Festool [state of the industry] keynote presentation (1)

STATE2013 OFTHE

INDUSTRY

PRESENTED BY

HOSTED BY MICHAEL WILLIAMS

Thursday, March 28, 13

STATE OF THE INDUSTRY

PREVIOUS NEXT+ + AGENDA Remodeling Industry Future Trends Lesson LEARNED RECOMMENDATIONS

01 / Identify & AsSess // The Remodeling Industry

02 / Future Trends // Predictions for WHATS TO COME

03 / Economic Downturn // Lesson LEARNED

04 / RECOMMENDATIONS // How To Position Your Business

TODAY’S AGENDA

+ AGENDA Remodeling Industry Future Trends Lesson LEARNED RECOMMENDATIONS Thursday, March 28, 13



01 / Remodeling Industry // Overview




Forecasts and Trends

01 / Home Repair & Improvement Spending

02 / Leading Indicator of Remodeling Activity

03 / Residential Remodeling Index

04 / Cost-Value Ratio




30% IncreaseNew Homesin 2012

The US Economyand HousingMarket AreRecovering

home salessurpassed

SINCE 20074m

Housing Market IN THE U.S.




Home Repair & Improvement Spending

0

100

200

300

400

$210$229

$281

$328

$287 $275$300

2001 2003 2005 2007 2009 2011 2012

$ Billion




02 / Future Trends // whats to come




LEADING INDICATOR OF REMODELING ACTIVITY

-20%

-15%

-10%

-5%

0%

5%

10%

15%

20%

-6.7%

-4.4%

-1.3%

0.5%-0.4%

-2.1%-1.4%

0%

2.2%3.7%

2.1%

8.2% 8.8%

10.6%

16.8%

19.7%

$100

$105

$110

$115

$120

$125

$130

$135

$140

$145

$150

4 2010-1 2 3 4 2011-1 2 3 4 2012-1 2 3 4 2013-1 2 3

$145.5

$134.0

$127.0

$124.1

$121.6

$115.1$114.8$114.0$112.3$112.6

$110.7$111.6$112.3

$114.3$113.1

$112.0

Homeowner ImprovementsFour-Quarter Moving Totals

Billions of $

Four-Quarter MovingRate of Change




Residential Remodeling Index (RRI)

10.1 MillionPROJECTSin 2012

400,000 MoreRemodeling &ReplacementProjects in 2013

10.5 MillionPROJECTSin 2013

4% Increase Forecasted for Number of Remodeling & Replacement Projects in 2013




Remodeling Cost vs. Value for Midrange ProjectsRemodeling Cost vs. Value for Midrange Projects

40

53

65

78

90

2008-2009 2009-2010 2010-2011 2011-2012 2013

Average Deck Addition (wood) Minor Kitchen Remodel Window Replacement (wood)Siding Replacement (vinyl) Window Replacement (vinyl) Basement Remodel Major Kitchen RemodelDeck Addition (composite) Two-Story Addition Bathroom Remodel Garage AdditionFamily Room Addition Master Suite Addition Roofing Replacement Bathroom AdditionBackup Power Generator Sunroom Addition Home Office Remodel




03 / Lesson Learned // remodeling Spending




Spending Share on Home Improvement Projects

+ AGENDA Remodeling Industry Future Trends Lesson LEARNED RECOMMENDATIONS

Source: JCHS tabulation of 2001, 2007, 2011 American Housing Survey (AHS) and American Community Survey (ACH)

20112007

Replacement 38%33%

Exterior 24%17%

27%Discretionary 38%

Interior 11%12%




Average spending change on discretionary projects

20112007


$31,680kitchen Remodel(Major) $24,974

$17,160Bath Remodel $12,801

$17,661Exterior Additions $16,196

$40,054Bedroom $14,998

Change as %

- 21%

- 25%

-8%

- 63%




Change in average annual per-owner improvement

’07-’11’01-’07


65+ + 53% - 14%

55-64 + 52% - 29%

45-54 + 33% - 28%

35-44 + 36% - 33%

Under 35 + 36% - 25%




Projects to expect from age segments

Eco-Friendly RemodelingBaby Busters (35-54 yr. olds)

