Lennox International (LII) 22 Apr 192019 Q1 Earnings call transcript

Ladies and gentlemen, thank you for standing by. Welcome to the Lennox International First Quarter 2019 Earnings Call. [Operator Instructions].

As a reminder, this call is being recorded. I would now like to turn the conference over to Steve Harrison, Vice President of Investor Relations. ahead. go Please

Bluedorn; reconciliation you Joe Lennox Thank of us this for CEO, for I'm will Reitmeier. Good key take financial morning, [Operator earnings release the that through review financial company's we included for discussed performance measures. you have In of points to the Todd and Chairman non-GAAP International's the today quarter, quarter financial today CFO, for review All Joe Instructions]. performance here year of the Todd be will and comparisons necessary issued morning. the period. with joining and measures will are the and this XXXX. first the prior outlook. GAAP we against mentioned

you link call today's of that such could direct statements everyone to The webcast results call, numerous can uncertainties are that and a These site on this differ materially www.lennoxinternational.com. at like the find on risks to better website subject will statements. replay. we give course our to conference be will cause making forward-looking webcast archived remind in for understanding statements. the a to of the to certain would our be I You from operations, actual of

concerning new result with update risks or a any events International's the For revise any as Lennox information or future filings these of to obligation and statements or SEC. available disclaims publicly see uncertainties, intention The company information, forward-looking otherwise. whether

call Todd Bluedorn. turn me CEO, the let to over and Chairman Now

joining everyone, for us. Good morning, Steve. Thanks, and thanks

company of for impact and and was XX% from our divestitures. $XXX impact our down quarter including of as the accelerating residential tornado basis, negative as each proceeds business million the revenue a this with businesses on the well recovery from Let an discuss me On GAAP start tornado on points in first X% year. overview and the insurance then key

tornado basis, adjusted On up a impact X%. revenue impact excluding a $XXX of was on negative negative an Foreign revenue first X% exchange quarter including divestitures, had million, growth. record company X%

to recovery, segment million to rose new profit proceeds against XXX XXX of Foreign was segment income resulting impact for set a a on $X.XX. from XX.X%. an from quarter Revenue $XX segment the GAAP million, segment and quarter X% million, new operating quarter total was up a GAAP a adjusted negative of margin up to record high profit to to margin XX% a construction our XXX record points new to $XX of XX% first impact XX.X%. quarter quarter to $XX tornado net first up million. million. record Adjusted and In XX% tornado XX.X%. first XX% record first quarter of quarter, insurance points business. revenues expanded expanded to from EPS $XXX of in Adjusted the profit high exchange $XX EPS for and $XX of XX% segment negative impact, Adjusted operations a X% insurance On up of XX% $X.XX. Residential business quarter. basis negative first in first margin basis of the rose in a was impact. had continuing replacement Residential segment points $XX tornado million a basis, residential growth. revenue rose total including basis both million operations continuing rose X%, first expanded profit residential

in new In with growth solid strong XXXX flat mid-teens known points, driven Both lumpy down segment declined construction, two a replacement decline Commercial of XX% in revenue down X%. had in to down couple business. replacement, first a and the Segment decline growth we points for business, and first emergency Commercial with X.X%. revenue replacement new quarters in example, profit by the construction in quarter, the to well a quarter XXX was was margin and of planned basis revenue. quarters in is revenue a for of Turning being up XXXX digits. quarter was two mid-single

For focus both saw seeing improvements up context at pause and our Arkansas. account new we seasonally Currently, Operationally, we our the all continue the construction government some planned macroeconomic quarters. of national the first in uncertainty quarter. largest in into heading nicely factory on investment however, replacement, productivity backlog we temporarily customers to the in in and are market

focus new we labor We and half, training further. inefficiencies brought addressing been up the continuing ramping for board In to on all first time productivity on the are employees have shortages and quarters. in recent full

the Our VRF service on service business account side, up mid-single double-digit and revenue quarter, in Lennox national growth was first saw digits. strong

negative quarter, currency, foreign expect constant and North in margin up for down the a continue expansion had growth the exchange same Commercial. in due of expansion Commercial revenue the uncertainty all context mentioned as remainder some We the year margin year the and full mid-single I America pause revenue of segment X% up X% market. We was the macroeconomic investment quarter. government dynamics of was for impact but saw first in with on and to at the Regionally, digits customers temporarily second half. Refrigeration basis the we In in

was basis enter XX%. factor currency was and our Commercial, businesses revenue more Europe a lumpy a backlog segment was can X%. was fast segment than Europe, overall. Both is Refrigeration these periods. down digits be HVAC segment to XXX first quarter-to-quarter mix the up low-double Refrigeration strongest Lower Commercial for a up growth the with Refrigeration was down in and in with as basis. on down volume up slightly In profit at points seasonal in we of As nicely margin XX% building and constant quarter down

the We Refrigeration margin year up expansion a half. the continue to margin and with growth second revenue of expect the on and full basis expansion segment remainder year in

quarter off is second to the a overall, start. company the solid For

look of strong year another our as profitability. ahead growth EPS reiterating to We and are revenue and guidance we adjusted

raising We million year stock $XXX are guidance our million. repurchases for $XXX from this to

