Lennox International (LII) 22 Jul 192019 Q2 Earnings call transcript

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

As a reminder, this call is being recorded.

I would now like to turn the conference call over to Steve Harrison, Vice President of Investor Relations. ahead. go Please

Bluedorn; you Lennox Thank of us this CEO, for I'm Reitmeier. Good financial for performance of Todd and Chairman International's today quarter CFO, for review Joe here morning. with joining and the XXXX. second

and for key yourself questions performance take during financial quarter, and outlook. the ask to questions To of give Q&A, Todd you points Joe follow-ups the limit through a will couple or the review to please company's and will for everyone In included issued necessary financial requeue questions. comparisons this are the morning, discussed reconciliation non-GAAP mentioned we additional earnings release All against be prior any the the GAAP will we the measures year measures. today to period. have that of time

a conference link to the www.lennoxinternational.com. direct website at site webcast the call webcast our find will archived today’s The to for You be on on can replay.

of call, that be from of you are would actual a in statements. the These uncertainties statements. numerous I course subject to differ understanding results operations, cause such everyone that statements to to risks to give like certain forward-looking our and this could we remind better materially making will

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

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

and thank everyone for morning, Good Steve. us. Thanks, you joining

current and tornado insurance each our of outlook the and Let key on cover weather businesses, for will me guidance. markets, and which update our conditions. the end second quarter was significantly start an adverse proceeds, view impacted impact by the refrigeration with reduced overview the XXXX on points commercial in on our I

the was exchange. revenue revenue For negative from down impact X% billion. adjusted GAAP second quarter, GAAP divestitures, was tornado, and X%, and including $X.X of the foreign

including a constant impact the from negative or tornado. divestitures, flat down X% currency, revenue adjusted X% was from impact the Excluding at

was income segment XX%, $X.XX. and a GAAP The at pension million, relatively operations million, non-cash profit $X.XX, down up was Adjusted total from from continuing adjusted margin XX.X%. continuing of EPS $XXX segment operations was was operating XX%; X%. including down basis, charge $XXX total X% was flat On an to GAAP up EPS settlement $X.XX.

X% X.X% basis was Residential XX X% profit with reported currency and was basis yield. the revenue X% for was X% XX.X%. a down performance margin segment adjusted at on and volume expanded at Price down down points strong constant impact. down tornado and Residential flat to

impacted key Our second in that cooler areas regions was Residential and revenue. approximately States, days degree than precipitation the our quarter XX%, up were and XX% precipitation down more more negatively Central than cooling was business especially for XX% United the in temperatures by of higher where account the across significantly

Adjusted said case We was could residential XX% this to our quarter growth X%. could year. and second the the was in tornado, summer years over that down cold XX%, add which a subtract for volume summer residential a the hot

get you’d in the market a residential more overall that, line If to conditions. normalized you add XX% number with

and Adjusting flat, XX.X%. negative had insurance to million million and X%, proceeds, the profit $XX tornado million from profit, offset was segment $XX the tornado business revenue basis Residential Our XX was points down insurance margin quarter by second impact to and revenue down of in to recovery. residential impact the was of $XX net for

resume fourth confident which in quarter. following timeline in industry, will the We quarter we The slowed shipments to to gaining led and share the adverse include market XXXX. moving the remain weather tornado regaining recovery in us extends in share second slower our the

million previously. $XX Residential revenue, For up impact tornado expect negative of XXXX $XX million to now from overall, we

from $XX up We expect segment a negative million $XX to previously. profit, million impact

XXXX recovery insurance million residential lost of up profit profits for benefit net resulting in The million unchanged. to $XX segment $XX of expect $XX We is from previously. million,

in remaining segment of in for $XX the million impact negative million and Of tornado impact quarter. revenue profit XXXX, have the to third expect in $XX approximately we an

of fourth million quarter, expect the to profit. to $X For we million an and approximately impact $XX segment revenue

and recovery remaining core the split million in between For $XX guidance, expect the be of evenly that insurance we our to quarters. third fourth

insurance $XXX at step previously. proceeds up related core looking from non-core million, picture $XXX and expect now of the we back big to a tornado, and both approximately for Taking million the total

the expect $XXX received and of have that of remainder XXXX. of by end million of the as second quarter We the end

for The share of gain guidance per to of assets posted million We’ve our book remains or EPS. I website updates $XX the approximately value in value benefit the difference approximately financial $X.XX GAAP the expected summarizing non-core XXXX tornado discussed. and via replacement just a

points up quarter Commercial second a the growth a second Turning basis to second X%; currency. single-digit was expanded XX business. segment and to equipment the was national equipment led local record high Commercial by in up XX.X%. of a in profit quarter was Revenue Regional the revenue record million, digits up low-single was X%. record quarter. and $XX account million, margin constant revenue in Commercial $XXX at

up at up low-single replacement, was and the up digits was replacement constant at digits. currency. and new negatively out low-single another cooler emergency in was impacted replacement revenue constant business was way, digits Breaking construction also commercial high-single down the quarter, Planned by digits; weather currency, which low-double revenue was

high-single the digits in Our business VRF second quarter. saw

revenue constant national and XX% points XXX X% was digits. XX.X%. to account currency. On was margin the basis In low-single Adjusted Lennox side, Refrigeration, up segment was quarter, down down second adjusted services for was the up service revenue profit revenue at adjusted

Europe as volume mix America volume was in second unfavorable was and by down impacted North was Profit quarter. up the

allocations prior negatively timing the to in was quarter. profitability addition, refrigerant In Europe impacted the compared on the sale year of by

