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JPMorgan Small/Mid Cap ConferenceBoston, MA – November 13th, 2006
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ResidentialHeating & Cooling
CommercialHeating & Cooling RefrigerationService Experts
FORWARD-LOOKING STATEMENTS
This presentation contains forward-looking statements within the meaning of the Private
Securities Litigation Reform Act of 1995. These statements are subject to numerous
risks and uncertainties that could cause actual results to differ materially from such
statements. For information concerning these risks and uncertainties, see Lennox
International’s publicly available filings with the Securities and Exchange Commission.
LII disclaims any intention or obligation to update or revise any forward-looking
statements, whether as a result of new information, future events or otherwise.
A reconciliation of information presented to U.S. Generally Accepted Accounting
Principles (GAAP) is posted on the company’s website at www.lennoxinternational.com.
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ResidentialHeating & Cooling
CommercialHeating & Cooling RefrigerationService Experts
Investment Highlights Leading climate control solutions provider with 111-year history
of product innovation operating in over 100 countries
Positive operating earnings growth trend with expected FY 06 adjusted EPS up 15%+
A strong balance sheet with Debt : Capitalization of 13% provides a solid foundation for growth
Mitigating $60 mil in estimated commodities headwinds in 2006
Successful transition to 13 SEER resulting in product mix benefits
Exposure to residential new construction limited to an estimated 20% of total sales
4.7 million shares repurchased in first 9 months of 2006
Dividend increased 10% in December 2005
CEO succession plan for smooth transition
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CommercialHeating & Cooling RefrigerationService Experts
14%
19%
18%
49%
62%
5%
18%
15%
Packaged Rooftop Units, Split Systems
Cold Storage Applications, Primarily for Food Preservation
HVAC Equipment Sales, Installation, Maintenance,
and Service
Central Air Conditioning, Furnaces, Heat Pumps, IAQ Equipment, Fireplaces
RefrigerationService ExpertsResidentialHeating & Cooling
Focused on Four Related BusinessesSTRONG BRANDS SOLD THROUGH MULTI-CHANNEL DISTRIBUTION
Revenue Segment Profit
Notes: Data is TTM to 09/30/06; segment profit is before unallocated corporate expense; residential is net of eliminations
CommercialHeating & Cooling
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ResidentialHeating & Cooling
CommercialHeating & Cooling RefrigerationService Experts
35%
65%
Business Mix
Customer
Residential
Commercial
Source: Company estimates
8%
87%
Americas
Europe
Asia Pacific
Geography
Replacement
New Construction
End Market
5%
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ResidentialHeating & Cooling
CommercialHeating & Cooling RefrigerationService Experts
Manufacturing Footprint27 PLANTS IN 11 COUNTRIES
Residential Heating & CoolingCommercial Heating & CoolingRefrigerationJoint Ventures
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CommercialHeating & Cooling RefrigerationService Experts
HVACR Market Fundamentals
Maturing markets with mid-single digit growth
Increasing shift in end markets from new constructionto replacement
Economic conditions, new construction, and weather drive demand
Regulatory environment impacts product offering
Strong competitive environment with some pricing power
Value in brands and established distribution relationships
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ResidentialHeating & Cooling
CommercialHeating & Cooling RefrigerationService Experts
LII’s Historical GrowthSALES IN $ MILLIONS
0
500
1000
1500
2000
2500
3000
3500
4000
1985
1987
1989
1991
1993
1995
1997
1999
2001
2003
2005
Note - 2004 sales from continuing operations
Armstrong
Refrigeration
International
Service Experts
“Clearing the decks”
A new era of growth
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CommercialHeating & Cooling RefrigerationService Experts
Growth & Profit Improvement Initiatives Residential Heating & Cooling
Continue to invest in product leadership Increase sales in under-penetrated sunbelt markets
Commercial Heating & Cooling Solidify new construction position Penetrate replacement market opportunities
Service Experts Protection plans to strengthen relationship with homeowners Customer contact center to improve conversion rates Field automation to improve efficiency