let for on related approximately the quarter and proceeds XXXX. difference expect $XXX lower stand picture, approximately estimated and is Big from total year. $XXX down million, a gain for non-core to due recovery the construction our the insurance assets $XXX turn and core in The tornado book approximately over tornado, for where the XXXX $XX we in as to and of costs, now received of million insurance this impact of make financial $X.XX the in guidance million value the progress about residential of the From a benefit million previous of now a million I core expected more replacement EPS value We GAAP benefit and Before outlook, versus of seeing $XXX our the continues same me $X.XX to perspective, business acceleration on in of recovery we're and for expect it non-core to the guidance. significant XXXX million from summarize details previous approximately tornado. about things $XXX guidance. previous that Joe

of quarter well end As for first were our I for we residential we XXXX across end and there XXXX. as as mentioned three by previously, are product production of of are back factories all fourth the products heating quarter the of the full back cooling -- of to

impact tornado local are are on focused down negative impact team negative From dealers in the tornado distribution of million first for company-owned the business guidance on revenue impact We tornado quarter, the market profit take first core and in expected Lennox prior and from negative The a million. perform million. the guidance as segment in fully back back of $XX continues The as regional versus refilling network. from was our guidance quarter taking as $XX business to we and million versus on the is our the resupply perspective around was operationally $XX market. $XX around

guidance. from $XX business in tornado lost in XXXX, of million and profit of Of We in prior $XX expect remaining of segment tornado revenue million $XX in $XX impact in million same approximately impact insurance in million. million the prior and $XX down expect million hit revenue interruption the expected quarter. to $XX $XX we a XXXX, results for to compared positive estimate a of This be we million recovery the in about XXXX XXXX, of $XX second segment negative is as guidance. prior prior the $XX guidance to million profit million, profit impact For estimate the profits of down negative net negative from now for in impact for

$X and we million For revenue of profit. approximately the million to third a to quarter, expect hit $XX

to $XX million in the expect we lot in the three A quarters. that flow evenly remaining insurance guidance, our core remaining For across there. recovering

guidance the and financial updates chart tornado our a reflecting posted view. have details current prior the website We with on

Now it over Joe. I'll to turn

distribution, with & Cooling the from Heating profit the proceeds provide relative mix I'll which net some tariffs the margin was revenue. million impacted business Partial everyone. and Cooling. higher points. and from higher financial X% exchange and was profit by basis $XX in investments Residential was and Heating Residential of quarter, record flat, Todd, was insurance up on was mix, commodity, and XX.X%, quarter In & for Residential and comments you, [ph] and Segment favorably up up SG&A neutral costs, higher good to $XX reductions. $XXX productivity, as XX%. of price starting the $XX was up cost up X% revenue offsets well quarter, segments details a was favorable volume, sourcing as Thank led Segment morning, additional and factory quarter, X%. pricing XXX a freight, lower to million Volume was benefit first million, foreign was warranty impact expenses. negative engineering included first

was price the X% Cooling Commercial X%. was up Turning business. was X%. & in to Heating first up up mix $XXX million quarter, Volume X%, down revenue and Commercial was our

investments, segment factory Segment XXX was lower Segment by neutral down Foreign commodity, freight, X.X% higher $XX other tariffs, profit basis X% price expenses. costs, and revenue and and impacted mix was mix million exchange Commercial distribution offsets points. SG&A Volume the higher sourcing up productivity, led margin volume and X%. down in to first was down warranty product revenue. the segment, was reductions. was pricing XX%. profit flat In Refrigeration favorable included quarter. cost Partial engineering and were and and was

by and points. on had include expenses. unfavorable revenue. lower reductions. factory distribution engineering SG&A both Refrigeration $X Foreign X% offsets profit down X% investments, mix, profit margin costs, million was volume was productivity, led negative a tariffs freight Segment price impact higher basis and Partial and and was and favorable segment XX%. sourcing impacted down XXX Segment higher commodity, exchange cost

a $XX Regarding non-core were million. $X.X of or benefit quarter On the year in recoveries, $XX million to That first from $XXX special after of prior benefit include net company $XXX million net expenses from had cash gain incurred, million operations for business in based tax of overall million in access was quarter. a of $XXX and for compared charge basis, sale the compared for the in a from million was quarter, were million items quarter. GAAP a first compensation, business insurance $X.X the SG&A tax million items. totaling a revenue, losses the Capital first Corporate benefits quarter net $X.X in in a used of dollars results, on Net $X.X other million of million million various or loss prior quarter. million, $X of in down expenditures of share a to $X use the million ago. XX.X% the $XX a first $XX the XX.X%

the $X property to million result million. million in damage of use used tornado and timing was in plant cash the equipment was the to for proceeds the reconstruction In flow, increase of payments a totaled compared prior for our line the Marshalltown free we that $XXX use with first to expectations. $XXX quarter. of of had of tied of and cash quarter The also quarter We

year Cash early the dividends Given seasonality, of generate latter $X.X. were in of $X.X the in we March, debt and end part quarter. debt-to-even cash in ended cash the used ratio paid million the $XX the the Total was quarter, and quarter stock. year. of at our billion the and $XX and million the we our the with million ending business cash company equivalents part repurchased in of The first of $XXX

outlook for Before I turn our over I'll to review XXXX. Q&A,

assumptions underlying are the Our for unchanged. year market

to to we North the America to mid-single up we be For up flat. Commercial overall, we shipments shipments shipments be America and digits North and expect industry single HVAC low Residential digits, America expect relatively unitary North Refrigeration expect be

reiterating growth in X% the For X% to exchange. of neutral company XXXX, with we revenue foreign are

from $XX.XX million, placement book million to of approximately updating range costs of charge first special $XX.XX. to pension in pre-tax $XXX value $XX.XX associated which was XXXX, the non-cash items GAAP Pacific quarter, that the and we range annuitize We of of EPS operations gain are relates estimated guidance Life benefit This from in with the incorporates from approximately continuing the for $XX charge Insurance previous entered to in a $XX million a lower benefit workers to to of a quarter above pension a $XXX new Company settlement $XX.XX our agreement the reconstruction second factory settlement defined an The the results from obligation. value, of pension April of and million in into the XXXX.