XXXX. over outlook on will thoughts the for review I turn XXXX of few I it a Before provide to early latest and Joe, our

expect and Refrigeration North we Commercial for in the residential markets be We're still overall, industry North to reducing mid-single shipments America. the outlook HVAC digits. end America For up

slightly We now for to down in the businesses commercial both up to industry for flat half industry. market. to be revenue for expect That's the and year. still shipments the of for our shipments XXXX We second be expect in expect be the the refrigeration

continue second quarter. expansion year-over-year We Refrigeration resume half margin expect fourth in margin and to the the Commercial expansion to in

to up Looking the we're about nicely residential costs look down distribution still we’ve us post the the the And path. had robust in XXXX. the weather. in XXXX, we equipment, continues set made Commodity ahead as second positive do comps well up that tornado XXXX setting impact months for on and back thinking than us benefit is to investments to away, in but setting continue the easier in six us and price/cost aside market trail quarter gain controls, XXXX more and share get

Now let me Joe. turn it over to

comments the second and I'll Thank details $XXX provide some down the additional segments good Cooling & quarter, million, Heating Residential and on financial Heating revenue Residential X%. morning, everyone. quarter, for In business with Cooling. from the was starting you, Todd, &

and Foreign impact. exchange for revenue. on the X%. had or X% up a negative was X% X% tornado down was X% down mix down Volume Price impact adjusted was

impact by favorable points price, reductions basis favorably flat well warranty. cost of from million. million was the proceeds impacted quarter and as a benefit relative margin and profit XX.X%. net in as XX at expanded profit sourcing, insurance Segment the $X to $XXX Residential engineering-led Segment favorable tornado was to

Offsets product and impact, freight, exchange. distribution included productivity, cooler other foreign factory and unfavorable and as commodity, investments wetter mix, as tariff, weather, unfavorable tornado higher well and costs SG&A

Commercial Cooling was & to revenue million, our $XXX of record business. Commercial Heating X%. Turning second quarter a up

Volume was revenue. up account X% X%, was and Foreign the up was up of national to exchange X% mix on neutral was price strength growth.

Partial record margin up profit X%. XX price, $XX was higher basis and commodity and points. sourcing million, included distribution offsets volume, other and costs, lower by favorable segment engineering a mix Commercial SG&A a XX.X%, tariffs, and investments. was was profit impacted cost product record led freight and favorable up Segment Segment reductions.

was quarter. In X% second up the $XXX in the revenue adjusted Refrigeration million, segment,

was price profit XXX X%. X% down $XX X%, revenue. segment was exchange up had negative segment X%, Adjusted points. Foreign a XX%. up up down was XX.X%, was on and impact was margin mix basis Volume Adjusted million,

refrigerant on SG&A freight, product favorable compared costs and included led of from higher commodity, and quarter distribution other and to the Partial unfavorable foreign prior volume, by timing price, higher in Profit sale the engineering was and lower Europe tariffs lower impacted offsets and mix the sourcing reductions expenses. allocations exchange. cost

This Regarding from a included company of $X.X after-tax charge special $XX.X -- excuse incurred. million me, insurance million. million of of again and items excuse losses million a net various items charge me, -- in totaling net the second for $XX.X other settlement, charges $XX.X pension had of for recoveries, the quarter net

$XX year million Net to $XX second Corporate $XXX million basis SG&A quarter. year compared $XX compared million the the expenses $XXX second in million quarter. in $XX quarter. an from quarter on million year the compared in adjusted million the were to prior the quarter in prior was operations of in prior to cash Overall,

million a property, expenditures proceeds We $XX million second short-term the disposal equipment this $X year. and $XX plant the investments second Capital from of year-ago. to tornado and were for quarter compared in to of purchases of proceeds and quarter in had damage million the property

quarter. the Total million end The Free the paid $XX prior cash in debt X.X. equivalents in stock debt the and $XX of $XX $XXX Cash quarter. were repurchased quarter flow the was to June of $X.XX in million and ending company billion ended with ratio compared was EBITDA year to the $XX quarter. at million a million million and cash we dividends

We're of X%. including to EPS second Now a GAAP a revenue X% of for from turning new $X.XX in the incorporates year, to to $XX.XX range XXXX. adjusted of to to new to We're of range a to updating growth revenue the from our range special overall for a guidance settlement -- X% company first updating in This pension X% range operations charge the $XX.XX. in guidance the for of from from half quarter. $XX.XX continuing non-cash items the $XX.XX adjusted

settlement Company to Pacific million defined benefit pension of obligation. entered into that $XXX the with our in to April Insurance an relates agreement charge pension annuitize we discussed, previously As Life

plan second accumulated write-off As non-cash settlement Pacific of this transaction, $XX.X remeasurement in million to a the actuarial Life. also in after-tax pension related a required pension part the the million results in and assets $XXX to of quarter losses. charge event we This transferred

to associated above And mentioned, million related value expect gain of construction book to total costs and $XX from pre-tax XXXX factory a continue Todd we gain as replacement value. the

continuing range for $XX.XX of a from to updating of EPS adjusted new For $XX.XX in guidance to $XX XXXX, to operations we're a $XX.XX. range

and Let the points the through me guidance puts for takes and for now assumptions key other our run XXXX.

