Heatcraft Worldwide DAVID MOON President & Chief Operating Officer 1
Financial Summary REFRIGERATION 2003 2004 2005 2006 Est. Sales $387 $445 $467 Segment Profit $36 $43 $44 Segment Profit Margin 9.3% 9.6% 9.5% Sales CAGR* 11% Segment Profit CAGR* 15% 2 * CAGR from 2003 to 2006 estimate
Segment Profit Target REFRIGERATION 2003 2004 2005 2006 Est. Sales $387 $445 $467 Segment Profit $36 $43 $44 Segment Profit Margin 9.3% 9.6% 9.5% Long-term Segment Profit Target 13-15% 3
Strengths Successful domestic business model Leveraged worldwide Similar technology globally Culture (execution, customer intimacy) Strong brands Leverage global capabilities Technology integration Best practices 4
Worldwide Product Segments $17.5 BILLION TOTAL MARKET ($ BILLIONS) $3.1 Transport $1.0 Non-Food Ultra Low Temp $1.2 Walk-in Coolers $1.9 Vending Ice Machines $0.8 Specialty Chillers $2.2 $2.2 Systems $2.9 Refrigerated Cases/Display $2.3 Industrial/Ammonia $2.1 Self Contained/Reach-In 5 Sources: Fredonia, Census Bureau, Frost and Sullivan, company estimates
Others 47% Residential Global Market Position $2.2 BILLION COMMERCIAL SYSTEMS Heatcraft Worldwide 13% Compete Regionally Compete Globally A 11% B 5% Sources: company publications, internal estimates 6 H 5% G 3% F 3% E 4% D 6% C 3%
Primary End-use Segments Retail Stores Supermarkets Convenience Stores Food Production Cold Storage Food Processing Food Service Restaurants/Fast Food/Pubs, etc. Specialized Applications Institutional Non-food Applications 7
National/Global Accounts Food Retail Food Service Cold Storage 8
Manufacturing Footprint 13 FACILITIES IN 10 COUNTRIES Americas Operations Europe Operations Asia Pacific Operations Danville, IL Stone Mountain, GA Tifton, GA Queretaro, MX (JV) Krunkel, Germany Lyon, France Madrid, Spain Barcelona, Spain Wuxi, China Bangkok, Thailand (JV) Sao Jose dos Campos, Brazil Sydney, Australia Auckland, New Zealand 9
Geographic Revenue Mix Americas Operations Europe Operations Asia Pacific Operations Danville, IL Stone Mountain, 47% GA Tifton, GA Queretaro, MX (JV) Madrid, Spain Barcelona, Spain Krunkel, Germany Lyon, France 18% 35% Wuxi, China Bangkok, Thailand (JV) Sao Jose dos Campos, Brazil Sydney, Australia Auckland, New Zealand 10
Environmental Outlook Markets/customers Mature markets: Increased expectation of broader value proposition Competition extending value beyond traditional products and services Emerging markets: Rising disposable income Increasing infrastructure development 11
Environmental Outlook Technology Key Drivers: food safety, efficiency, sound Demand for real time product/service information Regulatory Refrigerant legislation impact Continued lack of consistency at state, national and global levels 12
Our Focus: ORGANIC EXCELLENCE Product Leadership Customer Intimacy Operational Excellence EMERGING MARKETS Asia India South America INNOVATION 13 INORGANIC GROWTH
Organic Roadmap STRATEGIC DRIVERS 2004 2005 2006 2007 2008 Product Leadership Customer Intimacy Product Development Strategy 3 year roadmap Stage Gate Open innovation Brand strategy Customer Interface Strategy Service alignment Customer segmentation Plan development and execution >8% revenue growth/year Plan development and execution Unparalleled customer service Operational Excellence Manufacturing Excellence Strategy Low-cost product platforms Open innovation Plan development and execution >15% cost reduction 14
Change in Sources of Revenue INCREASED FOCUS ON DEVELOPING MARKETS 2005 2009 $416M Emerging 11% Mature 89% Mature 60% Emerging 40% 15
Developing Markets STRATEGIC DRIVERS Represent approximately 20-25% of global refrigeration market today Developing refrigeration infrastructure Development of retail food channels Average per capita spend ~10% of developed markets Emerging economies and infrastructure offer attractive market growth rates China ~12-14% India ~12-14% Southeast Asia ~ 9-11% South America ~6-9% Heatcraft model in place in Brazil 16 Source: McKinsey report, internal estimates
Brazil Results REVENUE $14 EBIT 16% CAGR $12 $10 $8 10%+ $6 $4 $2 1999 2006 $0 -$2 1999 2006 -$4 17
