Lennox International Inc. (LII) Q1 2012 Earnings Call April 24, 2012 9:30 am ET Executives Steve Harrison - VP, IR Todd Bluedorn - CEO Bob Hau - CFO Analysts Jeff Hammond - KeyBanc Capital Markets Josh Pokrzywinski - MKM Partners Adam Samuelson - Goldman Sachs Keith Hughes - SunTrust Rich Kwas - Wells Fargo Securities Rob Wertheimer - Vertical Research Partners Steve Tusa - JPMorgan Presentation Operator
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Now, let me turn the call over to CEO Todd Bluedorn.Todd Bluedorn Thanks Steve. Good morning and thank you everyone for joining us. Let me take it through a few key points on the first quarter and then Bob will discuss the financial results more detail and the outlook. Total company revenue in the quarter was up 2%, led by 7% growth in our residential business. Volume and price mix were both up for the company overall. We continue to closely manage cost with SG&A down 3% from the prior-year quarter. Total segment profit margin was up 50 basis points. Adjusted EPS from continuing operations was $0.01 versus a $0.04 loss in the prior-year quarter. This is adjusted for discontinued operations from the planned sale of our Hearth business. First quarter 2012 adjusted EPS from continuing operations had a $0.03 benefit from the movement of the Hearth business to discontinued operations. First quarter 2011 had a $0.07 benefit from this move. So Hearth had not been moved to discontinued operations, we would have reported a $0.02 loss for adjusted EPS on continuing operations versus the $0.11 loss in the prior-year quarter. On our website we have posted revised 2011 quarterly and annual earning statements, which show the effect of the removal of the Hearth business on the company's 2011 results. On a GAAP basis for the first quarter of 2012, the loss per share from continuing operations was $0.01 versus a loss of $0.06 in prior-year quarter. Residential business had strong execution in the first quarter, driving 7% revenue growth and 230 basis points of margin expansion in the business. Residential segment profit was up 150%. Revenue from residential new construction HVAC equipment was up more than 40% in the quarter. Revenue from replacement equipment was up high-single digits. The first quarter got up to a relatively slow start in January and February due to warm weather, but then seasonally warm weather in March led to an early start to the cooling season and a strong finish to the first quarter.
Our 22 shipments were up a couple of points from the first quarter of last year and were high-single digits as a percent of total cooling shipments. As we enter the summer months, we're still planning for R-22 to be about 25% of the cooling product shipment, up about 5 points from last summer. We still expect R-22 to be a mix headwind to operating profit of about $50 million in 2012.Overall, it was a nice quarter for residential, but looking ahead some cautions are in order. The first quarter is a very seasonally light period for us and the industry, and start to draw conclusions as the business transitions more to cooling products for the key summer selling season. April is off to a solid start and it seem warm weather in some key regions, but the critical months are May and especially June for the second quarter overall. Turning to our commercial business, revenue was flat in constant currency with segment margin up 10 basis points. As we mentioned in last earnings call, the timing of growth in our national account business in 2012 would be beyond the first quarter. Backlog and order rates look good and we continue to expect a solid year in our commercial business. On the national account front, we signed up nine new accounts on top of the 20 last year to bring our total to 104 new national accounts won since the start of 2007. In Europe, revenue was up low-single digits at constant currency. Turning to service experts, revenue was down 13% on weakness in the residential business. Commercial service revenue saw strong growth and continued success with national account customers. Refrigeration revenue was up 6% in the first quarter about half of that rate on an organic basis. Read the rest of this transcript for free on seekingalpha.com