factory for headwind we the from cost to guidance million commodities absorption. First updating. the corresponding of be million. residential lowering million production the a productivity expected for to are We're impacts year-over-year factory on lowering the $X fixed weather guidance the lower benefit We're due $XX from from full-year elements flat in $XX the to

We're moved full-year. approximately from to updating manufacturing million, $XXX for XXXX million to for to expenditures of million We're from tornado facility $XXX flow the damaged has million to XXXX as $XXX free fully by million from guidance $XX capital reconstruct Iowa updating cash guidance approximately the the capital XXXX XXXX. $XXX for

moving the factory two the due the project pieces capital three are is XXXX. Iowa and a to and headwinds the capital are working earnings There and between lower in reduction The guidance guidance. in XXXX benefit timing higher reconstruction to expenditures

expect for that sourcing expect expect for of the for million million $XX For price from million same, engineering we cost SG&A. from $XX the remain tariffs, million a a to to we the $XX guidance and benefit still from and freight headwinds million led and of still $XX capture expect reductions. full-year. headwind We $XX elements $XX distribution continue We investments of still and million

to still targeted Corporate million expenses expected of for expense XX% the be XX the share an million stock $XX range repurchase which still rate to of an to plans $XXX between expect incorporates still shares, year. to for for to in full-year. And finally, adjusted million count Net we XX the diluted million full-year effective be XXXX. the tax on to million expect at are average basis weighted is XX% approximately interest we $XX continue and this our

with And go that, let's to Q&A.

Julian of Mitchell go [Operator ahead. from line Instructions] Please the Barclays. with First

Good morning. Thanks.

Julian. Hi,

Good the morning. Maybe demand. Commercial question just Refrigeration and around first

back with entered a about both pause good talked QX, had pieces. backlog in in You QX growth temporary

-- three what of the through the to and went kind as wondered segments terms get be just you quarter QX you're So in seeing second may start changed of a how demand? across

backlog. entered see, in especially and as revenue we with we Yes, you nice had second can a quarter quarter both Commercial, solid third the in segments, wise

backlog the Commercial both Refrigeration ways, some to from grow mid-single backlog in year-ago digits. segments. are those we flattish just is again, revenue Our expect is a But what X%, in through up look And down up you it and is June Commercial we we're market when we for mean, truing May, of think was because ARI in seeing. part at I data in weather. up X.X%, our

so, customers think again assumption. of some And the macroeconomic sort sort a the flat given we larger just it's on more calling of is seeing uncertainty, What in is it our we’re some deferring but of Refrigeration of margins. realistic

to we of We be are down so half revenue toggle sort low-single expect year. from if again, to points, being still both flattish slightly in of digits -- up going a sort be down, couple it it of slightly it second the call you up the should of market, segments But in is of will. those a

that And couple if tied of any improvement sort Thanks. to trended conditions any Residential, just the of you’ve last months in thoughts recently? maybe that's on then sell-through seen how

up was warmed warm. June, in to last remind third we're where like certainly a I’d year from quarter everybody it that's July It's helped, to off start. so in was solid so

it prior year, could above and warm. above last so third XX% was up, recall, was you memory normal from quarter the If XX% pretty

but easy, of so aren't a to nice chugging comps and the off along is So, Residential start. sort we’re

that it's conditions sort that or my retake? just be that would external you point question of thinking And weather has on through share of you the market of at short held Thanks. share Residential. in back falling last where efforts terms then are on the walk Maybe if market you’re really just

second again, -- as was think we we and fast -- are back, quarter, are by it gaining just I share weather. in I back driven largely it had gain we as didn’t hoped we the

market true. business get I’ve area country. in be market sort talking the an a think I is It's than to in share always markets. which harder The in in the just some that of to region of truism, we're found down it's our center up old a about of

than was down. when Our gain vast that’s it greater tough the share the to overall there things the majority revenue was impact. down in are even there of We majority, it's and think business, back

it, most protect did I get that had those coming with and it them they again. are full good share think quite confident are be to track honest back about other customers, who we not into vendor, if sort and as get back were a we majority we back new go gotten the and transparency, XXXX, frankly of protected think that to we there their we’ve where experience gain dealers smaller straightforward the probably to our valuable of the of we some aren’t some we side going on back, but will the by guided share we’ve we when of

Thank Great. you.

Thanks.

Steve Tusa Morgan. we ahead. Next to will go go with Please J.P.

morning. guys. Good Hey,

Steve. Hey,

Steve. morning, Good

early there were tweak of the June seeing Did the stage. this kind to that conference about the side, rates for on back think Just talked the year? you at how Commercial kind on about something come that bit in in order mean, happen a front later a I I lower at quarter had of you

a think on rather I I’m our Again, the share. than reflecting guide industry

sort of So, is, and the what is expect flattish of quarter in half lot because in had I’ve nice quarter. we backlog a we a up our we year, second chart revenue second the to the second revenue, delivered

end think optimistic year -- we’re half will industry the I flat. on going I in of less closer the hang, second halfway -- of these see uncertainties half year. still through think So, -- sort in to it's election, are we’re think likely market the don't the growth we second And but the to the is going the more and segment overall, we the get I macroeconomic

Right.