Retrofit RemodelsBaby Boomers (55+)




Average spending change By region

07-1101-07


+20%Midwest -18%

+53%South -25%

+19%Northeast -19%

+65%West -43%




What you should you do in an down Economy

Down Economy

Common FindingDecreased Share % During Downturn

Recommendation1. Entry Door Replacement (Steel)

2. Window Replacement

3. Kitchen Remodels

High Cost-Value Ratio(ROI)What: Shift to high ROI remodeling work (replacement)

Who: Rely on older homeowners (55+ yr. old)

Where: Work is easier to find in Northeast/Midwest

because their markets are more stable




What you should you do in an UP Economy

UP Economy

Common FindingIncreased Share % During Upturn

Recommendation

1. Home Office Remodel

2. Bathroom Addition

3. Master Suite Addition

Low Cost-Value Ratio(ROI)

What: Expect lower ROI, larger-scale remodeling work

Who: Embrace baby-boom and baby-bust generation

households’ preferences (Retrofits & Eco-Friendly

Remodeling)

Where: Western/Southern regions provide more

opportunities




03 / Competitive Landscape // Insights




5 Characteristics of Remodeling Industry

Highly Customized 2/3 of Industry were in “Specialty Trades”

Fragmented 50 Largest Remodeling Businesses Generate < 8% of Industry Receipts

Low Barriers to Entry Competition from Home Building Industry

Cyclical 8,000 Businesses Failed, 65,000 Employees Out of Work (‘07 – ’11)

Capital Deficient Many Players, Fighting for Scraps



PREVIOUS NEXT+ + AGENDA Remodeling Industry Future Trends Lesson LEARNED RECOMMENDATIONS + AGENDA Remodeling Industry Future Trends Lesson LEARNED RECOMMENDATIONS PREVIOUS NEXT+

Characteristics of Larger Remodeling BusinessesCharacteristics of Larger Remodeling Businesses

1.Low Failure Rate

0

7.5000

15.0000

22.5000

30.0000

18.6000

5.30002.7000

24.3000

6.5000

2.8000<$250K $250K-999K >$1M

2003-04 2009-10

2. Increasing Market Share/Revenues

3.Double Labor Productivity

0

75

150

225

300

<$100K $100-249K $250-499K $500-999K $1-4.9M $5M+

203

165139

11794

56

Average Receipts Per Employee, ($ thousands)




Business Strategies for Achieving Large Scale Presence

Manufacturer partnerships

Serving more than one niche market

Installed sales arrangements

Franchising & licensing

Operating across several business segments




04 / Remodeling Industry // The future




Demographic, Focus Business on Certain Projects

65% of Homeowners are in the 55+ Age group





Baby- Bust generation entering peak remodeling years





Venture into South and West regions for higher business growth opportunities




How to Position Your Business Better

Identify specialty and differentiate your offering

Market business towards key populations and their needs (Retrofits, Eco-Friendly Remodeling)

focus on retaining skilled workers



THANK YOU FOR YOUR ATTENTIONWe hope you enjoyed our presentation and look

forward to meeting with you again soon.




Forecasts for 2013 and Beyond

New Remodeling &400kReplacement Projects

Projected Increase in Home Improvement $20 BillionSpending through Q3 2013





Prepare for increase in retrofit, eco-friendly, energy efficient remodeling




Remodeling that adds value to homes

UP Economy

Down Economy

1. Entry Door Replacement (Steel)

2. Window Replacement

3. Kitchen Remodels

High Cost-Value Ratio(ROI)

1. Home Office Remodel

2. Bathroom Addition

3. Master Suite Addition

Low Cost-Value Ratio(ROI)

Common FindingIncreasing Share % During DownturnCommon Finding

Increasing Share % During Upturn




Strategies For Small Businesses to Succeed

Then Become LargeDifferentiate

eliminate bottle necks Streamline your sales

Improve Hiring process Focus on Employee Retention


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Festool [state of the industry] keynote presentation (1)

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