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Pentair Investor & Analyst Day
September 14, 2011New York, NY
Pentair’s 2011 Investor & Analyst Day
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TodayToday’’s Agendas Agenda
Welcome Investors & Analysts
8:30 – 8:35 Review Agenda Sara E. Zawoyski
8:35 – 9:20 Global Growth…Focused and Forward Randall J. Hogan
9:20 – 9:50 Innovation & Technology Philip M. Rolchigo
10:20 – 10:55 Globalization & PIMS Michael V. Schrock
9:50 – 10:20 Rapid Growth Todd R. Gleason
10:55 – 11:25 Filtration Solutions: CPT Netha N. Johnson
11:25 – 12:00 Accelerating Performance & ROIC John L. Stauch
12:00 – 12:30 Q&A and Closing Remarks Randall J. Hogan
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Any statements made about the company’s anticipated financial results and 2015 financial outlook,targets, goals and estimates are forward-looking statements subject to risks and uncertainties such as the company’s ability to integrate the CPT acquisition successfully; the magnitude, timing and
scope of recovery from the global economic downturn; the strength of housing and related markets; foreign currency effects; material inflation outpacing our productivity and pricing actions; retail,
commercial and industrial demand; increased risks associated with operating foreign businesses; product introductions; pricing and other competitive pressures; and the company’s ability to achieve its long-term strategic operating outlook, targets, goals and estimates, as well as other risk factors
set forth in our SEC filings. All 2015 financial outlook, targets, goals and estimates are based in part
on certain assumptions we make, some of which are referred to in, or as part of, the forward-looking statements; for example, they assume that the company does not make any acquisitions or
divestitures. We cannot provide any assurance that the assumptions referred to in the forward- looking statements or otherwise are accurate or will prove to have been correct. Any assumptions that are inaccurate or do not prove to be correct could have a material adverse effect on our ability
to achieve the results that the forward-looking statements contemplate. Forward-looking statements included herein are made as of the date hereof, and the company undertakes no obligation to
update publicly such statements to reflect subsequent events or circumstances. Actual results could differ materially from anticipated results.
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Global GrowthFocused and Forward
Randall J. HoganRandall J. HoganChairman & Chief Executive Officer Chairman & Chief Executive Officer
Pentair Investor & Analyst Day
September 14, 2011New York, NY
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A Decade of Positive Transformation
PentairPentair – – A History of ChangeA History of Change
~20%20% of Salesin Fast Growth
Region
~5%5% of Sales inFast Growth
Regions
Expanded Tech
Product Offerings,Acquired ~$200M
in Sales
~17%17% ROS
Tech ProductBusiness
TodayTodayEarly 2000Early 2000’’ss Mid 2000Mid 2000’’ss
Tools Largest
Business Sold Tools,
Acquired >$1B in
Water Revenues
Portfolio of ~25
Smaller Businesses;
Manufacturing
Oriented
Global Water
Business,
Product Focus
More Global Filtration
Sales, Acquired
A Leading MembraneLeading Membrane
TechnologyTechnology Company
Began Lean
Enterprise inTech Products
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Shareholder Value CreationShareholder Value Creation……
Total Shareholder Return of PNR from 1/1/01 – 8/31/11 vs. the S&P 500
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011
PNR S&P 500
2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011
A Decade of Differentiated Performance
Outperforming the S&P 500Outperforming the S&P 500by >200% since 2001by >200% since 2001
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“Reshaping Pentair to Emerge Stronger”
Maintain Growth Investments
– Innovation – Developing Markets
Accelerate Cost Reduction
Plans and ImproveProductivity
Continue PIMSAdvancements
Generate More Cash Flow
Just 2 Years AgoJust 2 Years Ago……
2009 Stated Strategy2009 Stated Strategy
Strong Organic Growth
A Recognized InnovationLeader
Globally Balanced
Lean & Growth
Strong Culture and
Expanded Capability
20092009’’ss ‘‘TomorrowTomorrow’’
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TodayToday …… WeWe’’ve Invested More in Growthve Invested More in Growth
Yielding More Innovation and Sustainable Growth
$57$62
$58
$67
~$83
1.7%1.9% 2.1%
2.2%2.4%
2007 2008 2009 2010 2011e
($M) % of Sales
Research & DevelopmentResearch & Development
IFB India XiroRO System
C o n s i s t e n t l y
I n c r e a s i n g R &
D a s % o f s a l e s
Containerized RO Systems Anaerobic MBR
IntellifloVariable Speed Pump
Spectracool Narrow
Newly Acquired CPT Award
Innovative Sustainable SolutionsInnovative Sustainable Solutions
Filtration System for Shale Gas
Biogas UpgradingSystem
Onga Rainswitchin Malaysia
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Ultrafiltration
• Desal pre-treatment• Water reuse• Drinking water
Ion ExchangeFiltration
Reverse Osmosis
Nanofiltration• Desalination• Industrial Wastewater• Industrial Processes
DisinfectionUV, Ozone,ClO2
EmergingDesalination
Recent CPT Acquisition Helped Fill In Technology Roadmap
Membrane Bioreactors• Water reuse
‘High Eff.Systems’
Emerging Maturing Mature Early Cycle
…… Advanced Technology CapabilitiesAdvanced Technology Capabilities
Cooling & Protective Enclosures• Advanced Materials• Anti-explosion Applications
= Enhanced Capabilities
with CPT
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Expecting ~30% of Sales in Fast Growth Regions by 2015
…… And Expanded GloballyAnd Expanded Globally
Sales Geographic MixSales Geographic Mix
Fast Growth
~14%
DevelopedNon-US~20%
Fast Growth
~19%
DevelopedNon-US~22%
2009 Sales$2.7B
UnitedStates~66%
UnitedStates~59%
Addressing theGrowing Demandsof the ‘New’ NewWorld
Broad Array ofSolutions withGrowing Application
Expertise andRegional Focus
More AdvancedProduction
Capabilities &Expanded Capacity
2011e Sales~$3.5B
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……Improved Sales and MarginsImproved Sales and Margins
Lean Enabled … Not Recovery Led
’’0909 – – ’’11 Drivers11 Drivers
14% Sales CAGR; CPTAcquisition Adding 4pts
• Solid Execution
• Strong Fast Growth Regions
Margin Expansion 240bps
• Cost Reductions Yielding Results• Strong Productivity
• Volume Leverage
On Track for Record Profits
and Margins Contingency Plans Ready …
If Market Requires
Sales & ROSSales & ROS
$2.7B$3.0B
~$3.5B
9.6%
11.0%~12%
2009 2010 2011e
Revenue Adj. Operating ROS
CPT
*All Results are on an Adjusted Basis. See Reconciliation to US GAAP in Attached Appendix.
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…… Accelerated Lean and PIMSAccelerated Lean and PIMS
Safety, Quality, Delivery, Cost and Cash Focus
Developing Top Talent
Prioritizing Investments & Innovation
Building Growth Capabilities
Global Lean Advancements and New Growth Tool
LEANENTERPRISE
LEANENTERPRISE
‘ Ne w Too l ’ in
P I M S Too l k i t
More Per va s i ve,
Ad vanc in g Wa ter
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Annualized Dividends*Annualized Dividends*
$ 0 . 8 0
$ 0 . 0 1
19 7 6 19 8 0 19 8 5 19 9 0 19 9 5 2 0 0 0 2 0 0 5 2 0 11
Pentair Has Increased Dividends for 35 Consecutive Years*Dividends Adjusted for Splits and Stock Adjustments. All Results are on an Adjusted Basis. See Reconciliation to US GAAP in Attached Appendix.
Free Cash Flow ($M)Free Cash Flow ($M)
Strong Free Cash Flow Conversion Fuels Dividend Growth
Adj. NI FCF in excess of Adj. NI
Free Cash Flow Conversion Consistently>100% of Adj. Net Income
Dividend Payout Ratio >30%
…… Generated Strong Cash FlowGenerated Strong Cash Flow
$207M $212M
>$250M
2009 2010 2011e
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14Consistent Strategy and Strong Execution Driving Performance
TodayToday……
Strong Organic Growth
A RecognizedInnovation Leader
Globally Balanced Lean & Growth
Strong Culture and
Expanded Capability
20092009’’ss ““TomorrowTomorrow””
Strong Organic Growth
A RecognizedInnovation Leader
Globally Balanced Lean & Growth
Strong Culture and
Expanded Capability
IsIs ““TodayToday’’ss”” RealityReality
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15Well Positioned in Attractive $70B Market
Water BusinessWater Business …… ~$2.5B Today~$2.5B Today
Filtration/Treatment
~$900M
Pumps
~$850M
Agriculture
~$150M
~$70B
Market
Pool
~$500M
PNR Water SalesPNR Water Sales
Market Growth Rate: ~6%
2011e Geography Mix:~59% US
~22% Non US Developed
~19% Fast Growth Regions*
In Emerging Markets … InfrastructureNeeds; Growing Consumption; andAgricultural Demands
In Developed … Aging Infrastructureand Significant Installed Base
Globally … Improved Efficiency,Conservation and Automation
Market DriversMarket Drivers
Water Sales & ROSWater Sales & ROS
CPT added
~$10B of Market
Opportunity
~$2.4B
~$3.3B
$1.8B$2.0B
10.3% 11.3%
0.14~16% +
~12%
2009 2010 2011e . . . . . . . . . 2015
* Fast Growth Regions include China, Latin America, India, SE Asia, Eastern Europe, the Middle East and Africa
Goal
ROS
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CPTCPT A Global Leader in Membrane
Technology & Ultrafiltration
2010 Sales: ~$300M
Bolstering High Growth, Technology-Driven Strategy
High Fit AcquisitionsHigh Fit Acquisitions
Hidro FiltrosHidro Filtros A Leader in Point of Use
Filtration in Brazil
2010 Sales: ~$10M
MarketMarket
LeadershipLeadership
Fast GrowthFast Growth
RegionsRegions
ApplicationApplication
ExpertiseExpertise
InnovativeInnovative
TechnologyTechnology
WuxiWuxiExpanding Manufacturing
Presence in China
Vertical Integration
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Market Growth Rate: ~4%
2011e Geography Mix:~63% US
~24% Non US Developed
~13% Fast Growth Regions
Best Getting Better in Margin … Meaningful Global Opportunity
Technical ProductsTechnical Products …… ~$1B Today~$1B Today
Protective
Enclosures
& Cabinets~$715M
Cooling Solutions
$110M
>$15B
MarketComponents &
Accessories
$165M
PNR Technical Product SalesPNR Technical Product Sales Technical Products Sales & ROSTechnical Products Sales & ROS
Fast Growth
Region Sales
Growing >30%
in 2011
Energy & Infrastructure … to Power &Support Human Development
Industrial … Automation to Drive
Productivity and Serve GrowingMiddle Class
Communication … Greater ConnectivityDemands Everywhere
Market DriversMarket Drivers
$1.0B
$0.8B
~$1.3B
~$1.1B
13.0%15.3%
0.185~17%
~20%+
2009 2010 2011e . . . . . . . . . 2015
Systems$100M
ROS
Goal
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Our VisionOur Vision
Making Significant Progress Towards Vision
A diversified industrial growth company…
A global enterprise and responsible citizen known
for operational excellence, innovation, attracting
top talent and growing by serving customers well…
Delivering superior long-term shareholder value…
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TodayToday’’ss …… Consistent, Focused StrategyConsistent, Focused Strategy
Well Positioned for 2012 and Beyond
Invest in Innovative Technology& Application Expertise
Taking PIMS to the Next Leveland Leveraging New Rapid
Growth Tool
Continue to Build Scale in FastGrowth Regions
Innovate Around Sustainability,Energy Efficiency and Safety
Strategic PrioritiesStrategic Priorities
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LongLong--Term AssumptionsTerm Assumptions
Realistic Market Assumptions + Growth Initiatives = Differentiated Growth
What We Are PlanningWhat We Are Planning
Slow Developed Market Growth
Moderate to Strong Developing Market Growth
New “Unlevered” Economic Base
11
22
33
Developed
Fast GrowthRegions
+20%
Organic Growth
+9%
+10%
+20%
+3 – 4%
+6 – 7%
’’0909 – – 1111
ActualsActuals (ex CPT)(ex CPT)
’’1111 – – 1515
AssumptionsAssumptions
Innovation, New Markets
& Lean Continue to DriveGrowth in Developed
Growing ‘New’ New WorldNeeds ... PNR WellPositioned
Acquisitions Play KeyRole in Technology & GeoExpansionCPT Acq. Impact ~4% ~1%
+ + +
(5 months in 2011)
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ROICROIC
Adj. Operating MarginAdj. Operating MarginSales ($B)Sales ($B)
Financial Performance & LongFinancial Performance & Long--term Goalsterm Goals
Growth + Productivity Focus Yielding Profitable, Sustainable Results
$2.7$3.0
~$4.6
~$3.5
2009 2010 2011e* . . . . . . . . 2015
9.6%11.0%
~16%
~12%
2009 2010 2011e* . . . . . . . . 2015
~7% CAGR
’11 – ‘15
2015 Target
~16%
Adj. EPSAdj. EPS
$1.47
$2.00
>$4.50
~$2.42 -
$2.50
2009 2010 2011e* . . . . . . . . 2015
6.2%
8.2%
~15%
>8.5%
2009 2010 2011e* . . . . . . . . 2015
>15% CAGR
’11 – ’15
2015 Target
~15%
*All Results are on an Adjusted Basis. See Reconciliation to US GAAP in Attached Appendix.