Okay.

between resi pretty to the nicely and up. you disclose difference think up number sold own sell-through guys your the in side, started were quarter. distribution, in On the external The sales I sales Qs, first externally your that was

your through own down of moderately. was, was , sell-through kind Your stuff

that read how out then the of the which And of kind just kind you Q’s trend can Is talk from in kind just with second we to quarter? you channel should what's or restocking think here going that the come impacts the about at the to guys I that? today, look of that into framework similar tornado was around?

in pronounced maybe second more was than quarter even the first it It's quarter. in

which So, our And our of business, are up wise, X%. is do, direct Lennox what XX% and ADP business, was which businesses, revenue X%. we Allied our down direct

of couple it's think a I things.

weather I think exposure. it's

Lennox our -- center branded of Our historic part that's than well, country allied our the I business is it. of so the on think business, Lennox more

independent seamlessly keep it's were to dealers to hang with dealers this because are dealers think juggle then and distributors so able brands independent happy. to we're our that move their and also are line. of we they issue with product I the brands reload our as sort able and onto to had the And multiple of product that able distributors sort back able

was relationship And of one turn the think it so able by them in. off move I of turned sort seamlessly were back had so sort that’s to of it. part they no off -- a

Okay.

bit it's share. other about, of talked the I end, gaining weather we are a so issue So

Lennox Okay. you some considering is core this then of is one all capital distribution still having your last or it And much part at a distribution? monetizing Are very of one. who

that Did I me? ask of you to ask

he to … a you curious is because Well, he but quick it compliment very done warranted. just have was call guys is on I conference guys mean, you probably very -- the job, great

notice -- and Thanks right. compliment. was I [indiscernible] compliment for head my Again, distribution. left. I absolutely that kept thought nice it a for We Very the off

It leverage where thousands from independently. has school a differentiator, a all knowledge moving want the have of sort times, needed small you so able I a boxes this me it's customers local As anything -- And made to investments business investments. get in differentiator be desire no you’ve will say of business gone to out you be tens learned where then we digitization I rather if today. think increasingly I one heard it and customer, at won't business large thousands we’ve of than to again, of multiple

What last there? any was differencing -- was Got in parts up major for resi. the what parts one actual One of there or like quarter, kind it. the versus equipment, or any difference

the of was construction sort No, residential I … business was that of the the new mean, part most up

Okay.

the or replacement and the … less trended parts direction impacted bit the impacted same parts equipment. both, and the weather even but than supplies add-on weather, little more that cool by maybe and

Okay. Awesome. Thanks, guys.

Thanks.

Next question from Hammond Please go Jeff ahead. with KeyBanc.

Good guys. Hey. morning,

Jeff. Hey,

Good morning, Jeff.

that question. Already knew to distribution the answer

I which but be will go ask to just I question, a to was if would you I going joke, shocked ask ahead.

right. All

Commercial how going I you you break how the the looks margins the of to coming residential through is piece, how seem XX% the made softer of well? kind that to Refrigeration like lighter XQ soft in and being much How it cut? is maybe then I versus XX% mean, you cut, much break out Just be as it -- piece know it but is commercial out adjustments the can much

the I of think the is at half sort of we Jeff, the And think had it, corresponding markets about third gain, magnitude, that's on of because quarter revenue offset the year businesses. passed out to sort of insurance. and the the full-year Commercial lowered the Refrigeration be I second then the a second push of by miss would end the guide. piece lowering what order And of but share and of we then

this fourth was. big Refrigeration I there? you suggest will down are margins maybe get you margins the Okay. That’s third which quarter, it and in just allocation explain expansion then would the what's helpful. on Refrigeration, in think can how that And the going and so quarter said dynamic And

dynamic our the America. I quicker in So business business in and refer third North quarter this mix, growing it Europe as issue than in to is is It's is the our just mix. that

a The flattish market, issue refrigerant sort about and the and of second quarter hurts about that I is of North was a gain in refrigerant, on in it. that's million. issue will I back we $X in share is come part that year-ago, $X share a million organic refrigeration of think we -- had part quarter we it America are Europe to second second had

year-over-year. able million to base simplified, to able resell gain a $X $X program of difference allocation net-net to So were for this allocation, and as gases, the million second we year. a sell recall, it's quarter $X trade you you we fluorine cap a parts had it's And Europe don't allocate in again those million F may gases an last a -- we're the year gain use a and and in

$X So million. year-over-year

Okay.

and Refrigeration third the normalizes on quarter in dynamic continues mix that margin is that So this comment it then XQ?

Correct.

is there … And Okay.

kick I would in, Also fourth broaden in quarter. the answer. will self-help

And distribution second pre-buy Okay. impacting just in declined the should half of last half we versus year. then this the How of dynamic? that the growth year first direct, with think one kind on about the of the

about? you’re Which The pre-buy furnaces? dynamic talking

Yes.

to I mind, I’m real-time paused haven't going in think. is so it because I to my yet quantified own

obviously right. think you're and will the direct more we sell. the way you on side the question, -- a have will I of in It asked

of be We sort selling indirectly where will it already. stocked furnaces it

pre-stocking there especially competitors the have do we you in our Although also think didn’t our impact away second of I distributors impacts, of tornado get I as will will done. the quarter. tell weather normalization as as because we much from be

Thanks a lot. Okay.

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

Hey, thanks.

by but I guessing like So don’t want first of get you better the from was numbers a the geography, quarter? question weak in to I’m how sense give to Midwest just me,

is replacement Florida contrast a weather, would numbers you for say, revenue in won't our maybe Lennox where like I XX%. the was in something but points XX% versus down overall numbers had market replacement will which add-on about want we the to you it the exact revenue. that, I give our or the exact I was or market. a revenue suggested, was of give And X X it I in warm up -- as

and the we good well, weather well. we we parts good didn’t have of do had where we didn't market country And did weather large a so

helpful. prior Okay. That’s follow-up a then to And just question. a

that like up make resi you shortfall the it hearing assume half, I you in the am second So would XQ that sounds right? didn't some of

think what guide says, the that's I yes.