Developing Markets Opportunities China Expand local production product breadth and capacity Target cold storage with extended geographic sales reach India Establish significant local presence Build on Bohn brand reputation Southeast Asia Expand manufacturing in region Leverage established distribution relationships South America Leverage existing infrastructure Evaluate appropriate inorganic options 18
Change in Sources of Revenue BY PRODUCTS 2005 2009 New 28% New 40% Current 72% Current 60% 19
Product Development & Innovation STRATEGIC DRIVERS Focus external technology experts on top needs Target 50% of ideas from outside Create development partnerships outside of our traditional industry Evaluating informal and formal controls relationships Leverage internal LII and external intellectual property to create innovative products Reduced footprint New materials Efficiency improvements Accelerate innovation capacity and time to market through concurrent development 20
Open Innovation Network Open Innovation Forum Members: IBM Intel Kraft Foods Dupont Heatcraft Wipro Novachem SAP Ricoh Genentech University Partners University of Maryland Penn State University Dartmouth University University of Illinois University of California Rutgers University Florida International University 21
Environmental Stewardship Lower global warming impact Higher efficiency NTC Condenser Alternative refrigerants Hydrocarbon evaluation with ARI Reduced charge systems CO 2 /glycol evaporators Slurry systems Micro-channel coils Zero ozone depletion systems Carrefour Ice Slurry Paris, France 22 Alternative cooling mediums Phase change material 2 nd generation ice slurry
Ice Slurry AN INNOVATIVE AND ENVIRONMENTALLY FRIENDLY APPROACH TO REFRIGERATION Pioneered in Europe Carrefour Paris Installation 15,000 square meter store 75% reduction in refrigerant charge Off-peak cooling generates 30% energy savings Improved refrigeration effect and food quality 23
Technology Realized Kit dramatically reduces number of defrosts in refrigeration system 30 to 40% reduction in cost to defrost Enhanced product integrity Growth driver Retrofit market is global and untapped Heatcraft s SDK is the only solution In US alone could save 1.7B kwhs and reduce CO 2 emissions by over 1.2 million metric tons Defrosts Per Day 4 3 2 1 Actual Results System Turned On 24 0
Inorganic Growth STRATEGIC DRIVERS Enhance our capabilities Geographic base Brands/channels Local capabilities/talent Extend our range of products and/or capabilities Technology Related product lines Strong brands/channels Extend global reach 25
Potential Adjacent Markets Common customer base and channels Leverage technology and manufacturing processes Supporting services and technology Food Retail Food Production Food Service 26 Expands our influence to key end use sectors Expands available market
Expand Influence Segment Food Retail Heatcraft Products Total Spend 15 35% Other Equipment Cases, Controls, Machine Houses Food Service 10 25% Kitchen Equipment, Walk-ins, Controls Food Production/ Storage (nonammonia) 70 100% Coolers, Controls 27
Worldwide Product Segments $17.5 BILLION TOTAL MARKET ($ BILLIONS) 28 $3.1 Transport $1.0 Non-Food Ultra Low Temp $1.2 Walk-in Coolers $1.9 Vending Ice Machines Sources Fredonia, Census Bureau, Frost and Sullivan, company estimates $0.8 Specialty Chillers $2.2 $2.2 Systems $2.9 Refrigerated Cases/Display $2.3 Industrial/Ammonia $2.1 Self Contained/Reach-In
Worldwide Product Segments $17.5 BILLION TOTAL MARKET ($ BILLIONS) $3.1 Transport $2.2 Systems $9.5 $9.5 Expanded Market Market Opportunity $1.0 Non-Food Ultra Low Temp Sources Fredonia, Census Bureau, Frost and Sullivan, company estimates 29 $1.2 Walk-in Coolers $1.9 Vending Ice Machines $0.8 Specialty Chillers $2.9 Refrigerated Cases/Display $2.3 Industrial/Ammonia $2.1 Self Contained/Reach-In
Summary ORGANIC EXCELLENCE Product Leadership Customer Intimacy Operational Excellence EMERGING MARKETS Asia India South America INNOVATION 30 INORGANIC GROWTH