Goal GoalGoal Goal
Goal Goal
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The HeadlinesThe Headlines ……
Mega Trends Remain Unchanged…
TodayToday’’s Worlds World…… Our End MarketsOur End Markets
Robust Fast Growth Regions
Steady Industrial Europe Mixed
Challenged US Municipal
and Consumer … >80%US Residential is Replacement
Contingency Plans Definedand Ready if Needed
Strong Execution onGrowth Initiatives
Strong Execution onGrowth Initiatives
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23Trends are Undeniable…
Global Mega TrendsGlobal Mega Trends
WaterTechnicalProducts
Water & Tech Prod
Innovation
Water & Tech Prod
Efficiency &
Sustainability
Water
Water Scarcity
Infrastructure
Population & Wealth of
“New” New World
Food
Globalization
Energy
Water TechnicalProducts
Water & Tech Prod
Health, Safety &
Security
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U.S Residential
23%
Non-U.S.Residential
12%
Agriculture 4%
Commercial11%
Infrastructure10%
Industrial40%
2011e Sales2011e Sales
by Verticalby Vertical
Sales: ~$450M
Beverage, Energy & Med.
Filtration (~1/2); Pumps (~1/2)
Industrial
Sales: ~$150M
Ag/AquacultureAgriculture
View by VerticalView by Vertical
U.S.
Sales: ~$70M
Infrastructure
Sales: ~$390M
Industrial
Mega Trends Directly Align with Pentair Portfolio
Fast Growth
Sales: ~$215M
Communications(incl Industrial)(incl in Comm’l)
Sales: ~$150M
Foodservice
Water Technical Products
Infrastructure
Sales: ~$300M
Reuse &Desalination (~1/2);Large Pumps (~1/2)
Vertical Highlights Vertical Highlights
(incl Commercial)
Energy
Sales: ~$115M
(incl Industrial)
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2000 2030
Emerging Global Middle ClassEmerging Global Middle Class
Expanding Middle Class Driving Resource Demand
52
35
14 13
10 8
98
69
2027
1411
China India Brazil Indonesia Turkey Mexico
2010 2015
120 Million More Middle Class120 Million More Middle ClassHouseholds by 2015Households by 2015 …… PuttingPutting
Additional Strains on Water,Additional Strains on Water,Food and EnergyFood and Energy
> 7 0 % P r e d
i c t e d G r o w t h2 0 10 - 2 0 15
Growing Middle Class HouseholdsGrowing Middle Class Households (millions)(millions)
Sources: Middle Class Data: EIU, PREI Research, Pipal Research analysis / Residential Markets: U.S. Bureau of the Census, National Bureau of Statistics of China / Consum tion: 2030 Water Resources Grou
2000 2030
406 ̂15 btu
4.5 T m 3
6.9 T m 3
735 ̂ 15 btu
>50%
Significant Increases in Global ConsumptionSignificant Increases in Global Consumption
>80%
prediction
prediction
Energy
Water
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Fast Growth Region OpportunityFast Growth Region Opportunity
Stronger Capabilities Fueling >20% CAGR in Fast Growth RegionsSource: IMF, Pipal Research analysis
GDP GrowthGDP Growth
4.5%
4.5%
4.6%
4.6%
4.8%
7.5%
8.2%
9.6%
3.8%Poland
S. Korea
Brazil
Mexico
Turkey
Russia
Saudi Arabia
India
China
~$1.3BGoal2015
~$0.3B2006
Fast Growth Region SalesFast Growth Region Sales
~$0.7B2011e
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Technology Innovation Plays a Major Role inClosing the Gap
Commercial & Industrial Efficiency (Reuse)
and Desalination are Key Newly Acquired CPT Provides Technology of
Choice for Pretreatment in Desalination andMembrane Bioreactor Solutions
Water ScarcityWater Scarcity
Technology Plays a Major Role in Closing Water Gap
Existing Accessible,Sustainable
Water Supply
2030 Water Demand
40% Water Gap
Economic Growth & Development = GrowingDemands for Water Supply
Agricultural Demand, Water Consumption
per Capita & Industrialization DrivingDemand
“Business as Usual” is Insufficient to Closethe Water Gap
2030 Water Resources Group Report
Strategic Focus on SolutionsStrategic Focus on SolutionsChallengeChallenge
GWI. Global Water Market 2011
Desalination
Reuse
0
3
6
9
12
15
1990 1994 1998 2002 2006 2010 2014
A n n u a l a d d i t i o n a
l c a p a c i t y
( m i l l i o n c u b i c m e
t e r s / d a y )
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Water Reuse SolutionsWater Reuse Solutions
Hospitality
Ritz Carlton Hotel, Bangalore, India
$3B+ Water Reuse Market Today … And Rapidly Growing
Breweries
Polar Brewery, Caracas, Venezuela
Venues
Target Field, Minneapolis, MN, USA
Shopping Centers
WTC Shopping Mall, Sao Paulo, Brazil
Dairy
Daisy Brand, Garland, Texas, USA
Food & Beverage
Nestlé, Cabuyao, Philippines
Water Reuse is Emerging EverywhereWater Reuse is Emerging Everywhere ……
System Integration Expertise Plus Application KnowSystem Integration Expertise Plus Application Know--How Position Pentair WellHow Position Pentair Well
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V e r t i c a l s / G e o
Beverage ofthe Future
Products
Protective Enclosures forElectric Vehicle
Charging Stations
Aquaculture
Megablock
MBR
Anaerobic MBR
Nanofiltration
Precision Ag
Leverage CorePortfolio of
Products & Solutions
Across Channels
Gas Recovery
RO Skids/ Containerized
Innovation, Efficiency & SustainabilityInnovation, Efficiency & Sustainability
Innovations Serve Exciting Growth Markets
POU Filtration,Specific for FastGrowth Regions
Cooling
Eco-Select VariableSpeed Pumps
E x i s t i n g
N e w
Existing New
A Few Examples of Innovation ….
Our Customers ExpectSmart and EfficientSolutions that areEconomical, Renewableand Reliable
PNR’s Portfolio Well
Positioned WithMembrane Technology,CO2 Systems, Valves,Vessels, Control &
Measurement, Pumps …
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Health, Safety & SecurityHealth, Safety & Security
Providing Technology That Keeps People Healthy, Safe & Secure
Safety & SecuritySafety & SecurityHealthHealth
Enclosures for systems that monitor radioactive and nuclear materials
Supporting critical railway infrastructure in China with
protective enclosures and control panel cabinets.
Providing airports with cabinets that housesensitive electronics, ensuring passengerscan reach their destinations safely
Enclosures for security applications at Ground Zero in
New York.
Point of Use / Point of Entry filtration providing safe, clean water
• Significant industrial and municipal wastewater
pollution challenges water supply.• <40% of municipal wastewater is treated, and
often not to acceptable standards.
• Emergence of a large middle class (from 4% ofpopulation in ’05 to >50% in 2030), will drivehousehold water consumption higher.
Rising Water Quality Challenges
Water Quality Source: 2030 Water Resources Group Report
In China, for example
Counter TopModel
UF and Advanced Carbon
RO and/or UF with Carbon
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Pentair is Committed to SustainabilityPentair is Committed to Sustainability
Recognized As a Leader in Sustainability and Humanitarian Efforts
Received 2011 International Corporate Award;Recognized as a Global Leader and Citizen forProject Safewater Initiative
Recognized for Global Water Quality ReliefEfforts
Fifth Annual Million Shades Of
Green Gala
2011 Environmental Business of the Year;Recognized for Innovation and SustainableSolutions at Twins’ Target Field
Recognition In Our Communities … And Globally
Establishing Global Leadership Position in Water Issues
Project has demonstrated that solutionsare cost-effective
In Honduras alone, Project Safewater
has helped 300,000 people gain accessto clean, safe water
www.ProjectSafewater.com
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’’0909 – – ’’1111ee
Sustainable, Profitable GrowthSustainable, Profitable Growth
’’1111 – – ‘‘1515
MarginExpansion
RevenueCAGR
Leverage Fast Growth
InvestmentsServe/Expand Our
Installed Base
Accelerate Systems &Innovation Capabilities
Infuse Rapid GrowthProcess into Culture/PIMS
Continue LeanAdvancements
~14 %(incl 4 pts CPT)
+120 bps / year
> 100% NIConversion
FCFGeneration
Adj. EPSfrom cont. ops
CAGR
> $4.50 Earnings Power and 15% ROIC Goals by 2015
Goals
~30%
~7%( incl ~1 pt CPT)
+100 bps / year
>15%
> 100% NIConversion
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What YouWhat You’’ll Hear Todayll Hear Today……
Focused and Forward Thinking on Growth
• Today’s Portfolio Reflects Technology, Innovation andFast Growth Region Strategic Focus
• Mega Trends Provide a Broad Array of Opportunity
• Execution on Growth and Productivity Initiatives areStrong, Focused and Prioritized
• Pentair Integrated Management System FuelsOperational Excellence and Growth
• Pentair is Well Positioned to Deliver Profitable,Sustainable Growth & Shareholder Value
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Building A Sustainable
Innovative Platform
Philip M. Rolchigo, PhDPhilip M. Rolchigo, PhDVP, Technology VP, Technology
Pentair Investor & Analyst Day
September 14, 2011New York, NY
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• People
– A Strong Organization With ExpandingGlobal Capabilities & Technical
Competencies
• Process
– A New Lean, Customer-Focused NewProduct Development Process
– A Solid Pipeline Of New Products
• Technology – Investments In High Growth Technology
Platforms To Transform Our Future
Today’s Discussion …
Establishing Pentair’s ‘Thought Leadership’ Position
Building A Sustainable Innovation PlatformBuilding A Sustainable Innovation Platform
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• People
– A Strong Organization With ExpandingGlobal Capabilities & Technical
Competencies
• Process
– A New Lean, Customer-Focused NewProduct Development Process
– A Solid Pipeline Of New Products
• Technology – Investments In High Growth Technology
Platforms To Transform Our Future
Today’s Discussion …
Establishing Pentair’s ‘Thought Leadership’ Position
Building A Sustainable Innovation PlatformBuilding A Sustainable Innovation Platform
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Building Key Competencies To Drive GrowthBuilding Key Competencies To Drive Growth
0
50
100
150
00
50
00
50
00
Technical
Products
Flow
Technologies
Filtration
Technologies
Well Positioned To Innovate Across All Pentair Platforms
Technology Resources(Indexed to 2006)
Key Takeaways
Tech Products - Rapidly Globalizing
– Building Capabilities In China, India & Latin
America Flow Tech - Advancing & Globalizing
– Strengthening Advanced EngineeringCapabilities In Europe & India
– Building Design & Manufacturing Capabilities
In China
Filtration Tech - Advancing & Globalizing
– Continue To Advance Strong MembraneScience Competencies
– Continue To Build & Globalize Total Solutions& Systems Capabilities
– Building Strength In Controls
2006 2011 2015e
Technology Resources up 45%Since 2006; Expected to Increase
Another 25% by 2015
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Creating Value In Fast Growth RegionsCreating Value In Fast Growth Regions
Advancing Global Capabilities Faster Than Costs
0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100%
2015
2011
20062006
2011
“Idea To Reality” Capabilities (% Total Headcount)
Sustaining Eng - 68 %
New Product Eng - 75 %
0 20 40 60 80 100 120
2015
2011
20062006
2011
“In Region For Region” New Product Focus (% Total Headcount)
2015e
Global Support - 94 %
In Region - 45 %
2015e
33 %
6 %
72 %
32 % India Design Center Shifted SignificantlyFrom Sustaining To New Product
Development Focus China Design Center Supports Both New
Product Development & LocalManufacturing Activities
India Targeting > 25 % “In Country”Focus By 2015
China Maintaining Its Already StrongFocus Above 70 %
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India Design Center (IDC)
– Engineers for All GBU’s co-located
• Expertise in Engineering Analytics
• Electronics & Controls
• Water Treatment System Design – ‘State of the Art’ NPD Labs
• Rapid Prototyping (2011)
• Electronics Development & Testing (2011)
• Pump Development & Testing (2011)
• Filtration Lab (planned 2012 - 2014)
China Design Center (CDC)
– New Product Development
• Melt Blown & Carbon Filtration
– ‘State of the Art’ NPD Labs
• Energy Application Lab
• Analytical Capabilities Mirroring PRF
• Filtration Lab I, II, & III (‘08, ‘10, ‘12 planned)
Energy Applications Lab
Product Development & Analytical Testing Lab
India Design Center China Design Center
In Region For Region R&D Facilities … A Key To Growth
Investing To Support Global CapabilitiesInvesting To Support Global Capabilities
>30% EngineeringResources in
Fast GrowthRegions
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““In Region, For RegionIn Region, For Region”” …… IndiaIndia
Low Cost, High Functioning Microprocessor ControlPanel For Pretreatment & RO Systems
50% Of The Cost & Size Of a Traditional PLC Design
Discover To Deploy In 6 Months
Standard Designs To Meet AggressivePerformance & Cost Targets
– Standard Pretreatment Designs IncludingMultimedia, Water Softening & Aqualine
Systems For Flow Up To 500 GPM – Standard RO Systems With Capacities
From 1 to 250 GPM
Standard Pretreatment & RO Systems
Smart Controller For RO Systems
Nearly Doubled New Product Launches In Fast Growth Regions In Last 2 Years
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• People
– A Strong Organization With ExpandingGlobal Capabilities & Technical
Competencies
• Process
– A New Lean, Customer-Focused NewProduct Development Process
– A Solid Pipeline Of New Products
• Technology – Investments In High Growth Technology
Platforms To Transform Our Future
Today’s Discussion …
Establishing Pentair’s ‘Thought Leadership’ Position
Building A Sustainable Innovation PlatformBuilding A Sustainable Innovation Platform
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Pentair Integrated Management SystemPentair Integrated Management System
Safety, Quality, Delivery, Cost and Cash Focus
Developing Top Talent
Prioritizing Investments & Innovation
Building Growth Capabilities
LEANENTERPRISE
LEANENTERPRISE
Extending our Lean Principles & Discipline To Growth
3D E bli I i Wi h A P
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3D3D……Enabling Innovation With A PurposeEnabling Innovation With A Purpose
Development DeploymentDiscovery
Funnel
Product Development
RAPID
&
Technology
Research A Lean New Product Development Process
– “Customer” Focus Throughout Entire Process
– Portfolio Analysis Scorecards To ID Best Opportunities
– Standard Work For Best Practice Sharing
– Input, Process & Output Metrics To Drive Improvements
Web Based Workflow To Facilitate Process Speed
Faster Cycle Times … Increased Innovation … Improved Quality
P f li A l i A Cli k AP f li A l i A Cli k A
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44Prioritization Of The Right Investments
Portfolio Analysis A Click AwayPortfolio Analysis A Click Away
Filli Th F l T D i Vi liFilli Th F l T D i Vit lit
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DD
0
50
100
150
200
250
300
350
400
450
500
Q1 2010 Q3 2010 Q1 2011 Q3 2011e
Targeting +2 Pts Of Growth Annually From New Products
Project Count
Filling The Funnel To Drive VitalityFilling The Funnel To Drive Vitality
Projected Revenue
DiscoverDiscover (Garage)
DevelopDeploy
Launch
New Product Pipeline
Growing At A Steady Pace
Discover
~$1.5B
Develop
~$0.7B
Deploy~$0.3B
> $1B of New Product Ideas
in Current Pipeline
New Product & Solutions RoadmapNew Product & Solutions Roadmap
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Filtration
Technologies
Flow
Technologies
Beverage
Solutions
Advanced Treatment
Systems
New Product & Solutions RoadmapNew Product & Solutions Roadmap
Recent Launches Coming Soon
Launch Rates Up +50 % In Past 3 Years … Some Exciting Examples
Water & Energy Efficiency Solutions…A Key Focus
A Secret for Now…
A Secret for Now…
A Secret for Now…
A Secret for Now…
A Secret for Now…
A Secret for Now…
A Secret for Now…
A Secret for Now…
A Secret for Now…
A Secret for Now…A Secret for Now…
A Secret for Now…
Helical Membrane Air Dryer
SmartRO Controller
HomeSpring POU UF
Variable Speed APLEX
Low Footprint UF Pump
IntelliFlo 2.0
Beer Membrane Filter
365 IT Dairy Valve
Spirits On Tap
MegaBlock MBR
Low & High Brackish RO Systems
Anaerobic MBR
Filt ti T h l iFiltration Technologies
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Dry Air Is Critical To Proper Functioning Of Industrial & Medical Equipment
Moisture In Compressed Air Systems Leads to MicrobiologicalContamination, Process Upsets and Equipment Failure
Desiccant Air Drying Technology Has A Number Of Drawbacks – Poor Energy Efficiency & Unreliable In Small Flow Applications
– Potentially Hazardous Microbiological Contamination For Medical/Dental Applications
“The Challenge”
Innovative Membrane Technology Enables Safe, Efficient Performance
“Pentair Innovation”
New FluidPro Membrane Air Dryers
– Proprietary Composite Hollow Fiber Membrane
• High Material Strength To Ensure Reliability
• Surface Chemistry Engineered For High Vapor Transfer Eff.
