our Results for the Period Indicated Presented on an Adjusted Basis

  • Except as Otherwise Noted, and Except for Sales, All References to

2013 are Presented on an Adjusted Basis

  • Except as Otherwise Noted, All References to 2012 are Presented
  • n an Adjusted, Pro Forma Basis to Include the Results of the Flow

Control Acquisition

  • See Appendix for GAAP to Non-GAAP Reconciliations
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PENTAIR 2014 Electrical Products Group Conference

KEY MESSAGES

  • We Continue to Expect to Deliver ~$5.00 EPS by 2015
  • Productivity & Synergies Solidifying
  • Sustained and Predictable Growth is Goal
  • We Are Optimistic About 2016 and Beyond

Delivering on Commitments One Quarter at a Time

4

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PENTAIR 2014 Electrical Products Group Conference

GLOBAL PENTAIR PORTFOLIO – 2013 SALES

Pentair has a Balanced Portfolio By Reporting Segment By Vertical

  • Long & Short Cycle

Balanced Portfolio

  • Global Solutions /

Recognized Brands

  • Largest “Valve

Company” Globally

  • Balanced Geographic

Exposure with 25% in Fast Growth Regions

  • Current Trends: US

Strength and Western Europe has Stabilized

  • Balanced Across

Verticals

  • Current Trends: Strength

in NA Residential and Food & Beverage; Industrial has Stabilized; Energy Mixed

Resi/Comm, ~24% Energy, ~28% Infrastructure, ~13% Industrial, ~26% Food & Beverage, ~9%

5

Valves & Controls ~33% Technical Solutions, ~22% Process Technologies ~23%

By Geography

U.S. and Canada, ~46% Western Europe, ~18% Fast Growth, ~25% Developed Non-U.S., ~11% 100% = $7.5B Flow Technologies, ~22%

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PENTAIR 2014 Electrical Products Group Conference

STRATEGY

DRIVING HIGH PERFORMANCE

A L I G N M E N T

HOW WE DIFFERENTIATE PENTAIR

  • Purpose, Vision & Strategic Priorities
  • Value Proposition & Competitive Advantage
  • Controlling Our Destiny

HOW WE EXECUTE

  • Standard Operating Model … PIMS
  • Organization Design … Corporate, GBUs, Fast Growth Regions
  • Functional Excellence … Standards & Practices

HOW WE WIN RIGHT

  • Win Right … Pentair Values
  • Leadership Behaviors … Top Talent
  • How We Work Together

Three Levers … Aligned To Achieve Our Goals

PROCESS & STRUCTURE CULTURE & TALENT

6

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PENTAIR 2014 Electrical Products Group Conference

2013 2014 2015 2013 2014 2015 2013 2014 2015

FINANCIAL TARGETS

7

Continued Progress Toward Becoming a Great Industrial Company Revenue ($B) Op Income EPS

~$7.7 ~$8.1

+3% ~4%

CAGR

+15% ~19%

CAGR

$944M ~$1.3B ROS 12.6% ~14% ~16% $3.21 ~$5.00

+22% ~25%

CAGR

  • Revenue Growth Accelerating

– Prioritizing Platform, Verticals, and Geographic Opportunities

  • Op Income Growth & EPS Driven by Base and Synergies

– Balance Between Base (+10%) and Synergies (+8%) While Investing in

Simplification / Standardization (-3%) and Sustainable Tax Benefits

Guidance Goal Guidance Guidance Goal Goal

$7.5 ~$1.1B $3.85 to $4.00

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PENTAIR 2014 Electrical Products Group Conference

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  • Adj. EPS Up ~13%
  • Tax Rate of ~23.5%
  • Net Interest ~$16.5M; Shares ~199M

Q2 Free Cash Flow Expected to be Strong; >125% of Net Income Q2’14 FINANCIAL OUTLOOK (YoY)

Expect Margin and EPS Growth Even With Tough Top Line Comp

Q2'14 PENTAIR OUTLOOK

Sales ~Flat to Down 1%

  • Valves & Controls Flat
  • Process Technologies Up ~6-8%
  • Flow Technologies Down ~20%
  • Technical Solutions Up ~4-6%
  • Adj. Op Income Up ~6% (Includes -10% From OMT & AUS Projects)
  • Adj. Op Margins ~14.7% … Up ~100 bps
  • Valves & Controls Margins, ~14.0%
  • Process Technologies Margins, ~17.5%
  • Flow Technologies Margins, ~12.5%
  • Technical Solutions Margins, ~20.0%

~$1.95B ~$285M ~14.7% $1.02-$1.05

Q2’14 Q2’13

Sales Op Income (Adj.) ROS (Adj.) EPS (Adj.)