Okay.

short the in is what’s yes, guide. answer the and So that’s

Now we far, now sort to given talk often again, want but so wisdom everything the is of I I also -- is said we true sort the about to weather hot/cool, weather, now like you of hot/cool. don't have but that I believe is almost that conventional

So then they cools they down can of and better -- sort sellout say that hot. it gets

really or their get to a then busy planned dealers cool And business. to out, can Our sometimes they want week on to you two caught ready it and then weeks and so breath take catch new up gets you. will to order they the of we into September, sort furnaces. we as start loading up hot break they whether business our cool, stay and again, want get then to we get so And from

just not the quarter. it's balance record of the So heat for now

quarter to move, things have have up it's hard some miss of we due in to make second are to the to weather. going sort had but We

it. Got

Okay.

Just price a better price sell-through, little still this maybe lastly, Is shipments equipment you just given was that’s didn’t thinking. of function a discount just double increase to Residential try a the than this quarter? I helping yield and up X.X%,

double It's the point. the increase. first price just primarily It's

share but get a second the at the of slightly them, point instead. might peak in you to look, be than pull, the some increases. going And And not price so going high year-over-year of X lever difficulty] other [technical carryover that’s realize we're marketplace, not of given getting was mark look regain the we to any quarter, we were where -- pull performance protect to sort are second to will. water if quarter at lot to points so we're and competitive try we do of that it's And you second a at the we said, spot pricing the year, in both is levers of sort to just, not quarter better sweet like so we

Got it.

it will I pass on. Thanks, Okay.

Partners. with Vertical to Research go ahead. will Sprague we Please And Jeffrey go

morning, you. guys. Thank Good

Hey, Jeff. How are you?

you. well. Thank Doing

a those guess, of really Just the around I some there absorption, capital coming of to kind absorption building mentioned, the of I high. -- cash three flow Joe be to two kind of in questions. quarter inventory? and got working kind clearly benefit looks of Inventory pieces Was is kind have so from actually chunk.

but Marshalltown higher There levels was build, between Jeff, was raw and -- material are there also increased given Saltillo. production some there's at some the inventory that

guess would absorption And assume any context the then, back give some the conversely, half me impact I inventory Can burning any? under you if your guide in you’re margin down. there's there, as on

I production optimize is the continue going to think impact on we’re de minimis and impact the margin of to level the absorption.

down, that good just raw volumes thought. mats pricing. then Watsco any And see some heard back, as indication back I maybe some push you in mentioned Obviously, mean there Todd some are coming not did industrial parts to we Joe, or as that price, anywhere of is people channels, around kind it

raise still not commodities we’ve North still America extremely years. their labor in of had an year, in settled. last -- on from in in suppliers stick and a factories, are high wages -- Freight tariff marketplace have No. situation had. the we annual wages to And -- passing from still price our on as price raise the our little last couple But to a tight and versus have always bit we we’ve down well, transportation obviously bit. seen trailed is factories, plan we’ve and results increase is down

and on are competitors need same for So there to the the in inflation system doing and price thing. pass still us the our is

be were into where So they a list Beginning of dip of normal fair double to would kind again year, price year-end? but the increases was it assume should obviously a unusual, bit kind XXXX?

[indiscernible] XXXX I said. I will -- you Yes, into we repeat mean, is we what while just just

marketplace. Watsco getting at are And may from We But end XXXX. XXXX, will know did it. announcing perspective, Watsco, want hear. the that is us they and bash them that's to a them industry supplier into price talking about they price, Not up be to historically what when still but for the of price the realizing our how be to we increase in their talking letting set

you. Thank Great.

Our McCarthy Please from go next Robert Stephens. question ahead. with is

Good today? morning, everyone. you are How

[Indiscernible]. How are you?

Good morning.

just Good. I a bit any mean, broke 'XX from how think Maybe precede hearts you on long-term targets where some than you weather? your little now, little get do bit armor XXXX about how could talk of about about chinks outlook, the you comfort the because and since you seeing in investors maybe this think a current we you you Todd, and just that do worse think could environment. obviously bad something some sit cycle so Are just

bad it's weather. think I

think sort up And expect end just in macroeconomic surveys reality. in and its to that weather residential those go in bit bad Refrigeration still you revenue that end weather our I and are weather the all and XXXX, gain and strong. into is robust. of I consumer share market still things. think viewpoint, sort consumer But we as reflects markets. of a toggled is think two cool of the those Commercial still We we and I mean, to down the spending, terms U.S and of I see we continue continue. U.S markets data. dynamics. the expect from in is It's But a terms tornado. that just the bad wet be

going are even weather. this of a is So X-year quarter we but targets still XXXX, second ball less good. drop my to our markets with XXXXs stand end up think be because clear, crystal little

the residential of do that to there and do lowering, the see think you excuse think grow as or mean should conservatism that you share the I terms of you you increase. expect mean, answer in is you the market And just calling you're into -- then this fact it? and that terms do the commercial you’re be do I guide baking some me, in refrigeration

the now. mean way Yes, best guide I the sort and of it hope guide about I we’re of better, call is but the think I hope right it wrong sort does I that's our and

to I'll it? distribution you on a question sell you and spare whether your want

that as No sell happens, want matter what we write you’re to to Thanks. distribution. not going down do

Khanna Cowen Please and to Next ahead. go Gautam we will go with Company.