• Microbiological Barrier
– Patented Helically Wrapped Hollow Fiber Module Design
• Highest Air Efficiency in the Industry
• Compact Design
Filtration TechnologiesFiltration Technologies
Flow TechnologiesFlow Technologies
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4848
The Oil & Gas Market Is Growing Rapidly
– But Requires A High Pressure, Variable Flow Source Of Water For SteamActivation, “Fracking” & Reinjection
Minimizing Downtime Is Critical – Complex Pump Arrays To Manage Variable Flow & Back-up Typical
– Complexity Impedes Serviceability
“The Challenge”
“Pentair Innovation”
Innovative High Efficiency Design … Increasing Process Reliability
APLEX High Pressure, Variable Speed Piston Pump
– Pressure Lubrication System
• Allows Variable Speed / Flow Operation
– Superior Serviceability• Crankshaft Bearings Serviceable w/o Crankshaft Removal
• Fluid End Can Be Serviced Without Removing Piping
Flow TechnologiesFlow Technologies
Flow TechnologiesFlow Technologies
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“The Challenge”
“Pentair Innovation”
System Specific Pump Designs
– Footprint Reduced By 10 to 20%
– Energy Reduced By 5 to 15 %
Current Applications In Ultrafiltration (UF),Membrane Bioreactors (MBR) &Microfiltration (MF) Systems
Flow TechnologiesFlow Technologies
Filtration Systems Use Catalogue Pumps Designs
– Suboptimal System Energy Efficiency
– Increased Use Of Cleaning Chemicals Due To Layout Constraints – Suboptimal Footprint & Use Of Valuable Mfg Space
Combined Flow & Filtration Expertise … Innovative Advanced Systems
Still Verifying
Beverage SolutionsBeverage Solutions
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505050
Diatomaceous Earth (DE) Filtration
– The Legacy Method For Beer Filtration Prior To Bottling
– Health & Safety Risks of DE
– Cost of Solid Waste Disposal
Shelf Life & Taste Stability Are Key Parameters That Can Drive Brewery Profits
“The Challenge”
“Pentair Innovation”
+25 Full Scale Reference Sites … > $ 20M Annual Opportunity
Membrane Beer Filtration System
– Proprietary Hollow Fiber Membrane
– Integrated System Design
– Lower TCO Than DE Filtration – Improved Beer Taste Stability & Shelf Life
– Increased Beer RecoveryOptiBMF
Beverage SolutionsBeverage Solutions
Beverage SolutionsBeverage Solutions
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5151
Mixed Drinks Drive Higher Profits Than Beer, But…
Profits Offset By Bartender Variability
– Speed, Quality, Consistency & Integrity Auto Dispense Systems For Mixed Drinks Do Not Exist
“The Challenge”
Innovation In Food Service … Lower OpEx & Increased Profits
Spirits On Tap System
– Programmed Formulas
• Consistent Drink Quality
• Improved Speed of Service
• Controlled Pour Volume and Ratio
– Transparent Operations
Beverage SolutionsBeverage Solutions
“Pentair Innovation”
Spirits
Advanced Water Treatment SystemsAdvanced Water Treatment Systems
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525252
Demand For Water Reuse Increasing Due To Water Scarcity And RisingWater/Wastewater Discharge Costs
Municipalities Seeking Retrofit Opportunities To Expand Capacity And
Increase Revenue
Best Available Solutions Include Membrane Bioreactors & Ultrafiltration,But Retrofits Often Complex & Costly To Operate
“The Challenge”
“Pentair Innovation”
Innovative Integrated Design Enables Efficient Performance
MegaBlock Membrane Bioreactor
– Compact, Integrated Pump & Membrane DesignMinimizes Footprint & Simplifies Retrofit Implementation
– Best In Class Performance• Lowest TCO Including Energy
• Leading UF Membrane High Quality EffluentMegaBlock
Advanced Water Treatment SystemsAdvanced Water Treatment Systems
Advanced Water Treatment SystemsAdvanced Water Treatment Systems
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535353
Demand For Industrial Water Reuse Accelerating Due To Rising Water &Wastewater Costs & Regulatory Pressures
Many Industrial Applications Require Anaerobic Bioreactors To Digest Waste
Anaerobic MBR Not Easily Applied To Complex, Anaerobic Reactors
“The Challenge”
“Pentair Innovation”
Innovative Membrane Technology Enables Efficient Performance
Anaerobic Membrane Bioreactor
– Proprietary Cross Flow Membrane Technology
– Improved Anaerobic Efficiency & Energy Recovery
• High Levels Of Methane Production (up to 30% )
Makes Energy Recovery Economical
• Higher Quality Water For Reuse(> 98% COD Reduction vs. < 90% w/ Conventional ) Anaerobic MBR
Advanced Water Treatment SystemsAdvanced Water Treatment Systems
Building A Sustainable Innovation PlatformBuilding A Sustainable Innovation Platform
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• People
– A Strong Organization With ExpandingGlobal Capabilities & Technical
Competencies
• Process
– A New Lean, Customer-Focused New
Product Development Process
– A Solid Pipeline Of New Products
• Technology
– Investments In High Growth TechnologyPlatforms To Transform Our Future
Today’s Discussion …
Establishing Pentair’s ‘Thought Leadership’ Position
Building A Sustainable Innovation PlatformBuilding A Sustainable Innovation Platform
Global Water & Wastewater MarketsGlobal Water & Wastewater Markets
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Growing Market Opportunities … Informing Our Technology Roadmap
Water Markets
• Global Opportunity With Emerging Markets Growing 3-4Pts Faster Than Developed
• Deteriorating Source Water Quality Driving Point OfEntry (POE) Industrial Treatment
• Scarcity & Tightening Discharge Regulations DrivingOn-site Wastewater Treatment & Reuse…saving Energy& Improving Supply Predictability
Source: Global Water Intelligence Report June 2007, 2010 & Fredonia Group 2009
Global Water & Wastewater MarketsGlobal Water & Wastewater Markets
2009 2016
Water Reuse
Commercial & Industrial Desal
Muni Desal
Industrial Water Treatment
> 15 CAGR
$ 15 B
$35 B
Water Technologies Market ~ $ 5B (2009)
w/ >10% CAGR Through 2016
0 0.5 1 1.5 2 2.5 3
C&I Systems
Muni 'Mega 'Systems
UF & MBR
UV
RO Membranes
Conventional Pretreatment
Ozone
Desal Pumps
Energy Rec Devices
Membrane Vessels
Largest &
Fastest
Growing
Technology
Markets
Significant
Opportunities
To Leverage
PNR’s Core
Competencies
2009 2016
2009 2016
Water Reuse
Commercial & Industrial Desal
Muni Desal
Industrial Water Treatment
> 15 CAGR
$ 15 B
$35 B
Developing A Leading Technology PortfolioDeveloping A Leading Technology Portfolio
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5656
Ion ExchangeFiltration
Reverse Osmosis
NanofiltrationDesalinationIndustrial WastewaterIndustrial Processes
UltrafiltrationDesal pre-treatment
Water reuseDrinking water
DisinfectionUV, Ozone, ClO2
EmergingDesalination
High Growth Technologies + Multiple Applications Accelerate Growth
Membrane BioreactorsWater reuse
‘High Eff.
Systems’
Emerging Maturing Mature Early Cycle
Developing A Leading Technology PortfolioDeveloping A Leading Technology Portfolio
Investing Here!
ProElite Water Softening PlatformProElite Water Softening Platform
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5757
“Pentair Innovation”
The ‘Best in Class’ Design … But The Challenge Not Fully Addressed
Patented Design Enables ‘Best In Class” EfficiencyMinimizing Salt usage
User Friendly Operation Due To Advanced Controller &
Remote Monitor
Stylish, Unique Design
gg
“Soft” Water Is Critical To Energy Efficient Operation Of Household Appliances,And Commercial & Industrial Equipment
Ion Exchange Water Softening Technology Is Mature But Has Many Drawbacks
– The Process Increases The Sodium Content In The Water Treated
– Concentrated Salt Solutions Discharge To Waste During Operation
– Bans exist In 4 States & > 60 Communities
“The Challenge”
Developing A Leading Technology PortfolioDeveloping A Leading Technology Portfolio
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5858
Ion ExchangeFiltration
Reverse Osmosis
NanofiltrationDesalinationIndustrial WastewaterIndustrial Processes
UltrafiltrationDesal pre-treatment
Water reuseDrinking water
DisinfectionUV, Ozone, ClO2EmergingDesalination
Capacitive Deionization … One Of The Most Promising New Desal Technologies
Membrane BioreactorsWater reuse
‘High Eff.
Systems’
Emerging Maturing Mature Early Cycle
Developing A Leading Technology Portfoliop g g gy
Investing Here!
Investment In Capacitive
Deionization Technology
How Capacitive Deionization WorksHow Capacitive Deionization Works
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Step 1 - Desalination
– Desalination & Softening Occur Simultaneously
– A Highly Scale Resistant Process Due To The
Positive & Negative Ions Being Collected Separately
– Energy Stored During Desalination
Step 2 - Regeneration – Salts Discharged When Electrical Potential
Removed
– During Discharge Ions Collected In A Small Sweep
Volume Enabling High Net Water Recovery
– A Highly Energy Efficient Process Enhanced ByEnergy Recovered During discharge
A Potential RO Market Disruptor With Many Applications
o Capac t e e o at o o sp
Saltless Water Conditioning SystemSaltless Water Conditioning System
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“Pentair Innovation”
Changing The Game With A Leading Technology Platform
g yg y
Simultaneous Softening & Desalination
– Superior Quality, Low Sodium Water for
Process & Drinking Applications Chemical Free Operation &
NO Salt To Haul
“Smart” Controls For Efficient,User Friendly Operation
Proprietary To Pentair With 9 PatentsPending
Launch Planned For 2H 2012
A Significant Opportunity – +1 Million Softeners Sold Annually
Developing A Leading Technology PortfolioDeveloping A Leading Technology Portfolio
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6161
Ion ExchangeFiltration
Reverse Osmosis
NanofiltrationDesalinationIndustrial WastewaterIndustrial Processes
UltrafiltrationDesal pre-treatment
Water reuseDrinking water
DisinfectionUV, Ozone, ClO2EmergingDesalination
Membrane Technology…The Innovative Core Of Many Solutions
Membrane BioreactorsWater reuse
‘High Eff.
Systems’
Emerging Maturing Mature Early Cycle
p g g gyp g g gy
Establishing PNREstablishing PNR’’ss
Leadership Position inLeadership Position in
Membrane Technology!Membrane Technology!