charge to the this XXXX the measurement will the also pension in transferred in in part $XX we As Life. write-off settlement quarter plan event actuarial transaction, accumulated, it result assets required non-cash, and lead million related, of of This second losses. Pacific $XXX a pre-tax to million of pension

from range of our for our for key puts additional reiterating to And year. and the guidance operations capture run still expect For assumptions XXXX. price let adjusted we XXXX, a $XX.XX. takes to me EPS $XX guidance for We of points in million the $XX now continuing are through in and

productivity. We sourcing, freight, headwind from and reductions benefit $XX factory commodities, million million costs are and led from We that's and planning an benefit and from tariffs. $X dollar engineering a $XX $XX $XX million from still from million expect for residential

$XX in $XX investments, We expense basis for for SG&A. still million be for XX% year. of are XXXX expect an to from effective continue headwinds still $XX million. range $XX interest XX% targeted and Corporate expect still at rate the to million million we expected an of to tax expenses distribution approximately is on full the Net and adjusted

are to to facility. updates. cost expected for and the funded be manufacturing weighted expect due previous will let's Iowa million couple finally, now million million our we XX complete The reconstruction count prior to is down guidance. of from guidance million the to versus the to full the a We of $XXX to XX average by shares, which this this Now year the to plans $XXX proceeds. expenditures year. in to Capital change of million that, insurance incorporates expect go $XXX $XX now $XXX to And be lower repurchase the share And million between stock continue Q&A. be million diluted with be

[Operator Instructions].

Mitchell the Barclays. line, First on with Julian we have ahead. Please go

morning. good Hi,

morning. Good

QX you in maybe first those you than timetable of around Hey, QX talked if decline Commercial question I through know getting margin the the the issues thought. how on balance saw productivity. just the just margins. factory you about was last I call from over the And you the in headwinds the labor inefficiencies wondered productivity year? of about worse that think and

I absorption. in on as script, we freight have up. productivity half between in shortages our see second thought. on the a little second tariffs. it's and ramping frankly lower before had we lower addressing labor than us as And year what we expansion. a Arkansas and the quite focus the about for and of though beyond think and things operationally we we where at hurt XXXX, everybody as there we we price to continue volume we've the It's factory. of and going be to focus to worse continue commercial training on factory now were as the mean of these been to Also half gap I discussed, the volume lower well And above positive productivity the quarter factory expect improvements in couple the a and in larger commodities, margin We talked

end a at longer Commercial, and the quarter the marketplace Commercial the said, ahead, just of on in we're on basis, little they announced a first negative we're the Commercial price/cost, increases ahead full price year elements to were takes because basis in it the but in as year. we a So, full from Corporation priced get year the for I a --

So, those year, gap have between positive second two. half a the of we’ll

-- on and are entered XX% a up is As on revenue enter and to we we nicely, in have book about XX% as mid-single we already the is ship. Commercial, margins of up our as quarter, backlog and the I mentioned which quarter script, digits we

Thanks. about market the on any of end second business, you'd residential making are then line the if of update QX. in tornado is sort And And market my feeling impact. out the conditions, hoped you on broad question coming how what also you're progress share with

first answer we long short time and we're which saw then residential is in we so a and of I'd revenue answer impact very Residential our in you the had and of results, X% actual the is other -- we XX%. where earnings, when would words, at winning strong thought sort been up the on revenue we was actually season. or impact -- X% The slightly up we implies and going short last selling ready our at that going look for out tornado. lower we still ex back and ahead tornado coming summer core tornado guided have and getting of quarter is, we're EBIT share residential, side to said of overdelivered for

the that the through us that. confident back year we we'll continue borrowed we're as to do We was go and from gain share

conditions you market as thought And as are well?

LIVE, we tell or little us our meetings a events. But five are I have Yes. that's going with you we their mood but where excited, are call early spending but are meet that to dealer we with they in confident in the – go but in they're four the quarter, into mean the us Lennox this of extremely People the season. when tell atleast largest locations dealers them hard always it's really We in, as second they you’re them was loyal both spending. country. when importantly, people room positive. bring more showing The what around thousands to

saw, softness I Commercial Well, certainly Refrigeration saw attributable America I of was saw. you U.S. this more and you that concerns in the to was think that in that think are news. in our and you'd And there I to macroeconomic watching is think of think which some I or softness tied North by cable get tied overhang to you don't sort numbers, Commercial our in Refrigeration sort

as selling And think summer we that's businesses into feels I behind our of pretty all go us. now three good. season

Thank much. very you

Thanks.

with to Markets. Next, KeyBanc ahead. Jeff Please go we'll our go Capital Hammond

Tom. are How morning good Hey, you?

How you? are Good.

