Residential ConstructionGary Henry Capital Markets Day 2004
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Agenda
• Hart & Cooley Overview
• Market Overview
• Strategies for Growth
• Summary
• Hart & Cooley Overview
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Hart & Cooley – The Industry Leader
• Largest manufacturer of residential air distribution in the U.S.
• Growth through acquisition and organic growth
Revenues
$308m
1999 Acquisition Current
+$100m
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Hart & Cooley – Leading Brands
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Manufacturing & Distribution Locations
Manufacturing Facility
ASCD Shared FacilityDistribution Center
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Types of Residential Products
Gas Vent30% Mkt. Share
#1
Flex Duct14% Mkt. Share
#2
Registers51% Mkt. Share
#1Gutter Protection47% Mkt. Share
#1
Chimney Vent4% Mkt. Share
#3
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Replacement$49m (16%)
NewConstruction$257m ( 84%)
New Construction vs. Refurbishment Sales
SOURCE: Hart & Cooley Statistics
Our Sales – Breakdown 2004
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Residential Market Trends
• Flexible duct is replacing steel ductwork
• “Higher energy efficiency standards” create opportunities for new products
• Drive for improved “Indoor Air Quality” will create niche markets
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Agenda
• Hart & Cooley Overview
• Market Overview
• Strategies for Growth
• Summary
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Distribution Channels
Four Paths to Market
ResidentialWholesale
CommercialWholesale Retail Hearth
& Home
• 76% of sales
• Manage the relationships with contractors
• 14% of sales
• Recent productline expansion
• 8% of sales
• Controlled growth
• 2% of sales
• Growth market
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Leading Market Share
$1.2 Billion Market
Source: Hart & Cooley
H&C Inc. 25%
Ductmate 3%
Durodyne 4%
Others 9%
Atco 14%
Selkirk 10%
Duravent 6%
Continental 1%Shoemaker 1% Lima 1%
U.S. Aire 3%Tru-Aire 1%
Metal Fab 4%
Thermaflex 6%
Quietflex 4%
JPL 3%Dundas-Jaffine 2%
Teleflow 2%
Further consolidation opportunities
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Agenda
• Hart & Cooley Overview
• Strategies for Growth
• Summary
• Market Overview
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Grow Distribution Network
• Largest network of HVAC wholesalers (over 4,500)
• Strong position with large, national distributors
• Strategic regional distribution centers
• Expansion into new markets
Strategy #1
Leveraging distribution network
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Expand Product Range
• Unique ability to “package” products– Systems Supply
Strategy #2
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Expand Product Range
• Focus on new product development– $4.7m in newly launched products
Strategy #2
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Expand Product Range
• Product ranges– Further expansion of product lines into adjacent
spaces with Bolt-on acquisitions– Three potential opportunities
currently under review
Strategy #2
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Acquisition Philosophy
• Justification for acquisition
• Operational due diligence process
• Identifying synergies
• Developing integration plan
• Implementing plan post acquisition
Pre-acquisition activities
Strategy #2
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Acquisition Philosophy
• When acquisition completed, Hart & Cooley:– Installs Tomkins performance management framework– Implements synergies and integration plan– Rationalizes both manufacturing and products
• Ensure complete and successful integration
• H&C Managers compensated on success of acquisition
Post-acquisition activities
Strategy #2
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• Significant manufacturing presence in Mexico
• Continued product and manufacturing rationalization
• Focus on lean manufacturing
• Establish manufacturing presence in China
Continue to Improve Manufacturing EfficiencyStrategy #3
ChinaChina
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Agenda
• Hart & Cooley Overview
• Strategies for Growth
• Summary
• Market Overview
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Largest player in the residential market
Market Leader, Positioned for Growth
Comprehensive product line
Strongest distribution network
Low cost producer
Positioned for future growth
In Summary
9% CAGR last 5 years
Residential ConstructionGary Henry Capital Markets Day 2004