$1.96B $268M 13.7% $0.92 ~($95M) ~($20M)

$M YoY %

Sales Op Income (Adj.)

~(5%) ~(7%) Total Pentair Water Transport Impact

YoY % YoY % ~(1%) ~13%

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  • Adj. EPS Up 22%
  • Tax Rate of ~23.5%
  • Net Interest ~($70M); Shares ~198.5M

Free Cash Flow of ~$850M; >105% Net Income FY’14 FINANCIAL OUTLOOK (YoY)

Current Outlook Consistent with Previous Guidance

FULL YEAR 2014 PENTAIR OUTLOOK

Sales Up ~2-4%

  • Valves & Controls Up ~1-3%
  • Process Technologies Up ~8-10%
  • Flow Technologies Down ~5-7%
  • Technical Solutions Up ~4-6%
  • Adj. Op Income Up ~15% (Includes $20M of OMT Investment)
  • Adj. Op Margins ~14.1% … Up ~150 bps
  • Valves & Controls Margins, ~13.5%
  • Process Technologies Margins, ~16.0%
  • Flow Technologies Margins, ~11.5%
  • Technical Solutions Margins, ~21.5%

Total Pentair ~$7.7B ~$1.1B ~14.1% $3.85-$4.00

FY’14 FY’13

Sales Op Income (Adj.) ROS (Adj.) EPS (Adj.)

$7.48B $944M 12.6% $3.21

YoY % YoY % ~3% ~22%

~($150M) ~($32M)

$M YoY %

Sales Op Income (Adj.)

~(2%) ~(3%) Water Transport Impact

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PENTAIR 2014 Electrical Products Group Conference

2013 2014F 2015T

REVENUE GROWTH (YoY)

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Underlying Growth Masked by Inherited Projects

+15% (6%) ~+14% (~6%) ~+17%

Core Growth 5% Core Growth ~5% Core Growth ~6%

WT/Mega (2%) WT ~(2%)

$7.5B $7.7B $8.1B

  • Water Transport & Thermal Mega Projects Impacted 2013 Growth
  • Water Transport / Divestitures (Small - Non Core) Impacting 2014
  • “Core” (Excluding WT) Grew +5% in 2013 and is Expected to

Grow ~5% in 2014 & ~6% in 2015

Water Transport Expected to be Approximately Flat to 2014

By Segment

Valves & Controls 2013 +4% 2014F +2% 2015T +6% Flow Technologies 2013

  • 1%

2014F

  • 6%

2015T +4% Flow Tech. WT Impact 2013

  • 5%

2014F

  • 9%

2015T +0% Process Technologies 2013 +8% 2014F +9% 2015T +7% Technical Solutions 2013

  • 3%

2014F +5% 2015T +8%

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PENTAIR 2014 Electrical Products Group Conference

2013 2014F 2015T

OPERATING INCOME GROWTH (YoY)

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Solid Contribution from Core / Synergies + Repositioning

Repositioning +11% +13% (5%) Core / Synergies WT / Mega

+19%

~(7%) ~+14% ~+8%

~+15%

~+16%

~+23% $944M ~$1.1B ~$1.3B

~+7%

OMT OMT

  • Solid “Core” Performance + Repositioning / Synergies Driving Healthy

Operating Income and Margin Expansion

  • Water Transport / Mega “Challenged” 2013
  • Water Transport + OMT Investment Impacting 2014
  • OMT Expected to “Flip” to a Positive in 2015 … Core / Synergies Accelerate

By Segment

Valves & Controls 2013 +24% 2014F* +12% 2015T +20% Flow Technologies 2013 +7% 2014F

  • 2%

2015T +20% Flow Tech. WT Impact 2013

  • 3%

2014F

  • 19%

2015T +0% Process Technologies 2013 +35% 2014F +20% 2015T +20% Technical Solutions 2013 +13% 2014F +16% 2015T +15%