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6262
Membrane Technology VideoMembrane Technology Video
Membrane Separation SpectrumMembrane Separation Spectrum
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Micro
Filtration
Ultra
Filtration
Nano
Filtration
Cryptosporidium, Giardia, Bacteria, Human Cells
Viruses, Colloidal Particles, Oil Emulsions
Proteins & Large Complex Organic Molecules
Dyes, Pesticides, Herbicides,
Pharmaceuticals, Divalent Salts (Hardness),
Some Heavy Metals
Heavy Metals, Monovalent Salts
Water
Membrane Technology Enables Numerous Commercial Applications
Advanced Membrane Performance
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• Longer Membrane Life• Lower Energy Requirements
• Improved Separation Efficiency• Low Fouling & New Applications
Material Science is the KeyMaterial Science is the Key
Material Science…The Key To Continued Innovation
• Material Strength• High Porosity
• Pore Size Control• Surface Chemistry Control
Creating
Real ($$)
Value
Advanced Manufacturing TechnologyAdvanced Manufacturing Technology
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Diameter Control Flow & Porosity Control
Fiber Strength Control Uniform Pore Distribution Control
The Key To Quality … How Do We Do It ? … A Secret Forever
0
0.01
0.02
0.03
0.04
0.05
0 10 20 30 40 50 60 70
rp (nm)
d j / d r p PESU Norit
PVDF Zenon
CPT
Competitor
Pentair Technology Driving GrowthPentair Technology Driving Growth
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A Strong Global Technology Team WithAn Increasing Focus On “In Region, ForRegion” Innovations
Gaining Traction With 3D, Our NewLean Product Development Process
A Solid Portfolio Of New Product IdeasIn the Pipeline To Drive Growth
An Established Leadership Position InFlow, Filtration & MembraneTechnologies
Pentair’s Leadership Position Strengthening Everyday
TomorrowToday
Continued Focus On Globalization &Region Specific Innovation
A Steady Stream Of Innovative NewProducts & Growing New ProductVitality
Continued Investments In ProprietaryHigh Growth Technology Platforms
– Advancing Our Membrane & FiltrationTechnologies
– New, High Impact Applications
– An Advancing Disinfection Platform
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Rapid Growth ProcessBuilding Differentiated Growth Capabilities
Todd R. GleasonTodd R. GleasonVP, Marketing & Strategy VP, Marketing & Strategy
Pentair Investor & Analyst Day
September 14, 2011
New York, NY
Cultural Transformation
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Investing to Also Transform “Growth Mindset”
Continuation of our cultural transformation …
From
Decentralized Businesses
To
Global Businesses &Global Processes
(e.g. PIMS, Talent Management)
From
Mostly U.S. Based Business
To
Truly GlobalCompany
(More than 40% of Sales Outside U.S.)
68
Pentair Integrated Management System
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Satisfying Customers Through Lean
Discipline in Talent Management
More Product Innovation
Growth Capabilities
Building On Our Lean Principles and Growth Discipline
LEANENTERPRISE
LEANENTERPRISE
Adding Growth To ToolkitAdding Growth To Toolkit (Introduced 2010)(Introduced 2010)
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• Growth Mindset
– How We Identify Growth Opportunities
– How We Are Positioning For Growth
• Implementing World-class
Process – Consistent / Executable Methodology
– Top-Down / Bottom-Up Commitment
– Global Deployment
– Drive & Monitor Results
Taking Growth From A Game of Luck To A Game of Skill70
Rapid Growth Process: Introduced in 2010
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Growth as a Game of Skill … Not Chance71
Develop, Test and Refine
Growth Initiatives
Develop, Test and Refine
Growth Initiatives
33
Generate New
Growth Concepts
Generate New
Growth Concepts
22Define Growth
Strategy &Priorities
Define Growth
Strategy &Priorities
11Select and Resource
Growth Initiatives
Select and Resource
Growth Initiatives
44
Execute on Growth Initiatives
Execute on Growth Initiatives
55
Monitor Results
Monitor Results
66
Price UniquelyBetter
Product
Hassle-FreeResults
Expertise
Costs Benefits
Products“What we
sell”
Service“How we do business”
Offer Innovation Go-to-Market Innovation
Customer / Growth
Rapid Growth Process
Management System Tuned for Growth
(Perf. Management System, Planning, Talent Development, Values/Norms, Other)
High Level Overview
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efficient Prioritization of key
growth opportunities based on granular
market details
Priority 1
Example
Fast Growth
MarketsPriority 3
Influence
Each Other
Influence
Each Other
11 22 33
evaluate growth Concepts to
help “inform” priorities and determine
best initiatives
Funnel of Ideas Funnel of Ideas Funnel of Ideas
Alpha Test concepts to “prove”
Initiatives before we strongly invest
India Residential
Water
i2
• Significant Need
• Retail & Distribution
• Ready To Move Quickly
Initiative 3i3
Ensure Priorities Aligned … Move Fast on Initiatives72
Rapid Growth Process: “The Foundation”
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737373
Numerous RGP Activities Creating Growth Traction
• Methodology: Established “Pentair” Process
• Leadership: Global Growth Council
– Each Business & Function Represented
– Each Business & Region Promoting Rapid Growth Leaders
• Education: 500 Employees Trained Across Pentair
– Each Business & Corporate Function & Each Region (From KC to Suzhou)
– Online Training Rolling Out Q4 2011
• Global Communications
– Intranet Leadership Messaging & Best Practice Case Studies
– Lobby / Facility Posters• Recognition: Rapid Growth Award at PNR Global Leadership Meeting
Granular Market Segmentation
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Drilling Down Into Each Major Market & Geography
Granular Market Knowledge
• Develop growth strategies ongranular view of markets
Growth Industry?
• Most industries have mature segments … & … granular
growth pockets
“Megatrends”
• Positioning to mine the best
opportunities in megatrends
Less granular More granular
Example:
~ 7 MillionRestaurants in
China
“Middle ofPyramid” Offers
Most Growth
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Strategic Planning Ensures We Get In Position
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Strategy Process Identifies New / Emerging Trends
Markets or Vectors
Maturing /Steady-State
Declining(Little-to-noInnovation)
Rapid Decline(Commodity or
Replaced)
AcceleratingGrowth
New / Emerging
A) Cyclical Growth
B) Established
Competition
C) “Traditional”
Strategic Plans
Surf The Wave
Get In Position
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Example: Global Vertical
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India
• $725M Size
• 12% Growth
Rapid Growth Process Provides The Tools … The Answers
Where To Start?
What Products?
Which “Region” Offers Best Growth?
How Can We Win?
How To Best Utilize Limited Resources?
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Rapid Growth Tools
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Punjab
Uttaranchal
Himachal Pradesh
UttarPradesh
Madhya Pradesh
Rajasthan
Delhi
Haryana
Chandigarh
Jammuand Kashmir
Bihar
Meghalaya
Sikkim
Tripura
Manipur
Mizoram
Assam
Arunachal Pradesh
Nagaland
Tamilnadu
AndhraPradesh
Chattisgarh
OrissaJharkhand
West Bengal
Karnataka
Goa
Maharashtra
Lakshadweep
Kerala
Dadra & Nagar Haveli
Gujarat
Daman & Diu
Pondicherry
Maharashtra Region
• Opportunity: $27M In One ResidentialWater Category
• Growth Rate: 10%
• Competition: Medium (Currently 5)
• Product: We Are Well Positioned
• Tested Offering in Location
• Customer Preference For NewTechnology
• Standardize Our Current Systems
Alpha Tests – 90 Day Duration
Results: Know Where To Focus and What To Focus On …
Region / State Metric Product 1 Product 2 Product 3
Total Market $ 1,440 $ 2,700 $ 900
Annual Growth 10% 10% 15%
Pentair's Share X% X% X%
Total Market $ 1,500 $ 1,125 $ 400
Annual Growth 10% 6% 12%
Pentair's Share X% X% X%
Total Market $ 1,320 $ 1,100 $ 308
Annual Growth 13% 10% 10%
Pentair's Share X% X% X%
Total Market $ 1,020 $ 1,530 $ 510
Annual Growth 12% 13% 15%
Pentair's Share X% X% X%
Delhi/NCR
Tamil Nadu
Gujarat
Maharshtra / Goa
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Rapid Growth: Early Results (Examples)
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Already Yielding Revenue Growth … Tracking $70M+
Point of Use / Point of Entry
• Identified ~ $35M of New GrowthOpportunities for 2011 – 2013
Rural Water Solutions
Retail Solutions
Packaged Products / Systems
A Few Examples:
Agriculture
• Identified ~ $35M of New GrowthOpportunities in Agriculture
One Example: US-Ag. Pumps / Systems
• 2 Major US Segments (Previously
Limited PNR Content) • Alpha Test: Service & Delivery Model
• Markets: Successful Tests Will YieldRapid Deployment To Other Markets
• Results: Tracking Toward ~$2M 1st
Yr. with More to Come
Filtration
Rapid Growth: Early Results (Examples)
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Early Wins and Key Learning's In Exciting New Markets
Global Aquaculture Oil & GasRearing of fish in controlled environments
• Need for Global Protein Real & Exploding
• Fish Will Likely Be Chosen Source
– Aquaculture demand will besubstantial as the “Void” is filled
– Expected $40B InstallationInvestment (by 2030) … Could be150,000 or more Facilities
• Fragmented Industry Provides Oppt’y
• Alpha Test: Pentair go-to-market strategy
• Approach: Rapid VOC, equipment &economics validation … Mkt’g Approach
• Progress: Visiting Dozens of Fish Farms
• Progress: PNR product pipeline supportsaquaculture industry needs
• Shale gas expected to account for 45% of USnatural gas by 2035, a 3X increase to 2010
• For shale gas to be marketable, it must bepurified or “sweetened”
• Sweetening method at a gas plants requires a #of large towers as part of an Amine Unit
Shale Gas Opportunity
Liquid-LiquidContacting
(~$6M Rev in ‘11)
Liquid-GasContacting
(~$20M/year Segment)
Pentair Polarex® Alpha Test (New Design)
I n - h o u s e t e s t i n g
Already Winning Positioning For More
Rapid Growth Process
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828282
Numerous RGP Activities Creating Growth Traction
40+ Alpha Tests
10% Already Moved To “Beta” or Full Scale Initiatives
Dozens More In The Queue
~$500M “New”Growth ID’d
Quickly Testing Assumptions
Balanced Between “Core” Businesses and“Adjacencies” … With A Few in“Opportunity” Segments
Prioritizing For Best Results &Talent Deployment
Alpha Tests In Every Region …
World Class Process: Continuing to Mature
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Growth Discipline Maturity Model
Evolution of World-Class Growth Processes83
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5 Minute Break
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Globalization and PIMSDriving to the Next Level
Michael V. SchrockMichael V. SchrockPresident & Chief Operating Officer President & Chief Operating Officer
Pentair Investor & Analyst Day
September 14, 2011
New York, NY
Key TakeawaysKey Takeaways
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Accelerating Global GrowthAccelerating Global Growth ……
• Uniquely Positioned to Serve the Needs of theFast Growth Markets
• Ample Opportunity in Key Growth Markets: China,Latin America and India
• We are Building Global Capabilities to Capture theGrowth Opportunities … Much Stronger Today
Pentair Integrated Management System is a Key EnablerPentair Integrated Management System is a Key Enabler ……
• Pentair Integrated Management System …Pervasive and Delivering Results
• More to Come … Expanding the PIMS Toolkit,Extending Lean Beyond “4 Walls”
Driving to the Next Level
Key TakeawaysKey Takeaways
G GG G
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Accelerating Global GrowthAccelerating Global Growth ……
• Uniquely Positioned to Serve the Needs of theFast Growth Markets
• Ample Opportunity in Key Growth Markets: China,Latin America and India
• We are Building Global Capabilities to Capture theGrowth Opportunities … Much Stronger Today
Pentair Integrated Management System is a Key EnablerPentair Integrated Management System is a Key Enabler ……
• Pentair Integrated Management System …Pervasive and Delivering Results
• More to Come … Expanding the PIMS Toolkit,Extending Lean Beyond 4 Walls
More Global … Higher Growth
~$1.3B Opportunity~$1.3B Opportunity – – Fast Growth RegionsFast Growth Regions
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Stronger Global Capabilities Driving Compounding Growth
$0.3BSales
2006
2011e~$0.7B
Sales
In 2015 …
World Class Operationsand Product Development
Scaled Presence in KeyGrowth Regions
Margins In Line withDeveloped
2015Goal
~$1.3BSales
Actions
> 100 Products LaunchedUniquely for Fast Growth
Regions in 2011 Strong Acquisitions in Key
Growth Markets
More than Doubled SuzhouProduction Capacity,Expanded Reynosa
Built New EngineeringCapabilities in China &India
Meaningfully ExpandedDistribution
China OpportunityChina Opportunity
Chi S lChi S lM k t D iM k t D i
~$145M ~$345M
2011e 2015 Goal~25%CAGR
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China … Most Reliable Growth Market in the World
China SalesChina Sales
~$85M
~$145M
2009 2010 2011e
Market DriversMarket Drivers
~$65M
Continued Expanded Distribution… Double Distributors by 2015
More In-Region, For-Region
Leverage Lean to Build World ClassOperations and Support Growth
Technical Products … UniqueCooling for China Market, More‘Stocking’ Distributors
Water … Grow Residential Filtration,Infrastructure, Beverage andCommercial
Growth FocusGrowth Focus
50% CAGR
’09 – ’11e
30% organic
China’s New 5-Year Plan Indicates$600B Investment in Water RelatedInfrastructure
China GDP in High Single Digits;Industrial Production Double Digits
Over 6 Million New Homes Built in 2010
300 out of top 600 Cities Do NotConform to Drinking Standards
Tech
Products
Water
>$10B Market
Opportunity~8%+
Growth
Commercial/Hospitality OpportunityCommercial/Hospitality Opportunity
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In-Room Drinking
Water RecycleKitchen/FoodserviceSystemsWater Supply
Waste watertreatment
Fire SystemsPool
From ComplexAdvanced Water
Systems … To
Energy Efficient
Pool Solutions …
To High Standard,
Protective
EnclosuresCommercial & Hospitality
Opportunity
One-Stop … Innovative, Sustainable Solutions Provider
Safe, Protective
Enclosures Cooling
Latin America OpportunityLatin America Opportunity