Good.

just just, seems finding just Are So your of competitors the share dealers you they’d as talk and are to share going dealer you just to be like of some hold experiences suggesting shift. back able of this attrition it because to kind were your recapture. expecting are some you some what that

Yes. year, yes. There's short at is we lost, won't we dealers of mean, that every come we same bring We bring on. met But the I some new the answer have on. time some, ones lose that dealers hundreds back. that we

So all us. from ones the can't hold said and when they plus all took can't sort done, They their all dealers they hold it's their of dealers.

So borrowed after on a their we're back going dealers. attacking they broad front, but dealers, who also winning our from, share existing both

fronts. of confident so to We're attacking numbers. on good we're the we're going share we're the the position in at be in and And a it year end seeing all real

into the part guess I some of or as know the confident just the we latter that Refrigeration, of given you steps then you year. up just pause on And know that move Okay. concern

lumpy second to it we're backlog backlog was quarter start to in I I was earlier I case North be theory down up. still XX% a but saw ship, when its and the we're there'll ship, balance second to but mid-single XX% to again, be be and the on cost quarter have book of said European which you the digits the Yes. Like half Like confident revenue expansion digits so softness confidence in the and and year, we Refrigeration be Commercial you up mean, entering quarter. we And like our ties it's XX% in Commercial that where of the and you was we expect America book double of have can that can margin going the with into that year. so will business and the lag actually up be backlog. Commercial, think of of for price

Okay, thanks lot. a

Jeff. Thanks,

question go Ryan ahead. is next William Our Please from with Merkel Blair.

thanks. Hey

question is first second on So quarter.

start. You off across sound true to just is to the want said it's all confirm, this segments? I

Yes.

So.

digits So, I'll and give doesn't Commercial up backlog where mid-single digits. backlog you Refrigeration the double again. matter. much math backlog up residential

you half. others know what You is now a solid/strong third, start, again, is that off a we about May XX% but of is we're April say and obviously I'll right know the to to reminder June's do. about

still bottom the doing but we're So, [Indiscernible]. well, of we first, have a

Got it.

maybe of Should the that just some Okay. in Commercial And expectations, be our what though. us of quarter the give secondly, hearing? margin expansion lowering we're half second context we second XXXX, sort is on

everyone trying second be flat half of to just combination would half is, trained Commercial I'm we're the think price positive was of matter negative still in it’s out flat, be second in XXXX tell are up of a margins have. issues then executing productivity cost. a second up Getting a some will year. lot in and factory What Yes. first second have the and I then you that and of we new. price quarter will the is and is cost. quarter margins and you and people have quarter ironing we of them relatively factory a it's Roadmaps be when I they'll -- It And place year second of to guide -- down

do to discounting just maybe to it's quickly then you’re you good in less the And hear back expected? are taking you lastly, business. it. share resi But than Got having

we're I'd got We We quarter. numbers going X% the to confident in way. price. this see X% think, it real the price in answer get we're I and it

that expected, and the to sticking necessarily what we hoped price price. increases we what but and had with So guided the – into won’t I we’re we’re get holding we for getting we’re

great. Okay, very much. Thanks

Thanks.

Q Please with morning. Nicole - to Good Bank. we’ll Next, Deutsche Yes. DeBlase ahead. Nicole go Thanks. DeBlase

DeBlase Nicole Hi, - Nicole. Q Hi.

Commercial respect sense expect year; conviction some for So, with what’s full that to around XX, bps? a is the Just the talking we half? Refrigeration improvement possible us magnitude? in for the about you to XX, embedded margin to XX of get guys give second and Are it

early guide going Yes. the the year to in not margins. I’m this I’m not --

I’ve think than do I guide. given I more normally segment on

So year that up we’re the second be for guiding up both the Nicole year-over-year, Q understood. will for and full will down - half. DeBlase Okay, be be first year half will

The way I that buyback what’s about capital of you frame to of DeBlase talk Okay, Nicole it, its if I I mean, the guys seems with I’m confident like it. could sense, not the then breathless Q know they’re that about - got respect guidance, up. And proceeds. margins allocations that going we’re be a does on raised that little a makes deployment to indicate it But M&A Kysor that bit? lot – pipeline you

it’s pipeline. there M&A to no – think read-through I the is a

with to how Nicole shareholders. back way. in of But the let that grow then HVAC to be take talked – we’ve likely will of think America and -- and we’ll comes be comes and that the interested as if large it. to that friendly pipeline in and when lieu lumpy - not of Q that time shareholder we’re and sort we in money out get sheet M&A we’ll DeBlase North Our Thanks. be most balance about Got then we’ll care would a it figure finance

from Next Robert ahead. Please McCarthy Stephens. with question is go

Good morning everyone.