*Includes OMT

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PENTAIR 2014 Electrical Products Group Conference

2013 2014F 2015T

EARNINGS PER SHARE GROWTH (YoY)

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Repositioning Shares / Taxes Base / Core WT / Mega

+13% +14% +5% (6%) ~+5% ~+11% ~+13% ~(7%) ~+7% ~+15%

+26% ~+22% ~+27%

$3.21 ~$3.93 ~$5.00

A Solid Mix of Contribution

~+5%

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PENTAIR 2014 Electrical Products Group Conference

SUSTAINED, PREDICTABLE GROWTH IS GOAL

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Building a Growth Culture is Next Step in Evolution

  • We Have a 14 Year Legacy of PIMS and Lean in the

Factory / Enterprise

  • Growth Tools Within PIMS Applied 4 Years Ago …

Building Momentum

  • 20 Defined “Technology / Application” Platforms Exist

Under the 5 GBU’s and 4 Reporting Segments − Measured − Held Accountable − Investment in Growth Not Equal, Must be Earned

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PENTAIR 2014 Electrical Products Group Conference

VALVES & CONTROLS (2013 SALES OF $2.5B)

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Platform Focus Leads to More Disciplined Resource Allocation

Vertical Key Product Technology Platforms (4)

Quarter Turn Pressure Management Gate, Globe, & Check Actuation & Controls

Geography

Energy 61% Industrial 39% U.S. & Canada 25% Fast Growth 40%

  • W. Europe

24%

  • Oth. Developed

11%

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PROCESS TECHNOLOGIES (2013 SALES OF $1.8B)

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Vertical Key Product Technology Platforms (7)

Aquaculture Hygienic Production Systems Advanced Filtration Food Service O&G Separation

Geography

Energy 3% Industrial 7% Residential & Commercial 58% Infrastructure 7% Food & Beverage 25% U.S. & Canada 60% Fast Growth 21%

  • W. Europe

16%

  • Oth. Developed 3%

Pool Water Purification

Platform Focus Leads to More Disciplined Resource Allocation

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PENTAIR 2014 Electrical Products Group Conference

FLOW TECHNOLOGIES (2013 SALES OF $1.6B)

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Vertical Key Product Technology Platforms (4)

Engineered Flow Water Transport Residential Flow Applied Water

Geography

Energy 6% Industrial 8% Residential & Commercial 34% Infrastructure 39% Food & Bev. 13% U.S. & Canada 42% Fast Growth 13%

  • W. Europe

10% Oth. Developed 35%

Platform Focus Leads to More Disciplined Resource Allocation

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PENTAIR 2014 Electrical Products Group Conference

TECHNICAL SOLUTIONS (2013 SALES OF $1.7B)

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Vertical Key Product Technology Platforms (5)

Equipment Protection Industrial Heat Tracing Electronics Thermal Building Solutions Mega Projects

Geography

Energy 25% Industrial 46%

  • Resi. &

Comm. 14% Infrastructure 13% Food & Beverage 2% U.S. & Canada 63% Fast Growth 16%

  • W. Europe

19%

  • Oth. Developed 2%

Platform Focus Leads to More Disciplined Resource Allocation

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OUR STANDARD OPERATING MODEL

Standard Operating Model Across the Enterprise

Lean Enterprise and Standardization Talent Growth

Rapid Growth Process

  • Rigorous 2X Funnel

‒ Market Coverage ‒ Verticals ‒ Fast Growth Regions

  • Alpha Test

3D Innovation

  • Discover, Develop, Deploy

Sales Excellence

‒ Opportunity Segments ‒ Coverage Design ‒ Sales Process ‒ Job Design and Organization Structure ‒ Resource Deployment ‒ Sales Talent and Management ‒ Productivity Metrics ‒ Performance Management and Compensation

Lean Enterprise

  • ERP Management

‒ Larger ERP Platforms ‒ Tax Efficient Processes

  • Shared Service Centers

‒ Scale Efficiency ‒ Process Excellence

  • Process Digitization

‒ Standard Tools ‒ Electronic Transactions

Manufacturing Excellence

  • Four Wall Lean

‒ Strategy Deployment ‒ Transformation Planning ‒ 5S ‒ Standard Work ‒ Creating Continuous Flow ‒ Material Flow ‒ Visual Management/MDI