Latin America SalesLatin America Sales
~$190M ~$350M
>15%CAGR
Market DriversMarket Drivers
2011e 2015 Goal
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On Track to Become a $350+ Million Region
GDP Growing at Solid 4+% Pace
Continued Infrastructure InvestmentsNeeded to Keep Pace with Development
Significant Expansion in Oil & Gas in Brazil Expanded Development in Brazil Due to
2014 World Cup and 2016 Olympics
Continued Development of Agriculture andAlternate, Renewable Energy Sources
Latin America SalesLatin America Sales
~$110M
~$190M
2009 2010 2011e
~$90M
Technical Products … Enhance Access toEnergy, Datacom & Infrastructure, ExpandCooling Products, Localize Production
Water … Expand Residential, Food Serviceand Pool Markets with EconomicDevelopment and Population Growth
>35% CAGR
’09 – ‘11
>20% organic
Growth FocusGrowth Focus
Increase Distribution and ChannelCoverage in Brazil
Leverage CPT Argentina Presence andStrong Distribution
More In-Region, For-Region
Tech
Products
Water
~$5B Market
Opportunity
~6%Growth
Market DriversMarket Drivers
India OpportunityIndia Opportunity
India SalesIndia Sales
~$40M ~$100M
>25%CAGR
Market DriversMarket Drivers
2011e 2015 Goal
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India … Building on Strengths & Seeding New Opportunities
Infrastructure Spending Forecasted toReach $1T During 2012-17, Compared to$530M Over Previous 5-year Period
GDP = $1.4T Growing at 8 – 9%; IndustrialProduction Growing at 8%
Private Sector Investment in Water andSewage Projects Growing Rapidly
India SalesIndia Sales
~$20M
~$40M
~$2B Market
Opportunity>10%
Growth
2009 2010 2011e
~$10M
Grow Advanced Water Systems andTotal Solutions in Commercial andIndustrial
Exploit Opportunity in Energy,Hospitality and Rural
Technical Products … AcceleratePresence by Supporting Global OEMProduct Requirements, Expand Portfolio
to Include Cooling & Stainless Steel Water … Lead Channel Development in
Water Retail
Growth FocusGrowth Focus
Tech
Products
Water
Market DriversMarket Drivers
90% CAGR
’09 – ‘11
>60% organic
““The ChallengeThe Challenge””
Rural Water OpportunityRural Water Opportunity
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The ChallengeThe ChallengeSurface Water ~ 2 Km Walk
- Microbiological Concerns
- Industrial /Agriculture
pollution
Hand-Pump Well
- Arsenic & Fluoride
- Saline Water >1000 ppm
Non-Hygienic Storage
--- Over 700 Million People in India Have No Access to Safe Water ---
RO System
Village Education Program
Imagine the Possibilities … Sustainable, Clean Water for Millions
““Pentair SolutionPentair Solution””
- RO System Targeting Arsenic &Fluoride
- Confirmed Willingness to Pay forClean Water
-
Education & Awareness are Key- Sustainability Requires
Community Involvement,Franchise Model Concept
Rapid Growth Alpha Test in Kureb
Recipe for SuccessRecipe for Success
In Region For RegionM f iChannel
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Focused Investments to Yield Higher Growth
Local Product
Development
& Innovation
In Region, For RegionManufacturing
Capabilities
Channel
Development
& Pentair Brand
Awareness
Broad
Distribution &
Sales Coverage
Investing in Global GrowthInvesting in Global Growth
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Invested over $60 Million in Fast Growth Regions … Ready for Growth
Fast GrowthFast Growth
InvestmentInvestment 2008 to Today
$XXM>$60 Million>$60 Million
EE
MM
PP
LL
OO
YY
EE
EESS
Sales /Sales /
MktngMktng
R&DR&D
Sales & Marketing,
Manufacturing & R&D
~300
~140
~500
~220
China, Latin America, IndiaChina, Latin America, India
2008 Today
India Design Center
China Design Center
Fast Growth Manufacturing CapabilitiesFast Growth Manufacturing Capabilities
Headcount: >2,000 Headcount: >1,600( 1 200 Mfg)
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We are Where the Growth Is
MexicoMexico
,
Sq. Footage: >670k sq ft(~550k sq ft mfg)
Mfg Locations:Reynosa
Monterrey
ChinaChina
IndiaIndia
Clean Process TechnologiesClean Process Technologies
Expanded EuropeanManufacturing Footprint
CPT to Leverage Pentair’sGlobal Coverage andManufacturing Capabilities
Headcount: >900(>600 Mfg)
Sq. Footage: ~420k sq ft
Mfg Locations:GoaBangalore
,(~1,200 Mfg)
Sq. Footage: >~525k sq ft
Mfg Locations:SuzhouQingdao
Wuxi
Headcount: >550(>400 Mfg)
Sq. Footage: ~230k sq ft
Mfg Locations:
Sao PauloCaxias do Sul
Over 50Manufacturing
FacilitiesAround the
Globe
BrazilBrazil
Rapidly Innovating for Fast GrowthRapidly Innovating for Fast Growth
Top Cab SoftenerChinaChina Valves
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Innovating for Local Demands and Needs
2009 2011e
~75
~140
# of New Products Launched
in Fast Growth Regions
N e a r l y D
o u b l e
d
5-Stage RO System
Pentair Softener System
Top Cab Softener
POE Booster Pump
ChinaChina
RO And /Or UFWithCarbon
Water AppliancesDesigned for
ChinaApplication
Priced forMarket
Innovative Design
Accommodate SensorTechnology
Range of CustomOptions Available
IndiaIndia
Under sink ROsystem locallyassembled
Custom optionsavailable
Three differentmodels usingsystems valves
Suitable forharsh, dusty,environments
Compliments POEsofteners and filters
Hidro FiltrosLatin AmericaLatin America
CabinetsPressurized
PurgedStainlessSteel
DatacomFloor Mount
StrengthensFiltration
Presence in LatinAmerica
New solutionsfor improvingwater quality
Fast Growth DistributionFast Growth Distribution – – 20092009
Circle Size Represents # of Distributors
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Early in Distribution Expansion Efforts and Channel Development
ME/Africa
/E. Eur.
SE Asia
~15
~25
~15
~350
~40
LatinAmerica
p
Fast Growth DistributionFast Growth Distribution – – TodayToday
Circle Size Represents # of Distributors
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>40% More Distributors Today Than Just 2 Years Ago
ME/Africa
/E. Eur.
SE Asia
~65
~80
~95
~180
Extensive Distribution Growth
More to Come…
>500
LatinAmerica
Building Pentair AwarenessBuilding Pentair Awareness
Distributor Programs … Pentair Successful first time
Presence at TradeShow in High Growth
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Building Global Awareness … Creating Demand & Recognition
Customer Experience, Design& Interaction Center Openedin Shanghai – June 2011
gWater Universities Educating
Distributors in India, China &
Latin America … Thailand,
Indonesia & Malaysia …
Targeting New Trade Show
Opportunities in Select Growth
Regions
Investing in New Customer
Experience Centers and
Showrooms
Forging New Partnerships andLocal Recognition
Show in High GrowthNE Brazil Region
First PentairWater University
in Indonesia Over 70 Dealers
in Attendance Selected as water partner for “Green
Town,” the largest developer ofgreen housing in China
~$1.3B Opportunity~$1.3B Opportunity – – Fast Growth RegionsFast Growth Regions
20% CAGR’11-’15 Continued In
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Fast Growth Regions are Vast Opportunity for PNR … Just the Beginning
2010 2011e 2015 Goal
~$425M
~$650M
Region, For RegionFocus
LeverageInvestments
Build on CPT’sEmerging Market
Presence andKnowledge
Drive to WorldClass Operations
and ProductDevelopment
53%YoY
~$1.3B
China
% of Total 14% ~19% ~30%
Latin Am.IndiaMEA
SEA
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Suzhou Capabilities VideoSuzhou Capabilities Video
Key TakeawaysKey Takeaways
Accelerating Global GrowthAccelerating Global Growth ……
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gg• Uniquely Positioned to Serve the Needs of the
Fast Growth Markets
• Ample Opportunity in Key Growth Markets: China,Latin America and India
• We are Building Global Capabilities to Capture theGrowth Opportunities … Much Stronger Today
Pentair Integrated Management System is a Key EnablerPentair Integrated Management System is a Key Enabler ……
• Pentair Integrated Management System …Pervasive and Delivering Results
• More to Come … Expanding the PIMS Toolkit,Extending Lean Beyond “4 Walls”
PIMS … Taking to the Next Level
Pentair Integrated Management SystemPentair Integrated Management System
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Safety, Quality, Delivery, Cost and Cash Focus
Developing Top Talent
Prioritizing Investments & Innovation
Building Growth Capabilities
Taking PIMS to Next Level … Lean Everywhere Plus Rapid Growth
LEAN
ENTERPRISE
LEAN
ENTERPRISE
PentairPentair’’s Lean Competitive Advantages Lean Competitive Advantage
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Lean is Part of Pentair’s DNA … Driving Competitive Advantage
The relentless pursuit toeliminate waste –anything that is not valuedby our customers –and improve velocityin all processes within ourorganization.
The relentless pursuit toThe relentless pursuit to
eliminateeliminate wastewaste – –
anything that is not valuedanything that is not valued
by our customersby our customers – –
andand improveimprove velocityvelocity
inin all processesall processes within ourwithin our
organization.organization.4 Key PIMS Concepts:4 Key PIMS Concepts:
Value, Growth,Value, Growth,Waste, & VelocityWaste, & Velocity
Water Gross MarginsWater Gross Margins Technical Products Gross MarginsTechnical Products Gross Margins
Gross Margin Expansion*Gross Margin Expansion*
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29% 30%
31%
2009 2010 2011e
Growth and Expanding Profits Are Evidence of Lean’s Impact
Sales $1.85B $2.0B ~$2.4B Sales $0.85B $1.0B ~$1.1B
Overcame Headwinds
- Materials Inflation of 4%, FX
- Emerging Market Mix
- Global Investments
Created Success
+ Lean Productivity
+ Footprint Consolidation Reading Out
+ Leverage From Growth
30%
33%
34%
2009 2010 2011e
*All 2009 and 2011 Amounts Presented on an Adjusted Basis; See Reconciliation to US GAAP in Attached Appendix.
S S f t “Best in Class” Incident Rate at
PIMS ResultsPIMS Results – – Operational ExcellenceOperational Excellence
TopTop
FocusFocus GoalGoal ProgressProgress
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Lean Is Reading Out In Employee, Customer & Shareowner Metrics
S = Safety 40% of industry average
Improved 4 years in a row
Q = Quality Customer Defects down 30%...
Higher Satisfaction Total Cost of Quality down 40%
D = Delivery Up 300 bps per year in each of
the last 3 years
Helping gain market share
C = Cost 2010: 130 bps Expansion
1st Half 2011: 120 bpsExpansion
C = Cash 1st Half ’11 FCF of $117M
On Track for Remainder of 2011
TopTop
DecileDecile
WarrantyWarranty<1% Sales<1% Sales
OTDOTD
>95%>95%
GM ExpansionGM Expansion
>100 bps/yr>100 bps/yr
FCFFCF
> Net income> Net income
PIMS Yielding Results in WaterPIMS Yielding Results in Water
Water SegmentWater Segment Resi Flow GBUResi Flow GBU ActionsActions
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Lean Efforts Are Reading Out In Water Results
Q u a l i t y
b p s I m p r o v e m e n t
( C u m u l a
t i v e )
b p s I m
p r o v e m e n t
( c u m u l a t i v e )
D e l i v
e r y
FY'10 1H'11
Product Redesigns
Policy Changes
First Pass Yield Focus
Supplier Quality
SIOP
Making Material Flow
Lead Time Reduction
Localization
MDI
510
1,040
FY'10 1H'11
340
680
FY'10 1H'11
70
170
FY'10 1H'11
60
180
Visual ManagementVisual Management ““4 Wall / Lean4 Wall / Lean”” CapacityCapacity
Realizing ResultsRealizing Results
…… Focused at the Plant LevelFocused at the Plant Level ……
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Common Lean Metrics, Tools & Processes Globally
Quality
Delivery
ProductivityInventory Turns
Moorpark, CA
>30% More Sales Per Employee
China
Belgium
Mexico
+220 bps
+170 bps
+300 bps
+7%
Since 2009
DelavanItaly
China
BBOTD
%LeadTime
Cost %
(Logistics)
…… and Reading Out Regionallyand Reading Out Regionally
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From Footprint Consolidation To “4 Wall” Lean
BB
EE
FF
OORR
EE
71%
94%
5
Days
1-2Days
>4%
~3%
(Logistics)
AA
FF
TT
EE
RR
Water
EMEA
+220 bpsMargin
Improvement
2009
Today
36%
GrossGrossMarginMargin
Pentair
Looking AheadLooking Ahead ……
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29% 31% 32%36%
2009 2010 2011e 2015
+ 400 bps Gross Margin Expansion Goal by 2015
+ ~150 bps Direct Materials: Consolidation & Localization, VAVE, Supplier Lean
+ ~100 bps Labor: 4 Wall Lean, BCC Regionalization, Salary & IDL Volume Leverage
+ ~100 bps Variable OH: Quality Improvement, Logistics, Inventory Reductions
+ ~50 bps Fixed OH: Footprint Optimization, Asset & Volume Leverage
+ Inflation and Mix Challenges Offset by Pricing 4 0 0 b p s E x p a n s i o n
4 0 0 b p s E x p a n s i o n
G o a l
G o a l
Goal
2011 – 2015Actions
Supply Management FocusSupply Management Focus Simplification, Rationalization,
To Combat InflationTo Combat Inflation
Lean in SupplyLean in Supply
ProductivityProductivity
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Mitigating Inflation … Supporting New Growth
Time
M a t u r i t
y &
V a l u e A
d d
P r o d u c t i v i t y
G r o w t h
Q u a l i t y & D e l i v e r
y
S p cat o , at o a at o ,Modular Design
Value Engineering
Supplier Lean- Jointly Optimize Value Stream
- Consolidate Suppliers
- Localize Suppliers (BCC In Region)
Leveraging Co-Wide Commodity Spend
Global Indirect Spend
Fast Growth Region Localization
Dedicated Resources to SupportInnovation & Speed to Market
Supplier Quality & Development
Supplier Lean: Speed, Cash, Cost
PrioritizingPrioritizing GrowthGrowthRelentless inRelentless in Quality & DeliveryQuality & Delivery
Beyond theBeyond the ‘‘4 Walls4 Walls’’ ……
Front EndFront EndGrowth LeanGrowth Lean Supply & OpsSupply & Ops“ “ 4 Wall Lean4 Wall Lean” ” Back EndBack EndOffice LeanOffice Lean
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Lead Time ImprovedWC Turns Better
Costs Down
Complexity Cut
Complexity Cut
Cycle Time
“Front End” Growth & “Back End” G&A Processes Ripe for Lean
Cut NPI Lead Time
Improved Quality
Productivity Up
Innovation
Funnel UpRep Productivity Up
SalesExcellence
Service Level Up
Lead Time Lower
Productivity Up
CustomerCare
HumanResources
Finance
IT, Legal
SourceServiceDeliver
Invoice &Collect
Innovation Inquiry to Order Order to Remit
Plan Make
G&A
PIMS ResultsPIMS Results – – Front End ProcessFront End Process
Lean Methods Applied:Lean Methods Applied: Outcome:
Technical Products GermanyTechnical Products Germany – –
Customized Product OrdersCustomized Product Orders
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From: Batch, Slow, InefficientFrom: Batch, Slow, Inefficient To: Continuous Flow, Fast, ProductiveTo: Continuous Flow, Fast, Productive