are you? Hey, Rob, how

around may homebuilding be of comments augment to Good. your the channel. some just guess I

what I there? then sounds said as pause you’re beat you're think horse, a typifying dead as growth you not positive a And like to it And really but there? seeing this visibility, Obviously, reiterate just particularly what is you there? North Commercial argument something in to could your strength worse but channel opposed America. the of have maybe a you limited the in

the out Construction on digits that between break new the low was And construction the you, construction of impact. quarter. single replacements. and that's that's -- for majority X% would tell the again tornado although new impact Residential We replacement, I with -- and tornado up vast is didn't

we full the construction to So, digits into talk year. remain with season again, low building of to in we builders they roughly new mid is for going confident. what the when sort up line And single expected summer

see of are of months In was Refrigeration, there industry for terms Commercial saw backlog single four we where started We or book the to is customers, our that. it our extend are mid industry and Commercial where industry three We February as they our also to digits. and phenomenon recover. And down. on confident. we order up And were that’s talked it I within I’d can business the data said, part to

this last were that In in we be with that of a quarters So, the so XXXX it’s of strong, couple we’ve seen not couple had we really year down. and were where for a case quarters business. we to unusual

level margin context underlying in margins resi? incremental Refrigeration be lift and change be could targets see should in kind Any any incremental comments change sub-segment of that thinking at of of about that margin can of you the you any And just there Refrigeration should of for But color given fact two? then at around how case. the make up segments terms terms the those Commercial, we the in how the that is obviously we – we

half Resi that give at three for to line a said that – excuse to and not I've back But XX XX I'm targets for you guide XX to XXXX, it I and for the times and least to XX don’t Commercial get XX are and I between three-year and been XX four for to targets -- I’m be straight there, and XX to right is now I about, think Refrigeration, I about Commercial, to will going would me have three-year XX XX think points XX get and I there. Refrigeration the the roughly year. share for pretty clear going and

start. Congrats for sold this

Thanks. Okay.

to with ahead. Partners. go Vertical Jeffrey go Sprague Please we’ll Next Research

everyone. morning Good Thanks.

Hi, Jeff.

Jeff. Hi,

mean, the some imprecise, mathematical you back relatively recovery it's X% the we if still at this calculating imagine it I I kind of you’re but somewhat precise Could we’re Just little to would right? could. talking share a is pie, numbers. orders or other point, construct? elaborate actually that unfilled how bit

we couple the insurance it’s frankly to understand talking into sort what tornado. quite going share we mean, than a I the does. of the mean, its we’re also. I and was company triangulate market ways, understand we what our how And

understand And would what revenue delta to have between been it so we what was”. “our then the

So that’s top-down.

we’re The -- can tell get leave, is left how we it we allowed they it back. winning know other much took customer. we took and do much literally by to we we who Who us, how business way back who then as

pretty was of a it from frankly who it, sight Quite lost much clear lost, borrowed with, who have took us. line we how lost. of was So was what

And it comes now to as back. it to it get it exactly back know door and get to knock we so how when on whose is time

And going fully volume to struggle the non-price in is a things do dealers Or that the things opposed struggle for on? some dynamic a business the pledges reflect maybe for point that future? the pushed, there to competitive within numbers in dealer. your going of as dealers, extent rebate, some showed on this the a kind that's Are like givebacks,

accrue that kind if just reflect other In step economics Its from fully the revenue Yes. the of mean, or on. promise then I sort we words dynamic reflected make against a the kickback in on as we some that’s accounting, going it. the

but I dealers, But I back X this we out. case do we things. getting getting Quite switched in handful created But We’ll first if a the So we we’ll in to competitor always convert X% we the units quarter that's need did frankly, said that. furnaces somebody air-conditioners, of basic we’ll them. guided do and have the earlier, and as doing do we’ll in there. share, we they P&L. with and them they we revenue or take on over reflected of over it's when price. marketing all a things and buy mean, better back share stuck lots and some in from support There's initially than the we’re

we price. nervous I weren’t if price, would sticking so And we’re sticking be but

Great. Thank you.

Thanks.

is Robert go Research. question ahead. next Please from with Buckingham Our Barry

Hey, guys. morning. Good

Robert, you? how are

quarter? tailwind headwind the a to start just Maybe weather, the out either Thanks. a notable there, Good. call with as or anything in

little same a it of year, around than number. was it last been cooler mean, bit had but I sort the on No.

weather really much. impact So didn’t

net pull which think I you more there of $XX of highlighted don’t to margin if I the maybe. kind then, out? tornado the don’t with on know looks I benefit And call going that underlying than that of or out mid-teens expected. there's kind resi, and if kind mix contribution want just that you from ish it. you that if -- seasonality Got million Kind know, the quarter of in anything I

what it. I Here’s about think

overall, Just resi? talking right? talking You’re resi

Yes.

Add million I of of back $XX I XX%, if would the million $XX XX%. shows And million revenue. incremental it impact. Yes. do mean, then I And in tornado of $XX proceeds. that think add sort insurance subtract you if

XX%. you where sure not get I'm So,

I think points. think and XXX XX% margins XXX, I XX%, basis it's shows it up

I’ll Got revisit Yes. definitely it. there. No. it. the Got math

the Commercial… On

I think you're just testing I my conviction, don’t… Robert,

Okay. math I the was also the doing on fly.

So, I’ll it. check

from the of just a particular under terms pressure? pressure, vertical anything perspective in Commercial On any verticals

accounts. mean, I was it half the national mean, we’re I across No. board.

would happen expect believe This more to I retail. would you longer-term to is going people as that concern story what's about and we all the in the wouldn't back be just to pulling deferring. predominately national accounts. So that have over sort broader of But

time of they and in new for planned make just know the of a bit sort pulling you so have same discretion can matter construction, decisions the a on that’s -- accounts national they replacement of back replacement, majority thing. the As with that there’s

Got it, it. got

year. esoteric in last though Just lastly apologize and for I for just kind the accounting advance but question, looking more of K

this significant lot or was there might or this to first year I any P&L? was in be thought that which there's expected LIFO cost is if a any of of think visibility how product the Curious, headwind there play neutral just think a kind on on that like – adjustments? I category, that fairly other in

