Lennox International (LII)
Q1 2013 Earnings Call
April 22, 2013 9:30 am ET
Steve L. Harrison - Vice President of Investor Relations
Todd M. Bluedorn - Chairman and Chief Executive Officer
Joseph William Reitmeier - Chief Financial Officer and Executive Vice President
Jeffrey D. Hammond - KeyBanc Capital Markets Inc., Research Division
Keith B. Hughes - SunTrust Robinson Humphrey, Inc., Research Division
Charles Stephen Tusa - JP Morgan Chase & Co, Research Division
Richard Michael Kwas - Wells Fargo Securities, LLC, Research Division
Joshua C. Pokrzywinski - MKM Partners LLC, Research Division
Brian K. Langenberg - Langenberg & Company, LLC
Glenn Wortman - Sidoti & Company, LLC
Robert Wertheimer - Vertical Research Partners, LLC
Nicole DeBlase - Morgan Stanley, Research Division
Aditya Satghare - Lazard Capital Markets LLC, Research Division
Previous Statements by LII
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Steve L. Harrison
Good morning. Thank you for joining us for this review of Lennox International's financial performance for the first quarter of 2013. I'm here today with Chairman and CEO, Todd Bluedorn; and CFO, Joe Reitmeier. Todd will review key points on the quarter, and Joe will take you through the company's financial performance and outlook.
Financial results discussed today have been adjusted for discontinued operations related to the company's previously announced plans to sell the Service Experts business, which closed on March 22.
In the earnings release we issued this morning, we have included the necessary reconciliation of the financial metrics that will be discussed to GAAP measures.
You can find a direct link to the webcast of today's conference call on our website at www.lennoxinternational.com. We will archive the webcast on that site and make it available for replay.
I would like to remind everyone that in the course of this call, to give you a better understanding of our operations, we will be making certain forward-looking statements. These statements are subject to numerous risks and uncertainties that could cause actual results to differ materially from such statements. For information concerning these risks and uncertainties, see Lennox International's publicly available filings with the SEC. Lennox disclaims any intention or obligation to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise.
Now let me turn the call over to Chairman and CEO, Todd Bluedorn
Todd M. Bluedorn
Thanks, Steve. Good morning, everyone, and thanks for joining us. 2013 is off to a good start as our business momentum continued in the first quarter. With growth across all 3 of our businesses, company revenue was up 9%, led by 15% growth on our Residential business. Total segment profit was 4.4%, which was a first quarter record for us. And the EPS from continuing operations was also an LII record for the quarter.
Adjusted EPS from continuing operations was $0.33, up 74%. GAAP EPS from continuing operations was $0.31, up 72%. In Residential, segment profit was up 86% on a 15% revenue growth in the first quarter. We continue to capitalize on growth in Residential new construction, with equipment revenue up more than 20% in the first quarter. Replacement equipment revenue was up low double digits in the quarter.
As expected, we saw some mix-down from the faster growth in new construction, as well as generally from consumers in the replacement market, but the mix-down impact was offset by price in the first quarter.
In our Commercial business, revenue was up 4% and segment profit was up 34% in the first quarter. Growth was led by North America commercial equipment and services, while Europe remains soft and was down in the quarter.
Our Lennox National Account Services business was especially strong on the growth of nationwide services. Refrigeration revenue was up 4% at constant currency in the first quarter, and segment profit grew 18%. Refrigeration was led by double-digit growth in South America and more than 25% growth in Asia-Pacific. Australia saw a strong growth as we continue to make investments in our wholesale business in that country and expand our refrigerant operations. In 2012, we made purchases of low-cost refrigerant and invested into canting equipment and operations to sell it through our distribution network throughout the country. Also in Asia-Pacific, we are seeing strong growth as we continue to capitalize on refrigeration build out opportunities in emerging markets of China and Southeast Asia.
Turning to Service Experts. In late March, we completed the sale of Service Experts in a $10.4 million all cash transaction. As part of the deal, we also secured a tier supply agreement with Service Experts. Following the sale of the Hearth business in the second quarter of 2012, the sale of Service Experts completes the divestitures of our nonstrategic businesses and we like our business portfolio going forward.
With a solid balance sheet, we are well positioned to continue to make transformational investments in our businesses, maintain a competitive dividend that grows with earnings over time and consider acquisitions that makes sense in our core businesses. In 2013, we are planning to repurchase $100 million of stock. Currently, we have $371 million remaining under our stock repurchase authorizations.
Before I turn it over to Joe, let me update you on a couple of our strategic initiatives. In Residential, we added 7 more Lennox PartsPlus stores to our distribution network in the first quarter and are on track with plans to add a total of 28 of these wholesale stores this year. We now have 115 PartsPlus stores, and they continue to be one of the keys to the success we are seeing in our Residential business. Within these stores, about 3/4 of the sales are HVAC equipment and 1/4 of the sales are parts and supplies.