Value Stream Mapping
Standard Work
Creating Continuous Flow
1. Quality – Internal Quality: 80%
– Customer Quality: 60%
2. Delivery – Lead time reduction: 70% (3 days!)
– 48 Hour Order Acknowledgement: 90%
3. Productivity – Increased 80% (from 6 to 11 orders/day)
pppp
IssuesIssues
Fragmented, Batch ProcessSlow releasing order to factory
Improved ResultsImproved Results
U-Shaped Cell (In
Office) With Single
Piece Flow
Our Best Lean Businesses Only Get Better
Improved Process ConsistencyImproved Process Consistency More, Stronger Lean TalentMore, Stronger Lean Talent
7 Lean Dedicated~300
Why Lean is AcceleratingWhy Lean is Accelerating
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7 LeanTransformationDisciplines
All SitesFollowing ProvenLean Playbook
More Sites In Advanced LeanMore Sites In Advanced Lean
Common Processes. Greater Talent. More Results.
2560
12085
140
180
2007 2011e 2015
DedicatedLean Roles
LeanGraduatesin LineRoles
~90%
~40%
~10%
2007 2011e 2015
~110
~200
Goal
Goal
Stabilization
Continuous
Flow
Material
Flow
Continuous
Improvement
Early in
Journey
Proof of Concept
Key TakeawaysKey Takeaways
Accelerating Global GrowthAccelerating Global Growth ……• Uniquely Positioned to Serve the Needs of the
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Uniquely Positioned to Serve the Needs of theFast Growth Markets
• Ample Opportunity in Key Growth Markets: China,Latin America and India
• We are Building Global Capabilities to Capture theGrowth Opportunities … Much Stronger Today
Pentair Integrated Management System is a Key EnablerPentair Integrated Management System is a Key Enabler ……
• Pentair Integrated Management System …Pervasive and Delivering Results
• More to Come … Expanding the PIMS Toolkit,Extending Lean Beyond “4 Walls”
Strengthening Pentair’s Growth Profile
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Filtration Solutions:
Clean Process Technologies
Netha JohnsonNetha JohnsonPresident, Filtration SolutionsPresident, Filtration Solutions
Pentair Investor & Analyst Day
September 14, 2011
New York, NY
Filtration Solutions Overview
2011e Proforma Revenue*: $635MBy Product Platform By Key Vertical By Geography
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Supporting Pentair’s Strategic Initiatives
y y y y g p y
• Sustainability, Energy Efficiency at the Heart of Platform Offering
• Significant Installed Equipment Base Drives Recurring Revenue
• Global Platforms: 70% Of Revenue is Outside of the United States
UnitedStates(~30%)
DevelopedNon-US
(~35%)
FastGrowth(~35%)
Commercial(~25%)
Industrial(~45%)
Infrastructure
(~30%)
Water(~30%)
FoodService
(~22%)
POUFiltration(~13%)
Beverage(~20%)
SpecialtyPump
(~10%)
Energy(~5%)
* Includes Full Year Forecast of CPT Acquisition; Excluding Pre-Acquisition CPT Sales of ~$75M, Filtration Solutions 2011 Sales are Estimated at $560M.
2011 to 2015 Filtration Solutions Outlook2011 to 2015 Filtration Solutions Outlook
Sales*
2011e & 2015 Goal (Includes CPT)• Market Growth: Fast Growth Regional and
Vertical Markets + Advanced Water Systems
and Beverage/Dairy Penetration
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Strong Prospects for Value Creation in Filtration Solutions
'08 Actual (6+6) Forecast
ROS
~15%
CAGR
'08 Actual (6+6) Forecast
~$560M
~$1B
2011e 2015 Goal
2011e
~13%ROS
~18%ROS
~500 bpsImprovement
g y
• Diverse Vertical Markets: Global Scarcity
and Energy Needs Accelerating
• Global Product Offering: Over 40% of Water
Systems in Fast Growth … NA yet to be
penetrated
• Lean/Sourcing: Continued Emphasis on Leanto Optimize Available Capacity in Support of
Growth
• Significant Margin Expansion: ROS
Expansion driven by Volume Leverage,
Lean/PIMS/Sourcing, Systems Profitability &Global G&A Optimization
* 2011 includes partial year of CPT Results
2015 Goal
Strategically: 100% Fit with Strategic Imperatives
CPT is a Strong Fit with PentairCPT is a Strong Fit with Pentair
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– Strengths in China, Latin America & Middle East
Strategically: 100% Fit with Strategic Imperatives
Fast Growth Markets
– World Leader in Ultrafiltration (UF) Membrane TechnologyInnovative FiltrationTechnology
– Leader in Pre-filters for Desalination
– Leader in UF for Clean Water
– Leader in Side Stream Membrane Bioreactors (MBR) forWater Reuse
– Leader in Filtration & Separation in Beverage
Focus on AttractiveVertical Sectors
High Fit, High Impact Drives Long-term Shareholder Value
CPT Priorities
Growth (Expected 10%+ Annual Sales Growth)
1 Leverage PNR/CPT Technologies & Channels
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CPT Is An Accelerator of Shareowner Value
1. Leverage PNR/CPT Technologies & Channels
2. Focus on Key, High Growth Verticals & Regions
3. Leverage Business Model In Adjacent Sectors
Cost ($10M Synergy Goal by 2014)
1. Accelerate Lean/Sourcing in CPT Facilities
2. Leverage Sales Channels More Effectively
Filtration Solutions: Key Product Platforms and Verticals
Focused Growth Verticals
Major Product Platforms
IndustrialWastewater Desalination
Food &Beverage Energy
Food Service/Hospitality
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Advanced Technologies/Applications in Fast Growing Verticals
Membranes/Systems
Specialty Pumps
Specialty Valves &Equipment
POE/POU Filtration
Wastewater & Water Reuse Market Overview
Industrial Water & WastewaterIndustrial Water & WastewaterMarket DriversMarket Drivers• Fast Growth Markets
G R l S i OCAGR = ~8%
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Pentair Aligned To Address Key Global Mega Trend
• Investment In Core UF Technology With Ability To Handle Highly Polluted Water
• Leverage Suite Of Products To Develop Complete Standard Systems
• Focus On Intersection Of Water Intensive Industries In Fast Growth &Water Scarce Regions
Pentair Growth FocusPentair Growth Focus
• Greater Regulatory Stringency OnEffluent Purity For IndustrialWastewater
• Costs Associated With RegulatoryViolations Increasing
• Corporate Sustainability InitiativesAlso Driving Focus 2015E2010
$14B
$21B
Source: GWI, Industrial Water & Wastewater Equipment Market.
CAGR 8%
Pentair Capabilities in Wastewater & Water Reuse
Select Reference SitesSelect Reference SitesOverviewOverviewInnovation
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Track Record of Technology & Systems Innovation
Select ProductsSelect Products
Crossflow MBR Megablock MBR
Crossflow MBR in Istanbul, Turkey Airlift™ MBR inCaracas, Venezuela
• MBR Technology Utilizing Best-in-class
UF Membranes & Systems
• Crossflow MBR & Airlift MBR CoverWider Range Of Applications
• Proprietary Pump & Fluid Dynamics
Differentiation
• Ability To Handle Highly PollutedIndustrial Wastewater With Contained
Systems
• Smaller Footprint: Vertically Configured
Modules Result In Efficient Packaging
• Complete Systems Solutions CombiningMembranes, Housings & Pumps
Nijhuis
+ ~$80M
’11-’15
Desalination Market Overview
DesalinationDesalinationMarket DriversMarket Drivers• Long-term Population &
Industrial Growth CAGR = ~13%
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Pentair Providing Complete Systems to Growing Desalination Market
• Investment in core UF technology for desalination pre-treatment applications
• Leverage suite of products to develop complete UF pre-treatment & standard
RO systems• Focused on developing fast growth & water scarce regions
Pentair Growth FocusPentair Growth Focus
Industrial Growth
• Water Scarcity In Fast Growth
Countries & Regions• Country Specific Initiatives:
― China 5 Year Plan Heavy OnWater Investment
2015E2010
$~8B
$~15B
Source: GWI, Annual Desalination Capex
C G 3%
Pentair Capabilities in Desalination
Select Reference SiteSelect Reference SiteOverviewOverview
Innovation
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The world’s largest UF Desalination Plant(Shuwaikh, Kuwait) uses Seaguard membranes
Ability to Significantly Increase Content
Nijhuis SuperDuplex Pump
X-FlowSeaguard UFMembranes
CodelineVessels
Select ProductsSelect Products
• First Membrane In The World
Specifically Designed To Pre-treat
Seawater
• Highly Effective, Environmentally
Friendly Single Barrier Solution Installed
Before The RO Desalination Process
Differentiation• Single Barrier Pre-treatment With Low
Footprint
• Complete Systems Solutions Combining
Membranes, Vessels & Pumps
• PH Correction with CO2
+ ~$55M
’11-’15
Food & Beverage Market Overview
Food & Beverage MarketFood & Beverage MarketMarket DriversMarket Drivers• Heavy Emphasis On Quality
Control And Safety CAGR = ~4%
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Pentair Poised to Outpace Market Growth via Innovation & Expertise
• Expansion into New Segments and Installed Base – Multiple Systems & Solutions
For Food & Beverage Vertical
• Continue To Innovate – Focus On Critical Process Applications To Drive Margin• Target Fast Growth & Developing Regions – Plants Following Development
Pentair Growth FocusPentair Growth Focus
Control And Safety
• Manufacturers Focused On
Reducing Operating Expenses• Population & Wealth Driving
Food & Beverage ConsumptionGrowth
2015E2010
$~3B
$~4B
Source: GWI, Food & Beverage Water & Wastewater Equipment Market
CAGR = 4%
Pentair Capabilities in Food & Beverage
l i n e
u s e
CIP unfiltrate CIP filtrateWastewater
(re-use)Processwater
Process Steps in the Brewery CycleProcess Steps in the Brewery Cycle
PNR
Components
+ ~$70M’11-’15
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F i l l i n g l
B r e w h
o u
Wort coolingWort aeration
Fermentationcellar
BlendingCarbonation
Flashpasteurisation
Bright beercellar
BMF
CO2
recoveryDeaerated
water
Effluent re-use
Yeast management
Südmo doubleseat valves
Cleaning-in-place systems
Haffmans CO2
recovery systemO2 measurement
systemKieselguhr-free
OptiBMF systemCrossflow MBR
Reduced Water consumption
from five litres to two litres ofwater for every litre of beerproduced
• Increases process efficiency
• Reduction of chemicals use
• Improvement of total cost ofownership
Reduction in energy
consumption by upto 60% through heatrecovery
Apply Expertise to Gain Greater Share of Customers Wallet
MembranesMembranes ValvesValves Specialty EquipmentSpecialty Equipment
Core Strengths of Business Model
Technology• Ability to Address
Customers’ CriticalProcess Challenges
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Applications
Systems
Sales
Service
References
Established Path to High Margin Growth
Process Challenges – Unique Technology
Coupled w/ ApplicationsExperience
– Relevant to MultipleIndustries
• Recurring RevenueStreams from InstalledBase – Consumables & Services
– Expansion via MultipleSystems
Leverage Model Across Industries
• Aseptic Valves • Aseptic Valves
Typical Dairy SystemTypical Dairy SystemTypical Brewery SystemTypical Brewery System
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Apply Technology & Expertise to Adjacent Markets
• Control Panels
• Test & Measurement Analytics
• Stainless Steel Engineering
• Service & Management
• Control Panels
• Test & Measurement Analytics
• Stainless Steel Engineering
• Service & Management
Expand Sustainable Solutions into Attractive Markets
DairyDairy
ElectronicsElectronics
Produced WaterProduced Water
– –
Oil & GasOil & Gas
Market Size ~ $1B Market Size ~ $1B Market Size ~ $9B
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Replicate Current Systems Success into Future Markets
PharmaceuticalsPharmaceuticalsBioBio--EnergyEnergyPower GenerationPower Generation
Market Size ~ $2BMarket Size ~ <$1BMarket Size ~ $2B
CPT Priorities
Growth (Expected 10%+ Annual Sales Growth)
1 Leverage PNR/CPT Technologies & Channels
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CPT Is An Accelerator Of Shareowner Value
1. Leverage PNR/CPT Technologies & Channels
2. Focus on Key, High Growth Verticals & Regions
3. Leverage Business Model In Adjacent Sectors
Cost ($10M Synergy Goal by 2014)
1. Accelerate Lean/Sourcing in CPT Facilities
2. Leverage Sales Channels More Effectively
PIMS Operational Leverage
Proof of Key Focus Areas
Lean JourneyLean Journey Margin ExpansionMargin Expansion
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Stabilization