I P&L in mean, the I’ll through the me. the year. of attempt the during year to the And then flows answer could to I or the mean, of an give of the cost he’s I it LIFO here when of to just layman’s accounting go trueup timing to Joe, end have at has the should P&L. do what flown inventory front and

in – You news negative you year really perfect set of last -- there no or is good more had was good saw adjustment. up, we so we had obviously, LIFO The LIFO saw XXXX. information significantly really of sort that was

We have less in good news XXXX.

the never think the showed it, the it it? year, year its So was to during we going change. how The you neutral When be expected of we guide LIFO encourage about negative. think so during just I we change to sort and about that’s to

to point. guiding you future that XXXX that expected heads planned we we’re at in frankly changes quite and is this we periods in up. some impact no the If we’ll give What Yes. way be it and

it. right. Got All Thanks.

Please next is John Credit question with ahead. from Our go Suisse. Walsh

Good Hi. morning.

Hey, John.

you're distort efficiency But talking we side just summer. little to dynamic the way some a heating bit? that fan I that heard rating going more the if new be side. that kind of is wanted dealers cooling this to it's maybe coming share of about believe So, online that seeing season? to understand to the normal this outside requirements And instead related think the recapture of are would AC anything some with there

take that I then impact of that that how there’s answer don’t will impact talk and the place Why about independent because things it capture regulatory about with that I the to sure make end, talk some and us at yes, distribution. is, those share the I’ll the change

called we’ve This year change of from Efficiency the This furnace for move in technology distribution, date, FER, independent XX the we’re on happened going competitors standard i.e., -- over July and can feathered that we’re and there's of higher variable sell on regulatory its on pretty about on change will to sell go so so of efficiency inventory as to them cost build there So, to past units torque the probably we’ll that furnace the company is PSC step rating manufacturing the a units to XX transition like distribution scheduled same done confident to And waited on Fan sort X. in up the that you pricing but July going to furnace. XX Xrd do other date this motors time our of transitions, motors, it, continue based erosion what have of pricing, isn’t going business to standard is to you to view, regulation continue it a sell and later. from regulatory once XX fan as to goal regulation we’re of the be -- called new standard the that sell more after prebuild is well, stop to you that that me, in stated, bucks you function in point order excuse units FER are anyone thing better companies there add further units time. of constant the and a is called this share effect. the higher what over than and a requires it efficiency some to And – efficiency cost efficiency speed Rating,

be go we’re so confident price to and And going able transition. through we’re protect margin to when we this

big think on big wintertime. standard the these after I it that AHRI of and spike compared – the some them see share see time June competitors independent to able be will that furnace a units with July that's can't some stocking pick you’ll that our furnace up X. furnace for that in distributors April, share, data, in them aren’t distributors the to seasons impact during build period But you’ll or volume May, independent they will be

carry later that sell enough, our inventory the during numbers dealers John? in XXXX. the will and we’ll that come clear see season Was that through in furnace don’t You the we’ll because selling ourselves

No, to think but copper, further hedges, mean that maybe your how around move quick giving maybe wouldn’t that then necessarily the a any a expect detailed or that. answer. was potential? great about move just Yes. follow-up I you pricing and given in here, Appreciate And XXXX impact do

remain price offset to I price confident. to the commodities We get we’ll can to up, the it. all they down go in and do but prefer years than so continue if rather commodities that up We go out

we’re locked we’ll in. And copper so April on as again XX% copper adjust. XXXX, of moves for As hedged pretty we’re

Okay. Thank you.

Thanks.

go to we’ll JPMorgan. with Please Steve ahead. Tusa Next, go

guys. Hey, morning. Good

Steve. Hi,

realized? in price quarter a was the first what for So price residential,

[Indiscernible] make the got to we number. sure right

quarter. X% It the for was than a more little

for the but for X% that, I know but quarter. exact I know the Yes, so the its don’t number, quarter. X%

Okay. tornado like then revenue And better I was…? your how kind you understand just impact? mean, calculate of the that

its I [ph] heard somebody, million. $XX from

Okay.

like totally of of Your you revenue or consider profits like the at down. just the impact up whatever, non-operational you’re you X% just proceeds, if insurance looking but will, be out was kind were could which stripping your to

kind just -- that performance running not not guess kind incremental we’re if correct if the just of that the adjusting volume? all of kind profit cost I to is way guess point an of think kind that from have like extra Is that I you things that margin on about through lost skews the So, the it? of

revenues going mean, been that what clear you rich think tell a the beginning I’ll the mean, be I drop-through No. to about lost we’ve it. I the drop-through. was on I from

million from for guide agreeing which was guide than out product tornado is ground our revenue it's and yelling for And impact actual tornado. better the really with the quarter million our $XX the and coming was $XX Marshalltown. the the the $XX of So or quarter back someone of impact, is $XX in of that’s million the because that's rich It mix million margin me. impact EBIT highest

you take that proceeds earnings EBIT basis were if XX% insurance see had our XX% $XX subtract margins resi $XX So, up add of million our results revenue you'll and XX%, We reported and million points. is and that incremental. back expanded what million what and of were XXX a from XXX, the our in $XX

just and I story thought it what So do I the would be. that's how the math

at and $XX in consideration into rich product. mix million your I $XX take yield revenue that’s a million think EBIT math such because it's of doesn’t of

Okay. it. Got

been real-world of suggest that lower but I would we of at kind growth that on -- guess, have profits on down those basis units? a of on So, mix units if just in lower kind would look it these your mix

So yes, so cream lower exactly, tornado had we [Indiscernible] we the impact for Yes, instance, the margins. lost right?