Refrigeration Extend successful domestic business model into developing markets Leverage internal and external intellectual property to drive innovation Explore acquisitions to enhance capabilities and extend product reach
Acquisitions provide upside Strategic acquisitions Strong balance sheet Disciplined acquisition
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CommercialHeating & Cooling RefrigerationService Experts
0
1,000,000
2,000,000
3,000,000
4,000,000
5,000,000
6,000,000
7,000,000
8,000,000
9,000,000
19
80
19
85
19
90
19
95
20
00
20
05
Air Conditioners & Heat Pumps
Gas Furnaces
RNC Starts
Replacements Drive Residential Growth NORTH AMERICA RESIDENTIAL UNIT SHIPMENTS VS HOUSING STARTS
Source: ARI, GAMA, HRAI, NAHB, CMHC
ResidentialHeating & Cooling
CommercialHeating & Cooling RefrigerationService Experts
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CommercialHeating & Cooling RefrigerationService Experts
Multi-Channel Distribution
OEM Distributor Dealer Home Owner
BY REVENUE BY UNIT
Generating $1.5 billion* Delivering 2.8M units*
1-Step 1-Step2-Step 2-Step
* 2005 company data
ResidentialHeating & Cooling
CommercialHeating & Cooling RefrigerationService Experts
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CommercialHeating & Cooling RefrigerationService Experts
Product InnovationXC21 … The world’s first central air conditioner rated at 20+ SEER
HSX15 … The quietest central air conditioning system
G61V … The quietest gas furnace
SignatureStat … Humidity and temperature control in one device
PureAir … Cleans the air in your home better than any other single system
Humiditrol … Whole home dehumidification system
Approximately 30% of 2005 manufacturing equipment revenue came from products introduced in the past 3 years
ResidentialHeating & Cooling
CommercialHeating & Cooling RefrigerationService Experts
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CommercialHeating & Cooling RefrigerationService Experts
LII Market ShareGROWTH OPPORTUNITY IN LARGE AND GROWING SUNBELT MARKETS
At or above average market share
Lower than average market share
Sunbelt Market Focus
ResidentialHeating & Cooling
CommercialHeating & Cooling RefrigerationService Experts
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CommercialHeating & Cooling RefrigerationService Experts
Sunbelt Opportunity
Top 5 states represent 40% of all shipments
Sunbelt states represent 60% of all shipments
Growth in sunbelt outpacing others
0
250,000
500,000
750,000
1,000,000
1,250,000
1,500,000
1,750,000
2,000,000
TX FL CA GA IL
2005 U.S. Industry Shipments
Source: ARI, GAMA
ResidentialHeating & Cooling
CommercialHeating & Cooling RefrigerationService Experts
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The State of the RNC Industry
0
500,000
1,000,000
1,500,000
2,000,000
2,500,000
1990 1992 1994 1996 1998 2000 2002 2004 2006 2008 2010
Sources: NAHB, single and multi-family
Units
New Construction Market Forecast Remains Above Robust Years New Construction Market Forecast Remains Above Robust Years
ResidentialHeating & Cooling
CommercialHeating & Cooling RefrigerationService Experts
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CommercialHeating & Cooling RefrigerationService Experts
Strong Position with 17 of Top 20 BuildersLENNOX SHARE % : █ 1-33% █ 34-66% █ 67-100%
Source: 2005 GIANTS Listing, Builder Magazine
Builder ’05 Closings
DR Horton 51,383
Pulte 45,630
Lennar 36,204
Centex 37,822
KB 31,646
Beazer 16,417
Hovnanian 17,783
Ryland 16,673
MDC 15,387
NVR 13,787
Builder ’05 Closings
Standard Pacific 11,694
TOUSA 9,435
Meritage 9,406
Toll Brothers 8,769
Shea Homes 6,901
Weyerhaeuser 5,274
Morrison 4,422
M/I Homes 4,303
David Weekley 3,952
Taylor Woodrow 3,635
ResidentialHeating & Cooling
CommercialHeating & Cooling RefrigerationService Experts
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2003 2004 2005 2006 Est
Replacement
New Construction
Total Market
Commercial End Market MixINCREASING MORE PROFITABLE REPLACEMENT SALES
LennoxReplacement Sales Growth
Source: Industry data and company estimates
36% CAGR
ResidentialHeating & Cooling
CommercialHeating & Cooling RefrigerationService Experts
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Commercial Regional Distribution CentersINCREASE PENETRATION IN REPLACEMENT MARKET
24 - 48 Hour Response24 - 48 Hour Response
ResidentialHeating & Cooling
CommercialHeating & Cooling RefrigerationService Experts
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CommercialHeating & Cooling RefrigerationService Experts
16%19%
27%