Continuous Flow
Material Flow
Continuous
Improvement
Focused on Making Lean the Way We Do Business
Early inJourney
Proof ofConcept
Key Focus Areas
• Exploit In-sourcing
Opportunities• Develop supply chain focused
on process and value addedprocesses
• Create culture throughout shopfloor focused on improvingevery day
• Develop pipeline of
lean leaders• Consolidate Redundancies
2011
2014+
CPT ishere
FiltrationSolutions
is here
Channel Synergies
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Legacy Sales offices
ChinaChina
EMEAEMEA
North AmericaNorth America
41 Employees
15 Employees
11 Employees
India
India
13 Employees
Latin AmericaLatin America
4 Employees
Global Sales Coverage with Global Customers and Reference Sites
Legacy Sales Offices
41 Employees
4 Employees
13 Employees
41 Employees
4 Employees
15 Employees
13 Employees
41 Employees
4 Employees
11 Employees
15 Employees
13 Employees
41 Employees
4 Employees
Channel Synergies
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CPT Sales offices
Legacy Sales offices
ChinaChina
EMEAEMEA
North AmericaNorth America
India
India
Latin AmericaLatin America
Global Sales Coverage with Global Customers and Reference Sites
Legacy Sales Offices
ChinaChina
EMEAEMEA
North AmericaNorth America
17 Employees
29 Employees
97 Employees
IndiaIndia
14 Employees
Latin AmericaLatin America
16 Employees
CPT Sales Offices
11 Employees
15 Employees
13 Employees
41 Employees
4 Employees
Water Reference Sites
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CPT Sales offices
Legacy Sales offices
Water Reference Sites
Global Sales Coverage with Global Customers and Reference Sites
Water Reference Sites
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CPT Sales offices
Legacy Sales offices
Water & Beverage Reference Sites
Global Sales Coverage with Global Customers and Reference Sites
Nestlé (Cabuyao, Philippines)
Wastewater Treatment Plant
Water & Beverage Reference Sites
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Water & Beverage Reference Sites
Global Sales Coverage with Global Customers and Reference Sites
Channel Synergies
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CPT Sales offices
Legacy Sales offices
Water & Beverage Reference Sites
Global Sales Coverage with Global Customers and Reference Sites
Martens brewery (Antwerp, Belgium)Kieselguhr-Free Membrane Filtration Plant
X-Flow Südmo Haffmans
70%
2011 CPT Cost Analysis (vs. Revenue)
100%
Focused Reduction
Opportunities
2015 TargetsGross Margin >35%
Op Expenses <20%
ROS >15%
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Confident in Ability to Exceed 15% ROS While Growing Double-Digit
0%
of
Sales
Revenue Material &Mfg. Costs
3%
of
Sales Currently
8% ROS
R&D Selling &Marketing
G&A IntangibleAmortization
2011ROS
Gross
Margin
=30%
10%
of
Sales
5%
of Sales
4%of
Sales ~8%
ROS
In Line withGrowth Ambitions
ROS >15%
Summary
Growth Drivers• Maintain Technology Leadership Position
• Leverage Vertical Specific Application Expertise
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• Expand Share of Wallet in Existing Verticals
• Apply Solid Business Model to Adjacent Sectors
• Focus on Fast Growth Regions
Profitability Drivers
• Drive PIMS throughout CPT
• Accelerate Sourcing Opportunities
• Target High Margin Industries
Well Positioned for Profitable Growth
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Accelerating Performance
and ROIC
John L. StauchJohn L. StauchChief Financial Officer Chief Financial Officer
Pentair Investor & Analyst Day
September 14, 2011
New York, NY
Well Positioned to Drive Differentiated Growth•Aligned with Markets Growing at Greater than Global GDP
•Product Platforms + GBU’s + Regions are Aligned to Serve Customers
Pentair 2011 to 2015* OutlookPentair 2011 to 2015* Outlook
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•Product Innovation and Market Innovation + Fast Growth Geographies
(China, Latin America, India, Middle East, and Eastern Europe)
Cost & Business Models are Yielding Results
•Adequate Capacity within Current Global Footprint
•Continued Productivity … Significant Opportunity in VariableManufacturing Costs through Global Alignment of Supply Chain
Organic Revenue Goal of ~$4.6B by 2015
Targeting ROS of ~16% by 2015
EPS Goal of > $4.50 and ROIC of ~15% by 2015
Well Positioned to Accelerate Growth, EPS and ROIC*All references to 2015 represent Pentair’s long-term strategic goals.
DifferentiatedOrganic Growth
• Our Markets Should
Creating Shareowner ValueCreating Shareowner Value
Productivity
• Price/Material/Mix
• “PIMS Acceleration”
Capital Allocation
• Maintain a SolidBalance SheetP i i
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Grow Faster than
Global GDP• Rapid GrowthProcess
• Market Innovation
• Product Innovation
• Global Supply and
Logistics Opportunity
• Localization ofDesign, Marketing,and Manufacturing
Position
• Dividend Expansion• Organic Growth
• Self-Funded,Bolt-on Acquisitions
• Debt Reduction
Market ANDDifferentiated
Growth
Market ANDDifferentiated
Growth
100 bps+Annual Margin
Expansion
100 bps+Annual Margin
Expansion
DisciplinedCapital
Allocation
DisciplinedCapital
Allocation
Growth + Productivity + Capital Allocation = 15%+ ROIC by 2015**All references to 2015 represent Pentair’s long-term strategic goals.
Full Year 2011* OutlookFull Year 2011* Outlook
2011 Expectations
Sales
14-16%
Financial Summary
Revenue up 14-16%
• Water up 16-18%; RecurringOrganic Up High Single Digits, $3 0B
~$3.5B
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'10 Actual (6+6) Forecast
Adj. Operating Income
Growthg p g g g ,
excluding GIWW**
• Technical Products up ~10%+
Adj. Operating Income up >20%
• Cost Model Holding Nicely
• Gross Margin
Expansion > 100 bps• Op Expenses Flat at ~20%
• Operating Margins ~12%
Expected Adj. EPS up 21% - 25%
Expected Cash Flow > $250M '10 Actual (6+6) Forecast
$3.0B
2010 2011e
2010 2011e
$334M~$415M
11%ROS
~12%ROS
Adj. EPS: $2.00 $2.42 to $2.50
Strong and Balanced Growth in 2011 … Significant Potential
~24%Growth
*All 2011 Amounts Presented on an Adjusted Basis; See Reconciliation to US GAAP in Attached Appendix
** GIWW Refers to Gulf Intracoastal Waterway pump project in 2010 of $56M
Global Water PortfolioGlobal Water Portfolio($M)
All Numbers are Approximate
8%$2.0B
$2.4B
$3.3B
Water Segment Revenue Water Segment Product Platforms
2011e 2015 Goal
Pumps
Non
Water
~10%~40%
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Well Positioned Residential Water Portfolio
2010 2011e 2015
Goal
’11-’15 CAGR
~20%’10 to ’11
Targeted ’11 – ’15 GBU Growth Rates Targeted ’11-’15 Key Growth Verticals
Filtration & Water
Treatment
• Residential Flow ($700M) … ~5% CAGR
• Filtration Solutions ($560M) … ~15% CAGR
• Pool Products ($520M) … ~6% CAGR
• Residential Filtration ($380M) … ~10% CAGR
• Engineered Flow ($300M) … ~4% CAGR
• Industrial ($450M) … ~10% CAGR
• Infrastructure ($300M) … ~8% CAGR
• Hospitality/Health ($300) … ~9% CAGR
• Agriculture ($150M) … ~15% CAGR
• Beverage ($100M) … ~14% CAGR
*All references to 2015 represent Pentair’s long-term strategic goals.
~50% ~55%
Global Technical Products RevenuesGlobal Technical Products Revenues
Energy General Electronics Industrial
’11-’15 Growth Drivers
•Energy &
Infrastructure …
to Support Human
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‘10-’11
Strong Growth Expected for Technical Products Segment
2011e Rev.: >$115M 2011e Rev.: >$215M 2011e Rev.: >$390M
to Support Human
Development
•Industrial …
Automation to
Drive Productivity
& Serve Growing
Middle Class•Communication …
Greater
Connectivity
Demands,
Everywhere
15% ~10% 13% ~5%
15% ~5%
’10-’11 2015
+20% ~10%+
2015
(8)% ~7%
’10-’11 2015
17% ~4%
*All references to 2015 represent Pentair’s long-term strategic goals.
Infrastructure
2011e Rev.: >$70M
Communication
2011e Rev.: >$210M
Commercial
2011e Rev.: >$70M’10-’11 2015 ’10-’11 2015 ’10-’11 2015
Global Pentair PortfolioGlobal Pentair Portfolio – –2011e (~$3.5B)2011e (~$3.5B)
By Business (GBU) By Geography By Vertical
Technical
EngineeredFlow
FiltrationSolutions
FastGrowth(~19%)
USResidential
Infrastructure(~10%)
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• Balanced Portfolio
• 6 Vertical MarketFacing GBU’s
• Largest GBU only
~30% of Pentair
Diverse Businesses, Geographies, & Verticals
TechnicalProducts
ResidentialFlowResidential
Filtration
Pool
United
States(~59%)
DevelopedNon-US(~22%)
(~19%)
• ~19% of Portfolio inFast Growth Regions
• Biggest Opportunitiesin China,
Latin Americaand India
• Industrial IncludesAgriculture and OnsiteTreatment
• Commercial Includes
Food Service GlobalOpportunity
(~23%)
Commercial(~11%)
Industrial &Agriculture
(~44%)
Non-USResidential
(~12%)
Global Pentair PortfolioGlobal Pentair Portfolio – –2015* (~$4.6B)2015* (~$4.6B)
By Business (GBU) By Geography By Vertical
Technical
FiltrationSolutions
FastGrowth
USResidential
( 23%)
Infrastructure(~11%)
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• Balanced Portfolio
• More AdvancedFiltration Systems
• More Agriculture
Continuing to Become More Diverse & Balanced
Products
ResidentialFlow
ResidentialFiltration
Pool
Engineered
Flow
United
States(~50%)Developed
Non-US(~20%)
(~30%)
• More Global Mix ofRevenue
• Greater Presence inFast Growth Regions
• More Infrastructure &Industrial
• Less Residential / Consumer
(~23%)
Commercial(~11%)
Industrial &Agriculture
(~45%)
Non-USResidential(~10%)
*All references to 2015 represent Pentair’s long-term strategic goals.
2011 to 2015* Growth Accelerators2011 to 2015* Growth Accelerators
Customer First (Doing the Little things Right Everyday)
• Delivery from 92% of Sales in 2011 to 95%+ in 2015
• Quality (PPM) from 9,000 in 2010 to 4,000 in 2015
• Net Promoter Score greater than 35% in 2015
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Market & Product Innovation• Marketing Excellence … Rapid Growth Process
• Leverage our PNR/CPT** Channels with Richer Content
• Use our Global Capability to Grow with Faster Growth Customers
• Be the Go-To Partner for Sustainable SolutionsNew Platforms & Opportunities
• Industrial Water Reuse
• Expand our Agriculture Capabilities
• Global Systems for Water and Non-Water Applications• New Adjacencies: Aquaculture, Dairy, Hospitality, Salt-less Softeners
Distinct, Funded, Initiatives to Enable Double-Digit Growth*All references to 2015 represent Pentair’s long-term strategic goals.** CPT refers to the acquisition of Norit ’ s Clean Process Technologies Business on May 12, 2011
2011 to 2015* Growth Opportunity2011 to 2015* Growth Opportunity
$3 5B~$500M
~$225M~$300M ~$100M ~$4.6B
30%
~7%
CAGR
~4 Points~1.5 Points
~1.5 Points
(Net of Churn)
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~$3.5B
2011Estimate
MarketGrowth
NetPricing
DifferentiatedGrowth
CPT Acq**(5 months)
2015Goal
US
DevelopedInt’l
FastGrowth
~59%
~22%
~19%
~ 50%
~ 30%
~ 20%
Developed ~3%Fast Growth +8%
• Channel Expansion
• Fast Growth Markets
• Systems/Innovation
• New Platforms
Growth Initiatives:
~2 Points of Differentiated Growth + Market Recovery/Expansion*All references to 2015 represent Pentair’s long-term strategic goals.** CPT refers to the acquisition of Norit ’ s Clean Process Technologies Business on May 12, 2011
Market GrowthMarket Growth – – NA Residential RecoveryNA Residential Recovery
2011
US Residential Revenue($0.9B)
Recovery Opportunity
6% CAGR
’11-’15
ResidentialFilt ti (20%)
• >80% of 2011 Revenue isrelated to Installed Base($740M)
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• Water Distribution/ Dealer ~$0.4B
• Pool Distribution~$0.4B
• Retail ~$0.1B
NA Recovery Will Happen … Likely to Be in 2013+
ResidentialFlow (32%)
Pool (48%)
Filtration (20%)
• <20% of Revenue is relatedto New Housing ($150M)
2011e 2015*
New Housing Builds ~425K ~1MEstimated Revenue ~$150M ~$350MGrowth Rate (CAGR) ~20%Installed Base ($M) ~$740M ~$800M
Growth Rate ~2%
*2015 Goal Assumptions are Based on Management Judgment of External Housing Data or Predictions
Fast Growth Regions*Fast Growth Regions*
Fast Growth Regions
(China, LA, ME, & India) Differentiated Growth
~20% CAGR
’11-’15• China (+$120M)
• Latin America (+$65M)
~$1.3B
+$370M(~12 pts.)