  • Supply Chain

Logistics Optimization

  • Distribution Network
  • Lead Time Reduction

Service Excellence

  • Project Mgmt. Lean
  • Global Work Sharing

PIMS

Pentair Integrated Management System

Talent Management

  • Talent Acquisition
  • Talent Deployment

Organization Development

  • Organization Structure
  • Management Processes

Pay for Performance

  • Incentive Plans
  • Rewards and Recognition

Win Right Values

  • Customer First
  • Accountability for

Performance

  • Innovation
  • Positive Energy
  • Respect and Teamwork
  • Absolute Integrity
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PENTAIR 2014 Electrical Products Group Conference

“THE GROWTH PROCESS”

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The Key to Sustainable, Predictable Growth

Detailed Assessment Across 20 Platforms

Strategy Technology Innovation 3D Market Innovation RGP Core

Sales Excellence

Growth Tree Prior Year +/- Acq. / Div. % +/- FX % +/- Market % Global Analysis + NPI % + Projects % + Coverage/Penetration % Current Target Sales Excellence 1. Opportunity Segments 2. Coverage Design 3. Sales Process 4. Job Design and Organization Structure 5. Resource Deployment 6. Sales Talent and Management 7. Productivity Metrics 8. Performance Management and Compensation PIMS Tools

Differentiated Growth 2-3x Funnels Required Current State Future State

Transformation Plan For Each Platform

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CAPITAL ALLOCATION PHILOSOPHY

Disciplined Allocation Philosophy … Prioritized Towards ROIC

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Capital Allocation Uses (Assuming ~$2.4B Cumulative FCF from ’12-’15):

  • 1. Committed to Maintain Investment Grade Rating
  • 2. 37 Straight Years of Dividend Increases … Disciplined Cash

Management and Return of Cash to Shareowners

  • 3. Highest ROIC Comes From Funding Organic Growth Opportunities;

Focus on Most Attractive Growth Platforms

  • 4. Acquisitions or Share Repurchase: We Play in Attractive Spaces

Where Opportunities are Plentiful … Bolt-on’s Focused on Channel Expansion, Technology, and Geographies

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PENTAIR 2014 Electrical Products Group Conference

2012 2013 2014F 2015T 2016+ 2012 2013 2014F 2015T 2016+ 2012 2013 2014F 2015T 2016+

WHAT’S NEXT AFTER 2015?

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We are Optimistic About 2016 and Beyond

Operating Income Revenue EPS

  • Over $4B of Free Cash Flow Expected to

be Generated Between 2014 – 2017

  • Synergies Expected to Continue

Through 2017+

  • Tax Rate Expected to Approach ~20%
  • Dividends and Buybacks Expected

to Continue

  • New Acquisitions and/or Buyback Capacity

$7.3B $7.5B ~$7.7B ~$8.1B ~+6% $0.8B $0.9B ~$1.1B ~$1.3B $2.54 $3.21 ~$3.93 ~$5.00 ~+3% +19% +3% ~+23% ~+15% ~+22% ~+27% +26% ~5%+ ~15%+ ~15%+

Summary

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PENTAIR 2014 Electrical Products Group Conference

KEY MESSAGES

  • We Continue to Expect to Deliver ~$5.00 EPS by 2015
  • Productivity & Synergies Solidifying
  • Sustained and Predictable Growth is Goal
  • We Are Optimistic About 2016 and Beyond

Delivering on Commitments One Quarter at a Time

22

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APPENDIX

GAAP to Non-GAAP Measurements & Reconciliations

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REPORTED TO ADJUSTED 2014 RECONCILIATION

Pentair Ltd. and Subsidiaries Reconciliation of the GAAP “As Reported” year ended December 31, 2014 to the “Adjusted” non -GAAP excluding the effect of 2014 adjustments (Unaudited) Actual Forecast In millions, except per-share data First Quarter Full Year Total Pentair Net sales $ 1,725.2 approx $ 7,700 Operating income—as reported 179.9 approx 1,060

% of net sales 10.4% approx 13.8%

Adjustments: Restructuring and other 22.9 approx 23 Redomicile related expenses 1.5 approx 2 Operating income—as adjusted 204.3 approx 1,085