Yes, morning, thanks. guys. Good

Hey, Gautam. How you? are

questions. of Couple thanks. well, Doing

like unfolding competitive but up. in the environment climate, in Ingersoll that you any going It was environment, you’ve might or break to expect the change CCS given seen I that's sound be expect next the doesn’t spin anything First, the over wondering you what else an would anything, year? the

business I in that whatever one way Co. compete parent one now. I are going way to any called. it's Carrier up. and think are about sort itself the Co. the assume needs to they’re I company a so mean, Trane the the Carrier thing stop, to -- to don’t going going I would new Co., be the I exactly I management unclear going right? Lamach -- as is conglomerate And competed think with Trane team management at of expect go be I the or to that of is change Co., probably If multi-industrial think is same they’ve -- in because distractions understand broken

businesses, there lower business. what their do continued what so discussions with profit what do will they they international they of security internal think with I some about And be with do refrigeration,

so will to us. think good a that for continue And I I and distraction be that's think all

consolidation? are HVAC -- just happens, it thoughts will on Okay. American your you happens, it North And think latest That’s think happen? You when there's helpful. it do also if what

player me the We people Gautam, say need a answer, Yes, value who scale, happen, to heard for you’ve my participate. do if drive worth would are anything could I listening good think We will and we'd it I And love created. to value. think be be but thousand something we'd don't help times, say new. a to

financial want I and business find the have decide a somebody way now and the combined. get than rather to if a value they someone have if can't assets right would But to to think to in that, else control handful of long-term find it's business be -- only to the -- of assets markets to out be better is over there's markets the I that me. is question who really asked created, that's

we you of the as recover? you that you're quantify percentage think the to quantify, to hurdle going dealers what so the customers net overcoming the to any the Fair. Is And and XXX% tornado. you that? you lost previously then related you you had customers sort not don’t do there back? you’re can -- retain way understand do come of the What of -- Can you mentioned,

XX%, that one points impacted resi that, revenue, of And comfortable market -- that’s totally X.X, quarter was changes revenue of maybe by XX%, why the And share to tornado of some order with XX%. of go lose I flitting in the revenue math we a gotten more of resi about versus we haven't of points And from I’m X maybe now the so back degree that gains. do share, point that on if of implies end Again, the backward of our will three .X a is its we still away sort yes, market we get uncertainty, to sort at the think share. out broadly of a magnitude some we you or keep of that points of XXXX to away kind closer it. of this pivot piece talking just XX

resi tornado a the and So in market thing or go we years us. will do of prior same more we up into will five behind gained during and half be the this we point to the six XXXX as or share

interruption one, no Marshalltown, up lingering fully there? operational, last fully sorry. there's speed, to And it production is

of interruption, No being lingering asked do of the the to of in up I sort factory, I to It's sort no speed the with the building admin lots. adding speed. to wing anticipate but of nothing capital, production up the the has production. has capital question, will mean of pushout are pushout on one it parking we

be. make to again. we we’re a of to sort time needed lesser factory full -- things where an to But it do priority up what we production And wise, need of

lot a I guys. appreciate Thanks it.

Thanks.

to Wells Raghavan go go Fargo will Securities. we Next with Deepa Please ahead.

about and like Can Is low-end and weather some in few guide? embedded already high-end Refrigeration? new resi out morning. Good you’ve that EPS because weakness talk just the revenue it playing months, in in you what's Commercial looks all factored now of your or

a of around in sort some freight around always also of there's transportation, factories. just our the and that, it's a there's It's execution range range around commodities, range there's a

And outcomes initiatives I around of of place. a think we of shaped stacking the that bell in it's The so, of range lots sort curve, have operational

there's is important guide. broadly I thing the other maybe and impact overall the weather -- more residential things most in state think that the market. But or

comment prior last this you it's year? called contribution on worthy a think few I takes noise given how all Can QX? the out, it. being mean, got to versus about Anything quarter and your years? puts and Okay, just should of EPS we think you'd

know give know quarterly I mean, that. know I to want No. you I number give don't -- as guidance. a don't we and you you

flat Residential. I think off as a I backlog mid-single Refrigeration. I Commercial, in outlook sort up we're start. of said about talked solid to earlier, in gave digits I’ve the

you last can this to sort a map executing. read but hot year also year, read and map, from of to got operationally You was understand, year a last it's weather we're weather it hot

So sort I commentary I think of color would that's make. the

Okay.

non-res. can Lastly you’re from on you very recent give some color what me, I points favorable. not us some seeing in data mean,

versus terms that your basis anything I in Thank you markets, you'd about to you? growth, viewpoints any obviously pretty else about is you’ve And about Just concerning us that but gave talked mean, office good you. like versus a talked there, You to broad color is market -- of generally retail institutional? there I on it. appreciate talk on

of and additional the use flat, couldn’t inventory no market's that I I elsewhere. macro get mean, again color. share call that No you would overall Thanks. it's sort so

All right. Thanks.

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

good morning Hey, guys.