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2011 2015
• China +$80M (~12% CAGR)
• Latin America +$85M (~9% CAGR)
• Middle East +$25M (~8% CAGR)
• India +$15M (~8% CAGR)
2011e 2015 Goal
Doubling of Fast Growth Regions Expected by 2015
Regional Market Growth
• India (+$45M)
• Southeast Asia (+$40M)
• Eastern Europe (+$40M)
• Africa (+$30M)
• Middle East (+$30M)
~$650M
* All references to 2015 represent Pentair’s long-term strategic goals.** Other Fast Growth includes: Eastern Euro e, Africa and Southeast Asia
ChinaIndiaLatin Am
MEOther**
+$260M(~8 pts.)
2011 to 2015* Productivity Accelerators2011 to 2015* Productivity Accelerators
Culture
• Better Price/Cost Management in 2011 … Even Better 2012+
• Evaluating/Improving Global Supply Chains
• Most Factory Footprint Moves Behind Us … Local Alignment
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Lean Acceleration• Adoption/Migration of Lean to CPT Facilities
• Continue to Upgrade and Invest in Processes/People/Global Training
• Variable Cost (Cost of Quality) and Manufacturing Laborare Still Largest Opportunities
Standardization/Simplification
• Systems/Software Vision Established and Being Executed …Completion Expected by 2015/2016 (Including CPT)
• Core Manufacturing Processes (10+) are Being Improved Globally …Advancing all of Pentair to Best Processes and Practices
Significant Cost Opportunities Remain*All references to 2015 represent Pentair’s long-term strategic goals.
41% 42% 40%
P&L Trajectory*P&L Trajectory*
Key Manufacturing Strategies• Reduce Variable Cost
(~$70M of Expected Savings by 2015)
• Reduce Manufacturing Labor(~$65M of Expected Savings by 2015)
2010 2011e 2015**~$4.6B$3B $3.5B
MaterialCost
100%
~ ~
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16%12%11%
20% 20% 20%
24%26%28%
42%
EPS: $2.00 $2.42 to $2.50 >$4.50
( $65M of Expected Savings by 2015)
Operating Expense Priorities• R&D, currently 2% of sales vs. goalof 3-4% of sales by 2015 …Fund with G&A Reductions (1-2 points)
• Selling/marketing, currently 10% ofsales … Long-term Goal 10%
• Prioritizing R&D and selling/marketingto developing regions
Gross Margin of ~36% by 2015
Op. Margin of ~16% by 2015
Growth + Productivity = ROIC
Cost
Mfg.Cost
Op.Expenses
Op. Margin
*All 2011 Amounts Presented on an Adjusted Basis; See Reconciliation to US GAAP in Attached Appendix.**All references to 2015 represent Pentair’s long-term strategic goals.
~
~
~
~
~
~
Key Cost Components*Key Cost Components*
~$3.5B
~$4.6B2011 Outlook 2015 GoalRevenue
• Sales Expected up 14-16%
• Water up 16-18% (Recurring High
Single Digits, ex. GIWW)
• Technical Products up ~10%+
• Revenue up ~7% CAGR
• Expecting ~$4.6B by 2015
• Water High Single Digits;Tech Prod Mid Single Digits
+$1B14-16%
2011e 2015 Goal
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p
~42% ~40%
Material/Sales
~32%
~36%Gross Margin
Tech Prod Mid Single Digits
2011 Outlook
• Significant Inflation
• Price/Inflation In-line
• Product/Region Mix Impact
• Price/Mix/Net MaterialExpected to Improve
• Inflation of (~3%/yr.)
2011 Outlook
• 100 bps of Improvement
–Productivity–Volume Leverage
• 400 bps of Improvement
–Productivity; Globalization–Volume Leverage
Revenue up $1.1B … Gross Margin Expected to be up ~400 bps by 2015
2015 Goal
2015 Goal
-110 bps
+100 bps
*All 2011 Amounts Presented on an Adjusted Basis; See Reconciliation to US GAAP in Attached Appendix.All references to 2015 represent Pentair’s long-term strategic goals.
2011e 2015 Goal
2011e 2015 Goal
Key Cost Components (Continued)*Key Cost Components (Continued)*
~20% ~20%
2011 Outlook 2015 GoalOp Expenses
• 20 bps Increase in R&D
• 50 bps Increase in S&M toabove 10%/Sales
• 70 bps Reduction in G&A
Flat %Flat %
• Long Term Target of 20%
• R&D at 4%, Selling/Marketing at 10% (Funded by
G&A Reductions)2011e 2015 Goal
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70 bps Reduction in G&A
~12%
~16%
Op Margin
>8.5%
~15%
ROIC
2011 Outlook
• Deliver 12% Op Margins%
• Up 100 bps vs ‘10
• Op Income Up $80M
2011 Outlook
• Improved Performance on
Base Business• CPT Investment
• Improvement driven by
organic growth andcontinued productivity
Op Margin Expected to be up ~400 bps by 2015 … ROIC >15%
2015 Goal +$310M
2015 Goal +650 bps
+100 bps
+50 bps
• Deliver 16%+ Op Margins
• Up ~1 pt. per Year ’11-’15
• Up ~$75M per Year ’11-’15
*All 2011 Amounts Presented on an Adjusted Basis; See Reconciliation to US GAAP in Attached Appendix.All references to 2015 represent Pentair’s long-term strategic goals.
2011e 2015 Goal
2011e 2015 Goal
RecoveringMarket Growth
• NA Tech Products
Mix of Revenue Growth (2011Mix of Revenue Growth (2011 – – 2015)*2015)*
New Productsor New Channels
• Fast Growth Regions
New Platformsand Systems
• Standard &
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• NA Residential• Commercial
• Municipal
• Western Europe
• New Channels• NA Retail
• New Technologies
Customized Systems• Large, IntegratedProjects
• Services & Rental
AverageConversion
of 35%+
All Growth is Not Equal … But, Global Growth Becoming More Profitable
AverageConversion
of 25%+
AverageConversion
of 10%+
*All references to 2015 represent Pentair’s long-term strategic goals.
Manufacturing Cost Goals*Manufacturing Cost Goals*
• $180M+ of Net Benefit by 2015
• Material/Sales Improvement150 bps to ~40% of Sales
• 1% Reduction in Mfg Wages;32% 36%
Full Year Manufacturing Costs
(% of Sales)
+$180M
100%
GrossMargin
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2009 2014
1% Reduction in Mfg Wages;
$60M (~1/3 from Localized FastGrowth and ~2/3 from volume /efficiency)
• $70M of Variable Mfg. and Fixed
Overhead Reductions fromOverhead Leverage, and VariableMfg. Reductions, predominantlyin logistics and quality
2011e 2015 Goal
Material
ManufacturingLabor
6%
42%
7%
ManufacturingOverhead
15%
11%
40%
14%
10%
Reduction of ~400 bps Targeted From 2011-2015*All 2011 Amounts Presented on an Adjusted Basis; See Reconciliation to US GAAP in Attached Appendix.All references to 2015 represent Pentair’s long-term strategic goals.
Margin
Operating Expense Goals*Operating Expense Goals*
• Maintain OperatingExpenses Flat as % ofSales
• R&D 3-4% of Sales by 2015R&D~2%
Full Year Operating Costs(% of Sales)
~4%
~20% ~20%
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2009 2014
y
• Selling & Marketing10% of Sales by 2015
• G&A of 5% (+200 bps)Funds Growth RelatedResources
• Amortization/Other
Improves with Volume2011e 2015 Goal
Amortization/
Other
G&A Non-Amortization
Selling/Marketing
6%
~1%
7%
~7%
~10%
~1%
~5%
~10%
Improving Op Expenses … Shifting More Towards Growth*All 2011 Amounts Presented on an Adjusted Basis; See Reconciliation to US GAAP in Attached Appendix.All references to 2015 represent Pentair’s long-term strategic goals.
2011 to 2015 Operating Income Goals*2011 to 2015 Operating Income Goals*
~$225M
>$725M
~15%+CAGR
~$320M
+6 pts. (3 pts.)
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Growth + Productivity … Yields ~ 15%+ Targeted Op Income CAGR
~$415M
~$265M
2011Estimate
RevenueGrowth
NetPricing
Inflation Productivity 2015Goal
• R&D = ~$65M
• Selling/Mark = ~$30M
• Other = ~$15M
~($390M)
StrategicInvestment
~($110M)
12%ROS
~16%ROS
+4 pts.
(11 pts.) +8 pts.
*All 2011 Amounts Presented on an Adjusted Basis; See Reconciliation to US GAAP in Attached Appendix.All references to 2015 represent Pentair’s long-term strategic goals.
~$1.60
>15%CAGR
2011 to 2015 EPS Opportunity*2011 to 2015 EPS Opportunity*
>$2.00
per Share
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~$2.42to $2.50
~$1.80 >$4.50
2011Estimate
RevenueGrowth
NetPricing
ProductivityNet of Invest
2015Goal
Share Count and Interest Assumed Flat for Modeling Purposes
~($2.85)
Shares/Interest
~$1.50
~$250Mof FCF
2011 to 2015 Adjusted EPS Goal of >15% Per Year
>$500M
of FCF
Inflation /Min. Interest
*All 2011 Amounts Presented on an Adjusted Basis; See Reconciliation to US GAAP in Attached Appendix.All references to 2015 represent Pentair’s long-term strategic goals.
Positioned for More IfPositioned for More If ……
• Growth: Developed World Less Sluggish than OurPredictions/Expectations
• Bolt-On Acquisitions Accelerate Our Geographical and
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Opportunity Beyond Identified Model
Technology Platforms … Accelerating EPS
• Price/Cost/Foreign Exchange Become More PredictableAllowing our Global Supply Chains to be Optimized
• Non US Growth Continues to Help the Tax Rate
• Excess Cash (Net Generated, Less Dividends andAcquisitions) Deployed Toward Debt Pay down or Share
Repurchase
2015 Cash Flow Generation Potential*2015 Cash Flow Generation Potential*
~$145M ~$500M~$150M
2 turns of WC(~0.5/yr.)
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Significant Cash Generation Potential; NI + Working Capital
~$450M
~($110M)
of FCF
2015NI Goal
Depr./Amort./SOE
Receivables** Inventory** Payables** 2015FCF Goal
~$1.5B’12-’15
~($50M)
Capital
Receivables 18% 18%Inventory 13% 11%Payables (10%) (11%)
’11 ‘15% to Sales
*All references to 2015 represent Pentair’s long-term strategic goals ** vs. 2011 Performance/Levels
~($85M)
>100%of NI
Capital Allocation PhilosophyCapital Allocation Philosophy
Capital Allocation Uses (Assuming ~$1.5B Cumulative from ’12-’15)*:
1. Debt Management: Maintain Investment Grade Rating
2. Dividend: 35 Straight Years of Increases … Allows for
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Disciplined Allocation Philosophy … Prioritized Towards ROIC
Disciplined Cash Management and Pays Shareowners 1st
3. Organic Growth: Highest ROIC Comes From FundingOrganic Opportunities (Cash thru Distribution Channel,R&D, Sales/Marketing, Capital, etc.)
4. Acquisitions or Share Repurchase: We play in attractivespaces where opportunities are plentiful … Bolt-on’sfocused on channel expansion, technology, and
geographies
*All references to 2015 represent Pentair’s long-term strategic goals.
Summary*Summary*
• Growth: Assuming Market Growth + Differentiated Growth
to be ~7% CAGR from 2011 to 2015 … Drives a 2015 Goalof ~$4.6B in Revenue
• Productivity: Still a lot of opportunity for improvement
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Significant Expansion Targeted in Revenue, EPS, & ROIC from 2011-2015
within our Global footprint and operating model• EPS: Driving for 15%+ CAGR from 2011 to 2015
• Cash Flow: Significant cash generation opportunity …
ability to add more revenue and earnings potential overhorizon
• ROIC: Driving to Expand ROIC to ~15% in 2015 through
organic growth, Bolt-On Acquisitions, and continuedproductivity
*All references to 2015 represent Pentair’s long-term strategic goals.
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Global GrowthFocused and Forward
Randall J. HoganRandall J. HoganChairman & Chief Executive Officer Chairman & Chief Executive Officer
Pentair Investor & Analyst Day
September 14, 2011
New York, NY
What You Heard TodayWhat You Heard Today……
Today’s Portfolio Reflects Technology, Innovation andFast Growth Region Strategic Focus
Mega Trends Provide a Broad Array of Opportunity
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Focused and Forward Thinking on Growth
Execution on Growth and Productivity Initiatives areStrong, Focused and Prioritized
Pentair Integrated Management System FuelsOperational Excellence and Growth
Pentair is Well Positioned to Deliver Profitable,
Sustainable Growth & Shareholder Value
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Thank You for Attending!
Question & AnswerSession