Food Equipment: A Growth Platform

Scott Santi, Vice ChairmanJohn McDonough, President,

Food Equipment North America

December 8, 2008

Today’s Topics

• Business Overview• Major End Markets• Major End Markets• Core Product Lines

Key Growth Strategies• Key Growth Strategies• Q & A

Business Overview

ITW Food Equipment Group13% of total ITW revenues—2008(F)

ITW Food Equipment Group

• Commercial Food Equipment and Related Services• 55 businesses in 22 countries represent $2 1 billion in55 businesses in 22 countries represent $2.1 billion in

total revenues• 2007 Revenues: +27%• 2008(F) Revenues: +10%

ITW Food Equipment Group

• Revenue by Category

11%

59%30%

Food Service

Service30%

Food Retail

ITW Food Equipment Group

• Revenue by Region

Major End MarketsMajor End Markets

ITW Food Equipment Group

• Revenue by End Market

18%Institutions

47%

7%Food Retail

Food Service ChainsI d R

16%

12% Ind. Restaurants

Other Food Service

Institutions• Colleges/Universities• Schools• HealthcareHealthcare• Lodging/Casinos• Canteens/Catering Cos.• Government

Food Service Chains• Full Service restaurants

– Family Style– Ethnic– Seafood– Steak

• Quick Serve Chains– Burger– Chicken– Sandwich– Ethnic– Bakery CafesP b & T• Pubs & Taverns

Independent Restaurants• Independents• Restaurant Groups

Other Food Service• Air Catering• Marine

– CruiseCruise– Offshore– Shipyards

• Transportation• Misc./Other

Marine

Misc./Other

Food Retail• Supermarkets• Mass Merchandisers• Membership ClubsMembership Clubs• Hyper Marches• Convenience Stores• Petroleum / Convenience

G• Grocers

Core Product LinesCore Product Lines

ITW Food Equipment Group

• Revenue by Product Line

13%

3%

Service

W h30%14%

Warewash

Cooking/Baking

Food Processing

21%19%Refrigeration

Other

Warewash• North America

• International

Cooking/Baking• North America

• International

Food Processing• North America

• International

Refrigeration• North America

• International

Service• North America

• Billed Services• Service ContractsP t (OTC)• Parts (OTC)

• Installations• Other

• International

ITW Food Equipment GroupPerformance Since Premark Acquisition

Total Revenues Op.

Margins

15%

20%

5%

10%

0%

5%

($500)( )

ITW Toolbox Impact - Hobart Germany80/20 MRDUSa Innovation

2000 2008PLS In-Lining Segmentation

Operating Margins: ~20.0%~20.0%Operating Margins: <5.0 %<5.0 %

• ITW Tool Box Implementation Drives:Significant Core Business Profitability Improvement– Significant Core Business Profitability Improvement

– Customer Driven Innovation/Organic Growth

ITW Toolbox Impact - Hobart France80/20 USa MRD

2000 2008PLS In-Lining Segmentation

Operating Margins: 14%14%Operating Margins: (5.0%)(5.0%)

• 80% reduction in SKUs• Refocused on “80” products and geographies

St li d l d d i• Streamlined sales and admin processes• Segmented business by core served markets• Targeted growth in direct service contracts

Key Growth StrategiesKey Growth Strategies

Key Growth Strategies

• Customer-Driven Innovation• Service as a Growth Platform• Service as a Growth Platform• Geographic Expansion/Emerging Market Growth

Targeted Product Category Additions• Targeted Product Category Additions

Customer-Driven Innovation: MBM/Hobart CombiMBM/Hobart Combi

• The Opportunity:• Operators focused on production efficiencies

» Simplicity of operation / ease of replicationp y p p» Process solutions vs. discrete pieces of

equipment• Often used with other “vertical” platforms

» Combi» Chiller» Holding/transport carts

• The User-Driven Solution:The User Driven Solution:• Bar code scanning to deliver ease of replication

» Oven recipes embedded in food company bar codes

» Recipes programmed on-site; onboard label» Recipes programmed on site; onboard label printer

• Interchangeable racking across platforms

Customer-Driven Innovation: 3000 Series Slicer3000 Series Slicer

• The Opportunity:• A core industry product with long-unmet needs

T f d f l i– True ease of use and ease of cleaning– Reliable slice quality (chain specification)– Improved yield (shrink management)– Operator productivity

• The User-Driven Solution:• Nine (9) patent-pending innovations, including:

– Removable knife (ease of cleaning)– Knife geometry (slice quality and yield)– Product tray presentation (slice quality and yield)