% of net sales 11.8% approx 14.1%

Net income attributable to Pentair Ltd. —as reported 118.6 approx 754 Loss on sale of business, net of tax 6.1 approx 6 Adjustments, net of tax 20.3 approx 20 Net income attributable to Pentair Ltd. —as adjusted $ 145.0 approx $ 780 Earnings per common share attributable to Pentair Ltd. —diluted Diluted earnings per common share —as reported $ 0.59 approx $3.71 - $3.86 Adjustments 0.14 approx 0.14 Diluted earnings per common share —as adjusted $ 0.73 approx $3.85 - $4.00

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REPORTED TO ADJUSTED 2014 RECONCILIATION

Pentair Ltd. and Subsidiaries Reconciliation of the GAAP “As Reported” year ended December 31, 2014 to the “Adjusted” non -GAAP excluding the effect of 2014 adjustments (Unaudited) Actual Forecast In millions First Quarter Full Year Valves & Controls Net sales $ 534.8 approx $ 2,520 Operating income—as reported 52.2 approx 330

% of net sales 9.8% approx 13.1%

Adjustments: Restructuring and other 9.5 approx 10 Operating income—as adjusted 61.7 approx 340

% of net sales 11.5% approx 13.5%

Process Technologies Net sales $ 418.3 approx $ 1,925 Operating income —as reported 46.3 approx 297

% of net sales 11.1% approx 15.8%

Adjustments: Restructuring and other 2.8 approx 3 Operating income—as adjusted 49.1 approx 300

% of net sales 11.7% approx 16.0%

Flow Technologies Net Sales $ 364.1 approx $ 1,505 Operating income—as reported 27.5 approx 163

% of net sales 7.5% approx 10.9%

Adjustments: Restructuring and other 8.5 approx 9 Operating income—as adjusted 36.0 approx 172

% of net sales 9.9% approx 11.5%

Technical Solutions Net sales $ 415.3 approx $ 1,745 Operating income—as reported 76.2 approx 372

% of net sales 18.4% approx 21.3%

Adjustments: Restructuring and other 2.9 approx 3 Operating income—as adjusted 79.1 approx 375

% of net sales 19.1% approx 21.5%

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REPORTED TO ADJUSTED 2013 RECONCILIATION

Pentair Ltd. and Subsidiaries Reconciliation of the GAAP “As Reported” year ended December 31, 2013 to the “Adjusted” non-GAAP excluding the effect of 2013 adjustments (Unaudited) In millions, except per-share data First Quarter Second Quarter Third Quarter Fourth Quarter Full Year Total Pentair Net sales $ 1,774.5 $ 1,963.7 $ 1,824.8 $ 1,916.7 $ 7,479.7 Operating income—as reported 74.3 225.9 240.0 233.8 774.0

% of net sales 4.2% 11.5% 13.2% 12.2% 10.3%

Adjustments: Inventory step-up and customer backlog 76.8 10.1 — — 86.9 Restructuring and other 27.4 32.4 8.7 61.6 130.1 Pension and other post-retirement mark-to-market gain — — — (63.2) (63.2) Trade name impairment — — — 11.0 11.0 Redomicile related expenses — — — 5.4 5.4 Operating income—as adjusted 178.5 268.4 248.7 248.6 944.2

% of net sales 10.1% 13.7% 13.6% 13.0% 12.6%

Net income attributable to Pentair Ltd.—as reported 51.7 154.1 172.8 158.2 536.8 Gain on sale of businesses, net of tax (12.5) — — (2.2) (14.7) Interest expense, net of tax — 1.6 — — 1.6 Adjustments, net of tax 80.8 33.5 1.1 18.0 133.4 Net income attributable to Pentair Ltd.—as adjusted 120.0 189.2 173.9 174.0 657.1 Earnings per common share attributable to Pentair Ltd.—diluted Diluted earnings per common share—as reported $ 0.25 $ 0.75 $ 0.85 $ 0.78 $ 2.62 Adjustments 0.33 0.17 0.01 0.08 0.59 Diluted earnings per common share—as adjusted $ 0.58 $ 0.92 $ 0.86 $ 0.86 $ 3.21

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REPORTED TO ADJUSTED 2013 RECONCILIATION

