IR 3Q 2002 Results

1
Fourth Quarter 2002 Results January 23, 2003
2
Fourth Quarter EPS - Excluding Restructuring
1.19
Changes from Previous 2002 Guidance
.70
.56
2002 2001
Results exceed prior forecast, 4Q 70 compared
to 2001
Excluding goodwill amortization
3
Fourth Quarter Orders

• Continued stagnant demand in many end markets
• Positive order rates in all sectors in the
  quarter
  
• Orders up over 4 overall, up 12 excluding
  Dresser-Rand
  
• Double-digit improvement Thermo King, Air
  Solutions, Bobcat, and Security and Safety
  
• Declining orders at Dresser-Rand and Road
  Machinery
  
• Order improvements against modest comparisons

No indication of sustained demand recovery
4
Free Cash Flow1991 1992 Compared to 2001 2002
1077
( Millions)
572
505
22
Excluding restructuring
(12)
(34)
1991
1992
Total
2001
2002
Total
Greatly expanded cash flow generation capability
5
Restructuring Program

• Total cost in the fourth quarter 35 million
  pre-tax, total cost 460 million since inception
  
• 29 plants closed
• 7,000 total headcount reduction
• In excess of 200 million annual cost savings
  attained

Successful restructuring program complete as of
12/31/02
6
Recurring Revenues Hussmann

• Added contracts for 400 additional stores
• 3,300 stores covered by national contract
  program
  
• Up from 800 locations at the end of 2001
• Target 5,000 locations by end of 2003

Recurring revenues continue to grow and
constituted over 38 of Hussmann revenues for the
quarter
7
Hussmann Retail Solutions Initiative

• Total 2002 Revenue 32 million
• Walmart purchase of Dor-O-Matic doors
• Neighborhood supermarkets
• 30-50 initial rollout, 200 total
• Total value 6 million
• Negotiating additional service package worth 6
  million
  
• National service agreement with Costco
• Maintenance of refrigeration equipment, audit
  services, and monitoring
  
• 3 million in 2002, 7 million expected in 2003

Benefits from Retail Solutions Initiative
materializing
8
Recurring Revenues Air Solutions

• of AirCare Contracts

8010
6229
3447
1039
0
2001
Pre 2001
2002
47 of Air Solutions revenues came from
aftermarket
9
Innovation Nirvana Air Compressors

• Most energy efficient air compressor of its type
• 20 million in sales in 2002
• Market share gains
• Customer energy savings 20
• Pegasus small rotary model launched 1,900 units
  sold in 2002, 12 million of sales

Customer savings through higher efficiency
10
Energy Systems

• Limited sales opportunities due to natural gas
  cost environment
  
• Marketing and product development focus on
  environmental applications (wastewater treatment
  and landfills)
  
• 250 Kw performance testing initiated commercial
  units to be shipped in April 2003

11
New Product Lines - Bobcat
Innovation sustains market share and sales growth
12
Toolcat
New product category
13
ETC - Nationwide Operations
Chicago
ETC has 36 offices and over 4,500 customers
coast-to-coast
14
Divestiture of Engineered Solutions

• Proceeds
• 700 million cash
• 140 million of Timken stock
• Retain 80 of CDO benefit in 2003 and 2004
• Expected to close by the end of the first quarter
  2003

Expected to close by end of first quarter
15
2002 Exceeded Targets and Executed Strategy
Exceeded Financial Targets Target Actual
Earnings per share 3.00 3.25 3.10
Free cash flow 500 M 572 M

• Strong cash flow for reinvestment
• New product innovations
• Growing recurring revenue
• Portfolio realignment progressing
• Restructuring completed

Strong base to expand earnings
16
Fourth Quarter 2002 Adjusted Results
millions, excluding restructuring
Revenues 2,445 Operating Income 192 Margin 7.9
Interest Expense (53) Other Expense (4) Earni
ngs before taxes, continuing operations 135
Taxes, continuing operations (5)
Earnings after taxes, continuing operations 140
Discontinued operations, net of tax 63
Net Earnings 203 EPS Diluted Continuing Oper
ations 0.82 Discontinued Operations 0.37 1.1
9
17
Revenues Continuing Operations
Change vs. 2001
2002 Results
Q4
Full Year
ESA
North America 7 2 ESA -4 4 Asia Pacific 34
23
Latin America 17 3
22
LA
4
AP
10
North America
64
Q4 growth driven by Air Solutions, Thermo King,
Club Car and Dresser-Rand
18
Climate Control
Millions
697
667

• Hussmann
• Revenues declined 3
• Cautious spending by U.S. supermarket chains
• Thermo King
• Revenues up 17
• U.S. truck/trailer revenues up approx. 50
• Strong worldwide container business

Operating Margins
5.9
5.9
2002 2001
Excluding goodwill amortization
19
Air and Productivity Solutions
Millions
349
322

• Revenues up 9
• 15 growth at Air Solutions
• 10 growth in aftermarket revenues
• 5.9 points operating margin improvement

Operating Margins
9.4
3.5
2002 2001
Excluding goodwill amortization
20
Dresser-Rand
Millions

• Revenues up 12
• 15 completes
• 9 aftermarket
• Backlog up 10 compared to last year

347
310
Operating Margins
8.2
8.1
2002 2001
Excluding goodwill amortization
21
Infrastructure
Millions

• Revenues up 9
• 5 Bobcat
• 24 Club Car
• New product introductions
• Continued softness in U.S. road-repair markets

663
611
Operating Margins
6.5
6.3
2002 2001
Excluding goodwill amortization
22
Security and Safety
Millions

• Revenues up 6
• Impact of ETC acquisition
• Operating margin improved 1.8 points driven by
  higher sales of electronic products and software
  
• Continuing to invest in new products and markets

388
365
Operating Margins
19.9
18.1
2002 2001
Excluding goodwill amortization
23
Manage for CashWorking Capital as a of
Revenues

• Working Capital
• A/R Inventory - A/P

Continuing Operations
15
11.9
10.6
10.5
10
Working Capital of Revenues
2001
5.0
5
2002
4.1
7.8
8.0
8.9
0
Q1
Q2
Q3
Q4
2002 Full Year Free Cash Flow 572 million
Quarterly revenues annualized
24
Other Balance Sheet Indicators
Q4 2002
Q4 2001
Full Year 2002
45 M 38 M 47.5 3.2 B
62 M 57 M 46.2 3.5 B
159 M 123 M
Capital Expenditures - Excluding Engineered So
lutions
Debt to Capital Total Debt
Excluding restructuring Includes impact of g
oodwill impairment and pension equity charge
25
Outlook Full Year 2003

• Similar macro economic environment
• 14 tax rate
• Material cost reductions and productivity gains
• Higher pension costs-incremental .35 DEPS
• CDO of 50 million included in discontinued
  operations
  
• Includes Engineered Solutions results for first
  quarter

Full year DEPS 3.10 - 3.30
26
First Quarter - 2003

• 2002 Actual DEPS
• Continuing Operations .50
• Discontinued Operations .08
• Total .58
• 2003 - Forecast
• Continuing Operations .52 - .57
• Discontinued Operations .08
• Total .60 - .65

Excluding restructuring
First quarter DEPS 0.60 - 0.65
27
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