Simplified controls interface (ease of use)– Simplified controls interface (ease of use)– Efficiency enhancers on automatic (productivity)

Customer-Driven Innovation: Somat eCorect

• The Opportunity:• Escalating waste management costs

» Weight and/or volume fees vary by municipality• Demand for cost-effective sustainability solutionsDemand for cost effective sustainability solutions

» Majority of foodservice waste is compostable»Food waste; cardboard; compostable

disposables

• The User-Driven Solution:The User Driven Solution:• Zero-environmental impact waste elimination

» 8:1 reduction of waste into soil-grade mulch in 24-hours

» Mulch can be used, donated or sold» Mulch can be used, donated or sold» No water, enzymes, bio-filters or ventilation needed» Complements use of pulpers in high volume

applications»Pulpers reduce waste volume by 80% to a p y

wet pulp»eCorect further reduces weight (70%) and

volume (55%)• Saves energy; supplies; hauling fees; labor

Service as a Growth PlatformService Progression (2000-2008)

– Created separate business units to provide focus– Identified core Hobart equipment and service customers– Identified core Hobart equipment and service customers

» Focused on service quality and field efficiencies» Targeted field operations against this profile of

accounts» Built in-depth tech training programs around this core

– In-depth USa projects to simplify field and back-office processes

– Since acquisition:q» Revenue growth: 2x» Income growth: 4x» Current worldwide operating margin %: mid-20’s

Service as a Growth Platform• Building a Global Service Platform

• Current Status– Expanding International footprint:

» US, Canada, Mexico, Brazil; Puerto Rico; Columbia» UK, France, Germany, Benelux» Australia, Japan, Hong Kong, China, Korea

– Unique Value PropositionU que a ue opos t o» Factory-owned service arm» 1700 Hobart technicians in the United States alone» Actively manage total ownership experience for customers

– Adding user-driven product and service offerings to grow base– Adding user-driven product and service offerings to grow base» Multi-brand and full-store service agreements for select customers» Water treatment and grease management products (US and

Canada)» Installation services» Installation services

Service as a Growth Platform

• Service Growth Opportunities Going Forward:• Currently serve less than 20% of ITW-installed baseCurrently serve less than 20% of ITW installed base

– Additional share of ITW-installed base– Active trials of full-kitchen service in select accounts underway– Evaluate coverage of non-ITW-installed base

• Recent acquisitions enhance service platform– (UK, Ireland, France)( )– & (France)

Emerging Markets• History:

• Have been successfully selling US/European equipment to Western-style hotels, large restaurants, institutions and employee dining facilities for years

• Have an established manufacturing and service presence to support these activities

• Targeted Growth Initiatives• Currently building localized marketing competence/capabilities in Cu e t y bu d g oca ed a et g co pete ce/capab t es

these regions• Focusing on penetrating select key end markets in key

geographiesg g p• Expanding our service coverage

Recent Acquisitions: Horis• Revenue @ acquisition: $225 million

• Acquisition closed January 2007St t i Att ti• Strategic Attraction

• Complementary positions with Hobart France» Cooking, Refrigeration» Restaurants and Institutions» New projects focus vs. Renewals (replacements)

• Attractive direct service business• Current Status

M f t i t lb i l t ti i f ll i• Manufacturing toolbox implementation in full swing• Targeting service margin improvements• Detailed market segmentation process was

initiated in early 2008y• Operating margin improvements on track with

acquisition plan

Recent Acquisitions: Avery Berkel• Revenue @ Acquisition: $80 million

• Scales; Slicers; Wrappers• 95% revenues emanate from Europep• Acquisition closed September 2007

• Strategic Attraction• Strong brand recognition• Attractive direct service business• Well positioned range of premium to value-line

products

C t St t• Current Status• Toolbox implementation is well underway• Leveraging growth opportunities across Europe• Exploring global platform development opportunitiesExploring global platform development opportunities

with Hobart • Operating margin improvements on track

w/acquisition plan

Food Equipment: A Growth Platform

Significant Future Growth Potential:• Significant Future Growth Potential:

– Relatively small existing ITW share positionG $ $• Global Food Equipment market estimate: $22 - $26 billion

• Market still highly fragmented

– Lots of Room to Grow:Lots of Room to Grow:• Customer Driven Innovation• Service as a Growth Platform• Geographic Expansion/Emerging Market Growth

N P d t C t Additi• New Product Category Additions

– Direct Service Capabilities• A highly leveragable differentiating advantageA highly leveragable differentiating advantage

QUESTIONS