12%
12%
14%
Commercial Market SegmentationNEW CONSTRUCTION (Square Footage)
Source: 2Q06 Dodge Analytics & company estimates
Retail
Parking Garage/Auto Svc
Education
Commercial Warehouses
Office and Bank
Other
ResidentialHeating & Cooling
CommercialHeating & Cooling RefrigerationService Experts
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CommercialHeating & Cooling RefrigerationService Experts
14%
12%
12%
27%
19%16%
A Strong Base in RetailNEW CONSTRUCTION (Square Footage)
Retail
Parking Garage/Auto Svc
Education
Commercial Warehouses
Office and Bank
Other
Strengthen PositionStrengthen Position
Source: 2Q06 Dodge Analytics & company estimates
ResidentialHeating & Cooling
CommercialHeating & Cooling RefrigerationService Experts
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CommercialHeating & Cooling RefrigerationService Experts
16% 19%
27%
12%
12%
14%
New Segment OpportunitiesNEW CONSTRUCTION (Square Footage)
Retail
Parking Garage/Auto Svc
Education
Commercial Warehouses
Office and Bank
Other
New Focus/New ProductsNew Focus/New Products
Source: 2Q06 Dodge Analytics & company estimates
ResidentialHeating & Cooling
CommercialHeating & Cooling RefrigerationService Experts
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Continuous Improvements at Service Experts
Over 78% of sales focused on more profitable and stable service/replacement opportunities
Common IT system, financial controls,and regional accounting centers deployed
Inventory Management & Replenishment programreducing working capital requirements to <8% of sales
49 graduates of GM Fast Track development program adding bench strength
Home Health Report Card - IAQ revenue growing over 40% in 2006
Continued roll-out of common branding & Standards of Excellence
Profitable IBS commercial business model growing over 20% CAGR since 2000
Over 85% of service technicians are NATE certified
ResidentialHeating & Cooling
CommercialHeating & Cooling RefrigerationService Experts
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RenewalsRenewals
Demand Service OPPORTUNITY
Demand Service OPPORTUNITY
Replacement SalesReplacement Sales Accessories/IAQSales
Accessories/IAQSales
Protection Plans
Protection Plans
Tune-Ups TRUST
Tune-Ups TRUST
Protection Plan ProgramsONLY 1 IN 20 HOMEOWNERS HAS A SERVICE AGREEMENT
Closing Rate More Than Double for Protection Plan Customers
Closing Rate More Than Double for Protection Plan Customers
ResidentialHeating & Cooling
CommercialHeating & Cooling RefrigerationService Experts
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CommercialHeating & Cooling RefrigerationService Experts
Customer Contact CenterCurrent situation: First contact is with a local Customer Service Representative
High CSR turnover (45%) Little or no marketing intelligence collected on customers Inability to consistently implement sales and marketing initiatives
Future situation:Consolidate calls into two outsourced locations to exclusively support Service Experts
Inbound calls Receive, handle or route all customer/prospect calls Warm transfer to local center
Outbound calls Customer satisfaction survey Maintenance appointment setting Telemarketing
Net Result is Low Call Conversion Rates (52%) Net Result is Low Call Conversion Rates (52%)
ResidentialHeating & Cooling
CommercialHeating & Cooling RefrigerationService Experts
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Improve Technician Efficiency Project “FAST” (Field Automation for Service Technicians)
Deploy mobile wireless solution to improve the efficiency (cost reduction) and effectiveness (revenue increase) of field technicians
Strengthen Service Experts control environment
Key Functionality Early phases
– Electronic service work orders– Driving directions (with GPS)– Interactive time stamps and enhanced paging– Up-sell prompts – Credit card, check, cash transactions with signature capture
Future phases– Full integration with business system– Immediate revenue recognition– Inventory management system with bar-coding– Equipment diagnostics
ResidentialHeating & Cooling
CommercialHeating & Cooling RefrigerationService Experts
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Demand Enablers
ConversionRate
Improvement
10%
20%
30%
Service Revenue
Opportunity
$18m
$36m
$54m
Additional Calls Per Tech
2/week
3/week
4/week
Service Revenue
Opportunity
$24m
$36m
$48m
Customer Contact Center Driving Demand
Customer Contact Center Driving Demand
Field Application for Service Technicians
Exploiting Demand Efficiently
Field Application for Service Technicians