Hi, Joe.

morning. Good

kind deeper of dive this dynamic. bit market Can little share just into a we

was make talking rate think growth last regionally where want I in resi right better-than-expected your understand there to I or mean I XQ. are to It more was quarter. than the weather getting recovery and seems is based that? So it guys up is way to the back your production just that just and sure you running like about to now

-- I think revenue the tornado the for million. which is to was what more called or we it tornado revenue the it's out quarter, $XX impact impact in

quarter back tornado. said early at all that's haven't us And and part of The earlier impact it so So in there's quarter to of as we the that the that associated larger weather. number was of second part full left regained weather and $XX that its It's revenue XXX% in production the was, weather. $XX there's a portion then being quarter the million and I that yet, by definition in the share tied is that's million. with

it. Got

tornado the smaller I’m trying get back. guess, the not guess, expenses I you're fair? I’m that going I then And thinking discussed the share, terms with understand, to that so dealers a so, in the in you’ve is kind is the recapture going increase related to of related to Okay. you're just about as portion that portion, to the your is portion that of to not

I’m question. not sure, I the understand

gain of You mean proceeds? the additional insurance

proceed on for go Yes, proceeds, is year. up what insurance any million insurance the guess, that gain expected quarter, impact the it's I to to to? related so the $XX this by the

the revenue with associated lost That's tornado.

how clean XXXX? the XXXX in is core and business look I or XXXX just we we in slate in how concept insurance that interruption be just that’s business whole And at the XXXX as there doing we going is get and business and core a Okay. additional through an guess, to and recovery think then, this calculated, should can expectation that is there the

fair a question. That’s

We and negotiating money to we insurance process get back. with to and are expect companies sort very with and we of been all the the have closely us continue fair worked in back the get they’re with of

numbers collect be be money clean Our the the desire or but now expects some a some at but things negotiation. it in But lead be And into current end -- XXXX. clean that would by to are the that will move that in now expectation but going we XXXX, understand year and maybe wrap in need we right with numbers point, over XXXX, on. have XXXX, have the up happen of look all forward that to guide just to would the to I the into may

Got makes it. That sense.

Thanks, guys. Okay.

Thanks.

Deutsche go will ahead. Bank. go Nicole to with we Next, DeBlase Please

Yes, thanks. Good morning, guys.

Nicole. Hi,

Good morning.

So I to Europe. want start on just

up you’re this sounded I like driven lot and again FX. it kind a the talked about you that was by commercial quarter. quarter HVAC And with think during of first double-digit of strong ex low growth

the So give update region? just could on if seeing a little bit you’re you what in us of

were we up Europe digits. In mid-single

digits of primarily those Our Commercial, are HVAC end but that's in our sort Europe. and Spain low-end major of where the Germany, and are our And average that strength. in sort we've seen was of we on our high-end, and in markets was and mid-single Refrigeration France

better? you have Okay, at the got expected last when was but little the second the down of What it. there. guided it top for improvement And we driver think bit the a then Was you the update the that upside? was was in margins, than improvement got I some quarter saw commercial or flat we operational to first better quarter, the line was HVAC in

we I We the say both. than would was and we a and [indiscernible]. in bit it's hoped on did It two. little equally then had better between split revenue better mix the did factory

Understood.

second the expect And last second see one then quarter cost. just me from in the still impact to then Okay. margins improvement price The if you there on and in half?

were if folks positive. [indiscernible] I’m that than to is answer right See we the me. got mean, turning in right Well, have now. in front of to see numbers of if front Turning us. I too in many head my I we

that’s For we quarter water obviously year. in and price we're $XX had million million and of high $XX million mark $XX headwind freight the the for and the commodities, tariffs, quarter, so positive the for

it will pass Got it. I on. you. Thank

you. Thank

Barry And go we ahead. will Buckingham Research. go Please with to Robert

Hey, morning. guys. Good

Hey, Robert.

morning. Good

covered, to ground just few guess things I of follow-up Lots a on.

in kind So price at kept of for that also you the the those quarter that? to Todd, the conference, but, or potentially any quarter so I and for think guide better, kind in the had costs same components, material tracking earlier of you in reason alluded late June, two a

commodities. we -- I think lowered I we think

million So, it headwind. $XX a to from a went headwind million $XX

and the costs. Sorry, commodity material It was costs. material price

the total didn't mean just of maybe I better. be think lump all I say would each the be I those saying would to tried better. to three together that by element

all three million, if million them, now $XX $XX And I have and right. the be are I to that so math of think used

Florida how store a it. Got that growth? for contributing that the to like number you same-store then Is in gave or in it. replacement volume And up stores is that you Florida number same Got are XX. that that Is adding that?

view I year it's of share we I because don't than way but I don't quite did mean sort I we had share we plus -- I -- it that's really same-store last I because don't I I Florida, think that we about stores don't if had don't the question think we I it dealers gain business know, market if or any did. we to in we think how did that's more for I had so view and sales. parts we just. added our Robert. not, know, is gain think

Got it. Got it.

And the was market up.

Right. question Joe's the lastly, following with just in the guess, I about I up, recapture included numbers. think, the way share is

lost you've right? this share. of what that just is million its of not quarter. It's $XX revenue net Is recaptured that in volume estimated So

Correct.

with thing at line? -- two guess I same the And the EBIT

Correct.

better So kind or even though the is the was, out-of-period? was the EBIT recapture of lower little the recoveries, insurance fact just revenue track on a share bit that

Correct.

had insurance we million way in tie time. in some lost the $XX and I rough million profits $XX would of last the we QX. And to QX, gave But guide proceeds

a sort -- by lag So not of it lagged it's of sort quarter.

All for clarifying right. Thanks all that.

Thanks.

Next, go with Pokrzywinski we Please go to Morgan Josh ahead. Stanley.

Hi. Good morning, guys.

