HARRY BIZIOS President & Chief Operating Officer 1
Financial Summary COMMERCIAL HEATING & COOLING 2003 2004 2005 2006 Est. Sales $508 $581 $652 Segment Profit $38 $51 $57 Segment Profit Margin 7.5% 8.8% 8.7% Sales CAGR* 12% Segment Profit CAGR* 21% 2 * CAGR from 2003 to 2006 estimate
Segment Profit Target COMMERCIAL HEATING & COOLING 2003 2004 2005 2006 Est. Sales $508 $581 $652 Segment Profit $38 $51 $57 Segment Profit Margin 7.5% 8.8% 8.7% Long-term Segment Profit Target 11-13% 3
Manufacturing Facilities 5 PLANTS IN 4 COUNTRIES North America Europe Prague, Czech Republic Stuttgart, AR Burgos, Spain Mions, France Longvic, France 4
Geographic Revenue Mix North America Europe Stuttgart, AR 72% 28% Burgos, Spain Prague, Czech Republic Mions, France Longvic, France 5
Strengths NORTH AMERICA Continued market share increase 5 year CAGR 13% revenue 5 year CAGR 26% EBIT Strong position with national accounts provides a solid new construction base Growing replacement opportunities Industry leading products/continued focus on innovation Manufacturing excellence/expanding capacity to support growth EUROPE Lennox rooftops hold the #1 position in Europe Unacceptable profitability 6
7 Residential 550,000 525,000 500,000 475,000 450,000 425,000 400,000 16% 14% 12% LII Market Share 10% Jan-00 Apr-00 Jul-00 Oct-00 Jan-01 Apr-01 Jul-01 Oct-01 Jan-02 Apr-02 Jul-02 Oct-02 Jan-03 Apr-03 Jul-03 Oct-03 Jan-04 Apr-04 Jul-04 Oct-04 Jan-05 Apr-05 Jul-05 Oct-05 Jan-06 Apr-06 LII Market Share Growth Industry Shipments (up to 30 ton) LII Share - 12 month moving average Source: ARI and company sources Industry Shipments (units)
Customer Segmentation Owners Owners Engineers Architects Owner / Occupier / National Account Developer Purchasing Contractors 8 Construction Manager Facility Manager Contactors Design Build Plan / Spec Service
Successful Business Model Owners Owners National Accounts Engineers Architects Owner / Occupier / National Account Developer Consultants Territory Managers Purchasing Contractors 9 Construction Manager Facility Manager Contactors Design Build Plan / Spec Service
Successful Business Model Owners Engineers Architects Technical Support Customer Service Contractors 10
11 National Account Focus 12 12 of of the the top 25 25 National Accounts representing approximately 75% of of the the total square footage are are Lennox Customers Source: Chain Store Age Millions of Square Feet Rank Company 2003 2004 2005 1 Wal-Mart Stores 55.0 50.0 55.0 2 The Home Depot 18.7 19.4 18.6 3 Lowe's Companies 14.1 16.0 17.1 4 Target 13.8 14.1 15.2 5 Kohl's Department Stores 6.9 7.8 7.4 6 SUPERVALU 1.6 5.9 6.3 7 Dollar General 4.7 4.2 5.0 8 Walgreen 6.2 4.2 5.0 9 TJX 4.1 3.9 4.9 10 Family Dollar 4.0 3.7 4.0 11 CVS Corp. 1.7 1.5 3.3 12 Best Buy 3.1 2.2 3.3 13 Dollar Tree 4.9 3.6 3.1 14 Ross 1.7 2.5 2.5 15 Gap 0.5 1.6 2.4 16 May Department Stores 2.0 1.4 2.3 17 PetSmart 1.4 1.7 2.3 18 JCPenney 0.9 2.3 2.3 19 Costco 3.2 2.8 2.2 20 Publix 3.9 2.1 2.0 21 Bed, Bath & Beyond 2.1 2.3 1.9 22 Staples 1.7 3.4 1.9 23 Big Lots 2.4 3.4 1.9 24 Linens 'n Things 1.9 1.6 1.8 25 Kroger 4.0 3.5 1.2
Rooftop Awards and Recognition Energy Star Manufacturing Partner of the Year 2003, 2004, 2005 L Series wins Department of Energy lifecycle cost competition 2002 McDonald s Construction Vendor of the Year 2003 Contracting Business Innovation Award for Humiditrol 2004 ACHR News Gold Dealer Design Award of the L Series Wal*Mart s Vendor of the Year May 2006 Outback Restaurants Purveyor of the Year 2004 & 2005 2006 ACHR News Gold Dealer Design Award for the S-Class Buildings Magazine 2006 Editors' Choice Top Product Picks L Connection Network Lennox ranked highest in the first ever JD Power HVAC subcontractor satisfaction survey 12
Key Initiatives AMERICAS Solidify new construction market position Increase replacement market penetration Continue manufacturing excellence and expansion Maintain product leadership EUROPE Sales growth Expand rooftop market Focus on Eastern Europe Focus on cost reduction and improve factory efficiencies Rationalize product offering 13
Regional Distribution Centers INCREASE PENETRATION IN REPLACEMENT MARKET 14 24 24 --48 48 Hour Response
End Market Mix INCREASING MORE PROFITABLE REPLACEMENT SALES Total Market Lennox Replacement Sales Growth New Construction 35 36% CAGR Replacement 65 2003 2004 2005 2006 Est 15 Source: Industry data and company estimates
Market Segmentation NEW CONSTRUCTION (Square Footage) 14% 16% 19% Retail Education Warehouses 12% 27% Parking Garage/Auto Svc 12% Office and Bank Other 16 Source: 2Q06 Dodge Analytics & company estimates
A Strong Base in Retail NEW CONSTRUCTION (Square Footage) 14% 16% 19% Retail Education Warehouses 12% 27% Parking Garage/Auto Svc 12% Office and Bank Other Strengthen Position 17 Source: 2Q06 Dodge Analytics & company estimates
Residential New Segment Opportunities NEW CONSTRUCTION (Square Footage) 16% Retail 19% Education 14% Warehouses 27% 12% 12% Parking Garage/Auto Svc Office and Bank Other New NewFocus/New Focus/NewProducts Products 18 Source: 2Q06 Dodge Analytics & company estimates
Percent of High Efficiency Sales MEETING THE ENERGY STAR STANDARD 100% 80% 82% 60% 53% 40% 27% 20% 19 0% Industry Lennox Lennox National Accounts Source: ARI and company sources
100% Percent of R410A Sales WORLDWIDE COMMERCIAL LEADER IN ENVIRONMENTALLY FRIENDLY REFRIGERANTS 100% 80% 60% 40% 20% 7% 20% 0% Industry Today Lennox Today 2010 20 Source: Copeland and company sources
Stuttgart, Arkansas POSITIONED FOR CONTINUED GROWTH Industry leading configure-to-order lead times of 3-4 weeks Lean initiatives have increased productivity 40% 11 consecutive external ISO audits with zero findings Non-finished goods turnover rate = 39 60% domestic sales growth in past 3 years 250,000 sq ft building addition to accommodate continued growth 21
Summary Strengthen the core business Focus on the replacement market Maintain product leadership Invest for future growth 22