Okay, great. That’s really Thanks. helpful.

Thanks.

question next Joe Please Ritchie Goldman ahead. is go with Sachs. Our from

Thanks. Good morning, guys.

Joe. Hey,

Hey.

along sell-in far channel, about how you just sell-through in resi resupplying are on the versus So, I’m your curious Todd, when your comments process? earlier you selling on dealers, think the

XX% XX% We’re owned to distribution.

have only sell we we out. – sell-in, sell-out, we So, don't just

product. are who large for our So or sell-in, until selling some sell-out recognize dominated it But allied with really On inventory independent loading we the don’t have business not people sell us. there in. the that's we distribution, is

all XX% Our report. That's we numbers are sell-through.

there differently; that they a need your little some room maybe you to at levels bit And Or back go? getting to feel still you’re this where in be is do inventory there terms like point? asking of to

factories for full and at on get of residential so There’s quarter. to to season. room some our end It’s turned mean, the the still we’re April ready go. we sort first production I selling summer hard now still of running

year guys the And kind thinking then headwinds tariffs. as XQ? Was cost about that outlined thinking year there guess about the maybe should freight, I are I for of one there how cadence? about some of like guys Or was that’s think follow-on, we it any the in – as Okay. potentially commodity, you you the whether disproportionate impact how be progresses?

think of magnitude, year going a that would about plus, to two-thirds we and of third it it so third XX, about will be said second the $XX And will that of year. be first and million. freights a commodities, be thinking as would benefit the We’re be – tariffs that of price million $XX and of we of XX half half order be we’re the

backend loaded. so be it’s going And to

you impact? your that fingertips for do for XQ have guys And cost Okay. number a at

we slightly negative. were XQ

Slightly negative.

Okay. Thanks guys.

Thanks.

go Raghavan Securities. Please to we’ll Fargo next, And Deepa with Wells go ahead.

you Residential know backlogs Can in on I comment your morning. the momentum matter. Good don’t quarter?

curious therefore year-on-year to You about a any perspective also March April, just that, the spoke some like QX? a a as we forward and big seasonality or QX? a pull Or from quarter in takes perspective probably was And about Residential. other other from benefit and think puts just But the curious progression Easter, distributors call pretty from how was March extensively month. a was

Good much – Christians. don���t it’s but Easter Christmas for not week activity lapsed a or of not like day, I where of I It's Easter. Yes. matters. gets delayed selling mean, day I think deferred. a a is think I It's like so understand activity Friday don’t and

mean the about it's terms performance, the business in and the think think of solid, momentum but factories I more of timing and remain the end our roaring. are market strong I I the

We’re producing lines. product all the

out back of share. sort there gaining We’re

momentum the quarter. business strong Residential the so is go in And into second we as

Thank question. what this is steps looking around you. a probably by you you if closure look taking Got comment the it. could be any should forward at would that on such all? event? impacted if of And just an – some Mexico to border happens you Can Can that be you

We Yes. parenthetically by would border be impacted so of corporate America. a most down, Mexico shut with

a production our produce North and business for components we was in obviously Saltillo of lot a America even source as year more it than percentage and so And ago a of Mexico factory. for we our

So shutdown would impact us.

get we'll the ways border And and answer but so options we’re we’re the to be all and across scramble. short if shutdown impacted buffering doing the get different going about might at expect all is looking to things inventory to different do you border,

That’s you. Thank I all had. Okay.

go Tim Wojs Baird. ahead. we’ll next, to And go Please with

Hey, morning. gentlemen. Good

Just me. two ones from quick

the reduction, the shouldn’t quarterly just first down reconstruction then the cash CapEx number fully what’s kind million the for Iowa So, And there fully right into flow of once that year? any just why plant P&L? flow is on reason secondly D&A the the Iowa $XX was in free in --

the capital spend That’s tied take reconstruction of Marshalltown. really I’ll comment. Tim, to the

there. for well the direct So proceeds reduction there’ll as be in insurance capital expenditures

Okay.

comment. D&A then And

XXXX, will we into impact Yes. Depreciation we That much million for and XXXX. more the have not year. get full but so in amortization, as us $XX

great. Okay,

go The with Khanna Cowen next question is & Please from ahead. Company. Gautam

guys. morning Good Thanks.

are how Gautam, Hey, you?

thanks. the warranty well, made expense. you productivity comment in Commercial the on question Follow-up Doing

you any Is behind amplifying on the Just give -- root what's at is it us of or… problem can there there? color the

a much our and have but with do none do with lows, anything don’t and factory about business get in seasonal in are the not unemployment time. but into us of workers. year I it issue remember amount at the has has and of every record, mean, life warranty, we’re workers harder bring to I It's to we’ll that productivity seen lows significant a to – business when record temp

I’ll we’ve we’re the workers us. with so And behind be direct would operating we’ve do the rates. right the it what labor to the And had. be of first has in and factory. at with and the than We’ve some we’re frank confident the had adjustments. hoped, lingered things quarter it frankly we get Quite made training attrition and longer I’m the I doing thought We Its better. way but end we’ll change raised wage absenteeism it

Okay.

cost, release, warranty reference warranty year-over-year the okay? product was but in and Now the higher other

it's bad absence the news the for about. really news in That’s versus that's what year good and of

Okay.