Exploiting Demand Efficiently
Creating a World Class Service OrganizationCreating a World Class Service Organization
ResidentialHeating & Cooling
CommercialHeating & Cooling RefrigerationService Experts
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CommercialHeating & Cooling RefrigerationService Experts
Worldwide Product Segments$17.5 BILLION TOTAL MARKET
($ BILLIONS)
$1.2 Walk-in Coolers
$2.9 Refrigerated Cases/Display
$3.1 Transport Refrigeration
$2.3Industrial/Ammonia
$2.1Self Contained/Reach-In
$1.9 Vending Ice Machines
$0.8 Specialty Chillers
$1.0Non-Food Ultra Low Temp
$2.2Commercial Systems
$2.2Commercial Systems
Sources: Fredonia, Census Bureau, Frost and Sullivan, company estimates
ResidentialHeating & Cooling
CommercialHeating & Cooling RefrigerationService Experts
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Organic RoadmapSTRATEGIC DRIVERS
Pro
du
c tL
ead
ers
hip
Product Development Strategy
• 3 year roadmap• Stage Gate®• Open innovation• Brand strategy
Plan development and execution
>8% revenue growth/year
2004 2005 2006 2007 2008
Customer Interface Strategy
• Service alignment• Customer segmentation
Plan development and execution
Manufacturing Excellence Strategy
• Low-cost product platforms• Open innovation
Cu
s to
mer
Inti
ma
cyO
per
atio
na l
Exc
elle
nce
Unparalleled customer service
>15% cost reduction
Plan development and execution
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CommercialHeating & Cooling RefrigerationService Experts
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Developing MarketsSTRATEGIC 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%
Source: McKinsey report, internal estimates
ResidentialHeating & Cooling
CommercialHeating & Cooling RefrigerationService Experts
1999 2006
16% CAGR
-$4
-$2
$0
$2
$4
$6
$8
$10
$12
$14
1999 2006
10%+
REVENUE EBIT
Heatcraft Model in Place in Brazil
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Potential Adjacent Markets Common customer base and channels
Leverage technology and manufacturing processes
Supporting services and technology
Expands our influence to key end use sectors
Expands available market
Food Retail Food Production Food Service
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$2.2 Commercial Systems
$9.5Expanded MarketOpportunity
$9.5Expanded MarketOpportunity
Sources Fredonia, Census Bureau, Frost and Sullivan, company estimates
$1.2 Walk-in Coolers
$2.9 Refrigerated Cases/Display
$3.1 Transport Refrigeration
$2.3Industrial/Ammonia
$2.1Self Contained/Reach-In
$1.9 Vending Ice Machines
$0.8 Specialty Chillers
$1.0Non-Food Ultra Low Temp
Worldwide Product Segments$17.5 BILLION TOTAL MARKET
($ BILLIONS)
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Financial Overview
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5 Years of Sales & Profit Growth$ MILLIONS EXCEPT PER SHARE DATA
* Exclusive of restructuring, non-recurring items, non-operating gains/losses and goodwill impairment charges
0
1000
2000
3000
4000
20
02
20
03
20
04
20
05
20
06
est
Adjusted Income From Continuing Operations*
0
50
100
150
200
20
02
20
03
20
04
20
05
20
06
est
0
0.5
1
1.5
2
2.5
2002
2003
2004
2005
2006
est
Sales Adjusted EPS*
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Solid First 9 Months Performance$ MILLIONS EXCEPT PER SHARE AND RATIO DATA
2006 2005 % Chg
Sales $ 2,808.7 $ 2,495.6 +13%
Net Income 120.6 108.9
Discontinued Operations #… ---- 1.3 (Gains), losses & other expenses # * 3.1 (15.9) Restructuring charge #… 8.5 1.6
Tax items…… (8.8) ----Cumulative effect of accounting change # … ---- (0.2)
Adjusted Income from Continuing Operations $123.4 $95.7 +29%
Diluted EPS, as adjusted 1.65 1.37 +20%
Total Debt at 09/30 $120.0 $236.1 -49%
Debt : Cap at 09/30 13% 27%
* Net of realized gains on settled futures contracts # Net of income tax
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A Stronger Balance Sheet
Reduced Total Debt by $570 Million in Past 5 YearsReduced Total Debt by $570 Million in Past 5 Years
* As of September 30, 2006
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Financial ObjectivesFULL-YEAR 2006 GUIDANCE (provided 10/26/06)
GAAP EPS of $2.00 to $2.10; adjusted EPS exceeding this range
Revenue growth of approximately 10%
Capital expenditures of approximately $70 million
LONG-TERM
Annual revenue growth of 6 to 8% plus acquisition activity
10% segment profit margin…a minimum of 50 bps improvement per year
ROIC = 5% greater than cost of capital
Debt : Capitalization below 40%
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