Carrier (UTX) loses one of it's largest distributors to York (JCI)

Implications: US Air Conditioning Distributors ("US Air"), one of Carrier’s (a division of UTX) largest distributors, has dropped Carrier and starting the end of September 2007 will be selling York branded products in Southern California, Arizona, Utah, Idaho and certain parts of Nevada. US Air represents approximately $500 million in revenue and 48 branches in the market place. Currently, out of this shake up in the market place a few other events have occurred: 1)Ferguson has lost the York line in So. California (and possibly No. California shortly) and Arizona. Currently they do not have a replacement line. 2)Carrier decided to do a hard start in So. California and open Company owned distribution for Residential and Commercial hvac products. They will need to hire hundreds of people and open numerous locations in a short period. 3)Carrier acquired E.B. Ward, the No. California Carrier commercial and residential distributor and it will now operate it as Company owned distribution.

Analysis: Some key implications and issues are the following:

1)Carrier will lose market share in the near term due to three reasons: the time it will take to do a successful start for Southern California; US Air converting Carrier Dealers to York, and the timing of replacement of distribution in the other states besides California. In addition, it would appear that in the near future US Air would drop it's remaining relationship with Carrier in Northern California and parts of Nevada and take on York.

2)York will most likely pick up Market share and better penetrate light commercial business with US Air.

3)Ferguson will lose business and market share due to this time of uncertainty without a line and US Air converting Ferguson York Dealers to US Air York Dealers.