Yes. Good catch.

that’s comment commodity share. have about sort we across it. you Is talk been incremental change the signal if in quarter No, just of And any if kind of change the price Anything pressure? of competitive I terms But understand Okay. there's it. -- segments, offset some you environment just just disciplined raising more. helpful. any two of then to quite relative a to the no, that and on the Obviously, industry appreciate you could could seen still donating temporarily holding three or would dynamic resi any seen price ago? you've if

sales back being second residential in meat it's I felt we're and they're three think that's now after of I as again. and chasing about metaphors our of now to with confident an analogy force the sort the marketplace price wild held dynamic fine continue going price fighter I Yes. behind the is here, but across like, the and get in back, raw so of you realization two about tied what released a and dogs marketplace you mean, always all arms in and that know is we're I a mean, an test And it. three their we arm we'll mean our quarter. think segments. industry after do his or excited

comment from to if tornado? going more how relative now production you source that is pre you just Anything South and the Marshalltown one that or to about you and you relative might system back me, change change how you last will know Mexico. to Marshalltown in from how And Carolina online. got you're Any can know less to

No.

that a I capability eliminating our two product glad that earlier other it's on we we've man, don't have we now a done back They've But experience the obviously team. excited we're excited what but allowed Mexico Marshalltown sort premium about our team, that think, new at facility we're in continuing come all our we're glad also. about and really and to having job heroic the had grow that we us about there, facility capability. factories, plan said and I so of this to Carolina we're capability of and South built Marshalltown

you guys. Thank

Thanks.

ahead. go of Pokrzywinski Next from the Morgan Stanley. line with Josh Please

morning Hi, guys. good

Hey Josh.

can bit the Todd, and still. seems profits XQ, just there's about full share a but the heating back talk at and that It get those loss reason cooling you're you there. changes strength. I know comes two now and with guess both being how about you temporary numbers I any that why XQ. both some be shift forth, just couldn't lower like just thinking little

the in case had just know you in in up in profits. XQ point in loss table your it you think going of terms I actually

So, of would to anything kind want there monologue helpful. about you be

guide the I mean is the guide.

I I also So you it mean, be you winning mean guide. worse. understand be this I it this. or could capacity it people's did went quarter early they think the but so I tied to know product and cooling tried sort mean and had back, nature takes it attacking we're get in or better, have the rebates could to it of to competitors first of time before That's takes time have dealers our meet buy buying is in they They full smart much we when product to needs. and

we And quarter first so, if obviously better or good third second to in then to news. us in we did going time quarter like back, so very some it’s win like take that's but do

something said up that was the and we the the that the over more Got in stuff an a was was then know impacted. that, margin how resi year? you read the any of balance was surprising you anomaly other that or few years? mix what it. And Is of I you if given like Because I quarter first it know were line, think I related the that one most would higher I Joe product guess think pricing mix little of to guess both if high didn't that quarter. that off just mix think just and was past about the should some mix

favorable just quarter. did slightly. have slight Yes. majority The price. of was the Mix up within was it But mix we

significantly $XX And was was lost we would million from of The if the expect negatively point highest and profitable had to had, better it is the because mix skewed tornado impact. not again the had setting. impacted revenue we that we've

The to interpret mix the way of guess over that? balance should the one is accelerate year. I other

think, a interpret here I strong have I'd XXXX. in it. We'll mix

Todd. Got it. Thanks a lot

Thanks.

The be final the of Wolfe question with will Nigel from go Coe Please Research. ahead. line

Good Todd. guys. Hi, morning. Thanks

how are Nigel, Hey, you?

Good Yes. thanks.

but just this given a to go these model to So July. see inventories inventories build how you time, the happening speak backdrop maybe switchover back just and year-over-year especially were wanted that's unusual to with in know out obviously up that rebuild Todd, quite playing you

that. what's in part Well I think of

we our the think order last first quarter inventory an I was up XX%. at year magnitude versus prior X% up or were quarter, of

revenues growing, to your build inventory. is you tend when So

cost know impacts on commodities, also lay what's furnaces. number into part and also of in prebuilt of the that's you and You our had the the that inventory building we've

to the get will other until side build So still inventory driving still continue ramping we we're our of selling summer production factories, to the up and season.

Okay.

quickly construction. Okay, And great. just then on that’s new

will you down January. suggest seen the new channel for Does get it first And it get digits growth middle finally the will February we've low quarter. better? but that said year, was housing your through in March does February, gets worse builder know starts better. was worse You that digit double full to get before in

digits. mid-single to low up were we know You

was I quarter single first for digits low in it think us.

Again, be single had the quarter what we we'll going digits balance the think for and to happens. it's see first So solid up we of low a year.

is between and resi? tugged And right where replacement new for now build that mix

balance on We're probably XX%, construction new out to replacement. XX%

Right.

thanks a Okay lot.

Thanks.

any for to comments. back the it turn I'll company closing

another company, Thanks year To Operator. quarters. to us wrap to growth slow is start. look impact seasonal reiterating EPS quarter a to for the all you and off adjusted thank we from I XXXX We continues as strong the today. up, accelerate guidance. second revenue profitability. want enter to and largest joining tornado recovery our forward Overall We're our our of for

Ladies conference and does that your gentlemen your conclude today. for you Thank for participation.

You may disconnect. now