HVAC MARKETPLACE TRENDS

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1 HVAC MARKETPLACE TRENDS Ownership Coils Compressors Applied SPP Trane* / Ameristar Ireland (IngersollRand) x x x x x Monterrey / Asia Lennox USA x x Saltillo Nortek USA x Monterrey x x x Saltillo Rheem Japan (Paloma) x x x Nuevo Laredo York Ireland (JCI/Tyco) x Monterrey Daiken Japan x San Luis Honeywell USA x x Juarez Splits Furnaces Wall controls Control Boards Heaters Location *Trane (Ameristar): Splits, Furnaces and Coils made in Asia Sources::

2 WELL KNOWN BRANDS Operations in Mexico Source: 2

3 INDUSTRY NEWS May 13, Ingersoll Rand Investor Day TRANE TRANE American Standard Ameristar NEXIA Asian-sourced product Heavy Mexicosourced content Mfg. compressors (Res and CML) 3

4 INDUSTRY NEWS Lennox Lennox Q Earnings Call In Residential, we had expanded our manufacturing facility in Mexico and transferred certain furnace production there from the U.S. as well as insource sheet metal fabrication as part of our Mexico operations. Production began ramping up in the second half of 2014 and we expect 4 million of savings from this in We expect the incremental 11 million of savings in Lennox Chairman and CEO, Todd Bluedorn Q Lennox 2015 Investment Community Meeting Est. CAGR +24% over 7 years 4

5 INDUSTRY NEWS Rheem Japanese-owned (Paloma Group) yr plan to move AC s, HP s, and Evap coils to Nuevo Laredo, MX Sources most components from Northern Mexico and Asia Daikin Goodman Sources most components from Northern Mexico and Asia and assembles in Houston, TX production lines for splits, furnaces, and coils moved from Poplar Bluff, MO to Saltillo, MX Most components are sourced from Northern Mexico and Asia JCI manufactures applied products in Mexico and sources additional residential content from Northern Mexico Nordyne YORK ASSEMBLED in America, not MADE Daikin manufactures applied products in San Luis, MX Japanese-owned Daikin Industries, Ltd.; profits remitted to Osaka, Japan Johnson Controls, Tyco merge in tax-avoid inversion deal -- Jan 25, 2016 Johnson Controls-Tyco Deal Adds to U.S. Tax Exodus -- Jan. 25, 2016 Sources:: a4bcf6878.html 5

6 INDUSTRY SUPPLIERS Locating near suppliers Compressors: Valves: Microchannel: Copper: Motors: Steel: Fans: Copeland (Reynosa) Danfoss (Monterrey), Parker (Monterrey) Sanhua (Monterrey) Luvata (Monterrey) Regal Beloit (Reynosa) Ternium (Monterrey) Lau Ruskin (Monterrey), Morrison (Apodaca) Sources:: Internal / Business Relationships 6

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