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Lennox International (LII)
Q4 2013 Earnings Call
February 05, 2014 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
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
Nigel Coe - Morgan Stanley, Research Division
Walter S. Liptak - Global Hunter Securities, LLC, Research Division
Glenn Wortman - Sidoti & Company, LLC
James Krapfel - Morningstar Inc., Research Division
Previous Statements by LII
» Lennox International Management Discusses Q3 2013 Results - Earnings Call Transcript
» Lennox International Inc. Discusses Q3 2013 Results (Webcast)
» Lennox International Inc. (LII) Management Discusses Q2 2013 Results - Earnings Call Transcript
Steve L. Harrison
Good morning. Thank you for joining us for this review of Lennox International's financial performance for the fourth quarter and full year 2013. I'm here today with the Chairman and CEO, Todd Bluedorn; and CFO, and Joe Reitmeier. Todd will review key points for the quarter and year and Joe will take you through the company's financial performance and outlook.
Financial results in prior periods have been revised to reflect sold businesses and discontinued operations. 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.
We 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. The company 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. In 2013, Lennox International's strong business momentum continued. Revenue was up 8% and EBIT margin expanded 180 basis points to a record 9.4%. Adjusted EPS from continuing operations rose 37% to a record $3.70, and GAAP EPS from continuing operations rose 35% to a record $3.55.
Throughout 2013, growth was led by our Residential business, followed by growth in our Commercial business, which saw a strong pickup in the second half of the year. Both businesses continue to outpace industry growth in their respective end markets.
In our Residential business, revenue is up 15% at constant currency and profit increased 75%. We continue to gain share in the North America Residential HVAC market in 2013, driven by strength in both Replacement and New Construction business. In addition, we captured price and we realized improved mix for the first time since 2010.
In our Commercial business, revenue was up 7% at constant currency and profit increased 19%. Commercial growth was led by strength in National Account equipment and service, as well as from our strategic expansion in the emergency replacement market.
In North America, our high single digit shipment growth significantly outpaced the commercial unitary market. Our North America revenue was up double digits for the year constant currency. And in the second half of 2013, we saw improvement in our European Commercial HVAC business, including strong double-digit growth in the fourth quarter.
In Refrigeration, end markets' conditions remain choppy globally in 2013 and our revenue was down 1% at constant currency. But the team had strong operational execution, expanding margins 130 basis points to a record 11.7% and driving profit up 10%. Looking ahead, we expect top line growth to pick up in the second half of 2014 on the timing of existing programs and recently won new National Account business.
Turning to the fourth quarter. The company's momentum continued. Revenue was up 10% at constant currency and EBIT margin expanded 200 basis points to 8.2%. Adjusted EPS from continuing operations was $0.77, up 38% and GAAP EPS from continuing operations was 68% -- excuse me, $0.68, up 31%.
In Residential, revenue was up 18% at constant currency and profit tripled from the prior year quarter. Trends remain strong in both Replacement and New Construction business. We believe cold weather in November and December was also a factor, with heating degree days up double digits in the quarter versus the fourth quarter of 2012. This likely pulled some furnace volume ahead into the fourth quarter from the first quarter this winter.
In Commercial, revenue was up 13% at constant currency and profit rose 31% from the prior year quarter. Growth was strong across the board, in planned and emergency replacement and in new construction. National Account revenue growth was especially strong in the quarter, and on the new National Account front, we signed up 3 more to bring the total for the year to 18. National Account customers continue to select Lennox for our leading energy-efficient rooftops, advanced controls, outstanding distribution and delivery and customer support and service.