Pentair Ltd. and Subsidiaries Reconciliation of the GAAP “As Reported” year ended December 31, 2013 to the “Adjusted” non -GAAP excluding the effect of 2013 adjustments (Unaudited) In millions First Quarter Second Quarter Third Quarter Fourth Quarter Year Valves & Controls Net sales $ 585.8 $ 619.9 $ 611.5 $ 652.0 $ 2,469.2 Operating income (loss)—as reported (18.6) 56.9 76.6 46.5 161.4

% of net sales (3.2)% 9.2% 12.5% 7.1% 6.5 %

Adjustments: Restructuring and other 7.3 17.0 3.7 32.8 60.8 Inventory step-up and customer backlog 70.6 10.0 — — 80.6 Operating income—as adjusted 59.3 83.9 80.3 79.3 302.8

% of net sales 10.1 % 13.5% 13.1% 12.2% 12.3 %

Process Technologies Net sales $ 396.6 $ 477.6 $ 421.2 $ 470.5 $ 1,765.9 Operating income—as reported 43.4 76.8 57.1 65.9 243.2

% of net sales 10.9 % 16.1% 13.6% 14.0% 13.7 %

Adjustments: Restructuring and other 2.4 2.7 2.8 1.7 9.6 Inventory step-up and customer backlog 0.4 — — — 0.4 Operating income—as adjusted 46.2 79.5 59.9 67.6 253.2

% of net sales 11.6% 16.6% 14.2% 14.4% 14.2 %

Flow Technologies Net sales $ 390.6 $ 478.2 $ 397.2 $ 352.5 $ 1,618.5 Operating income—as reported 31.4 59.3 48.8 10.2 149.7

% of net sales 8.0 % 12.4% 12.3% 2.9% 9.2 %

Adjustments: Restructuring and other 5.1 3.9 0.7 14.4 24.1 Inventory step-up and customer backlog 0.2 0.2 — — 0.4 Operating income—as adjusted 36.7 63.4 49.5 24.6 174.2

% of net sales 9.4 % 13.3% 12.5% 7.0% 10.8 %

Technical Solutions Net sales $ 410.0 $ 397.4 $ 405.9 $ 450.1 $ 1,663.4 Operating income—as reported 53.3 65.1 82.2 84.4 285.0

% of net sales 13.0 % 16.4% 20.3% 18.8% 17.1 %

Adjustments: Restructuring and other 10.7 4.9 1.5 3.6 20.7 Tradename impairment — — — 11.0 11.0 Inventory step-up and customer backlog 5.7 — — — 5.7 Operating income—as adjusted 69.7 70.0 83.7 99.0 322.4

% of net sales 17.0 % 17.6% 20.6% 22.0% 19.4 %

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2012 PRO FORMA ADJUSTMENTS – TOTAL PENTAIR

Pro Forma Reconciliation Pro Forma Adjustments 2012 Total Pentair

(in millions, except EPS)

Historical Adjusted Results Historical Flow Control Acquisition Depreciation & Amortization Other Adjustments Adjusted Pro Forma Results First Quarter Sales 858.2 $ 995.9 $ — $ (74.0) $ 1,780.1 $ Operating Income 96.8 124.9 (17.1) (32.2) 172.4 Net Income 64.0 93.7 (12.8) (28.1) 116.8 Diluted EPS 0.64 0.44 (0.06) (0.48) 0.54 Second Quarter Sales 941.5 980.8 — (33.2) 1,889.1 Operating Income 134.5 143.5 (17.2) (24.0) 236.8 Net Income 83.7 107.6 (12.9) (14.0) 164.4 Diluted EPS 0.83 0.50 (0.06) (0.50) 0.77 Third Quarter Sales 865.5 1,019.8 — (16.0) 1,869.3 Operating Income 107.5 119.9 (17.3) 5.5 215.6 Net Income 65.5 89.9 (13.0) 6.4 148.8 Diluted EPS 0.64 0.42 (0.06) (0.31) 0.69 Fourth Quarter Sales 1,750.9 — — (7.1) 1,743.8 Operating Income 149.7 — — 16.6 166.3 Net Income 99.7 — — 12.7 112.4 Diluted EPS 0.47 — — 0.06 0.53 Full Year Sales 4,416.1 2,996.5 — (130.3) 7,282.3 Operating Income 488.5 388.3 (51.6) (34.1) 791.1 Net Income 312.9 291.3 (38.7) (23.1) 542.4 Diluted EPS 2.39 1.36 (0.18) (1.03) 2.54