Josh. Hey,

that the around some versus you up me. with if the how you second pre-bought furnace should these elements about the what We've the thought and for maybe pre-buy company-owned. other of calibrate around and was independents direction the can then could independents size like go you something of into we Todd, the touched the growth kind think wonder underlying? few of to magnitude a between there differential of the the half guess standard I

the have don't I front of in me, map Josh.

because like we may put We the have I to together, pre-buy the factory it didn't less dramatically furnaces capacity was our done. will competitors the versus -- others building be pre-regulatory just have

other the not And second distribution that's are distribution the tornado were brands, driven to. independent was by part distributors during hang doing ability so that the on think, definition thing by it, I able quarter independent and think with more better, which wasn't dealers by but impacted better that be of to Lennox to to the I able doing how the I are to degree same

it. Got

of was are distribution kind going substantial channel, pre-buy where obviously, company that's So taking May. I think the still little don't bit to this have was fill a orders is, I who competitors Carrier your able more with through

the came in it's that through So make timing absence the just the is read as big they've in does the company-owned into can flip half, or I second flip of you in of half in the the that second big of notion first pre-buy sale that how half the made second that? then, mean not already the maybe a where should not a half. a I guess they

I'm followed I question. not sure, the

… I think, if are you

… the so Yes,

a will distribution, year in company like by selling independent half the a the to revenue second Carrier first of who be over be half you're the inflated revenue, deflated If year, is we'll of that fact.

from and I Allied our you're tailwind are have on -- have our furnaces would the that's and here overstated amplitude the because of competitors of of first second the we the half didn't our lot as for was weather will think sort spent company-owned year, -- and competitors, half I greater than the issue -- the of be during a of -- after less and think half again that a If pre-build driver year that a of selling that we as the tornado using but first the disparity the headwind with to got build because was is there that quarter much distribution understated distributors were company rounding brands. share this distribution loss more Lennox revenue the we by the that's think the driven the third would was regaining our there alternative I through year order been haven't seamlessly by second points versus between half able avoid brands couple during on after Allied a dealers issue a distribution like more time talking brands second Reason of Lennox, a that year. like been some of about I a the in the during equation of independent of and independent losing

port point you just leave more Thanks complicated. on mean then belabor more to little thinking follow-up one And it. I'll will this. get I'm to the Got the know, trying on color. for the I it, don't it. It's about there. but I out, --

Thanks.

will we go Suisse. Walsh Credit to And Please go John with ahead.

Hi, good morning.

John. Hey,

Just a mentioned or of tariffs kind to going obviously, are understand how price up a of But mean, into to a by inflation, lot anyway of different of much things it's general kind mixing strong people now, want around right. opening price, of the realization. going confidence you you it consumer articulate is helpful. kind price would question right be to earlier that I whether about that price point driven maybe beyond higher, wanting

two sort price increases the of its little just price. of passed most impact, straight wasn't normal on I on. think the tornado quarter, being the bit a I it's in mix I there's given mean, but that's a the given weather, trajectory. mean mix of

then, and actually or I of, the I quarters pushing one of you. Is And see it Got I macro. kind capital that? if moves project it's customers guess, the to color of of, to that you're in seeing it, which it's made two you forward? spending we're some vertical, refrigeration if if in seeing they're you're kind kind waiting this the defer think kind around just comment given need

on margins cold cold to do I think, do -- you cold storage question on primary just not grocery so in the build the you and invest capital. and on new it facilities build the we're to stores I it's facilities, but think new, is much exposed storage storage

or I think corporate America? seeing the investment of we're sort it's decisions sort across macro of industrial

thank All right. Well, you.

Thanks.

Research. Nigel question with next ahead. Please Coe go Wolfe Our

good guys, morning. Thanks

Hi, Nigel. How are you?

I the of a QX. into dynamics just, here. but stand share lot just to [indiscernible] cover wanted Can maybe here, hate you ground we Obviously, my thanks. I mean, Good, betray to market

You actually in share XQ lose 'XX. any didn't

So therefore share, seems be illogical. talking about to regaining it

is the I'm away that that the measuring how half you're are second wondering, the loss back, in dealers share in So market we That about come of XQ? went year. just hasn't here talking

Nigel. Thanks,

So in quarter quarter the in so who and them in second significantly million. number dealers hadn't would the we gain that fourth have XXth back if greater impact we lost than XX been

talking so just Oklahoma, Central here XX% great. Texas, Midwest I that the both And that to exposure a got think Midwest? That's Okay. Would then, states. Central is, the not about we're Southwest on you well, include the States, classic as

obviously Michigan, I is call mean, it Ohio, Arkansas, lesser really football there, Louisiana, which the regions, too and such, Illinois, XX Central Iowa, Texas, out degree Yes, question, then South Nebraska is big swing Midwest, the traditional Dakotas the is, Wisconsin, Missouri, Indiana, to Oklahoma. will Plains, to Central I and it which much the be your Minnesota, out, direct fans

Okay. That quick to makes little ones then off just And more sense. here. tick two

Just, year compensated but talked the is for full mean, of understand do somewhat you get about I FY conceptually, insurance one this 'XX. lost profits. mean I just, sensitive I topic, for negotiation you

So is not it that simple.

simple. that not It's

and everything. we're where mix I in of speculative sort of -- our said mean revenue gained detailed all ways, revenue. out best plus we around. we and of lost factory work much we'll that we number it a And ability, expect gets done number to negotiations looking be publicly guided of we're would day, I Both of what sort what far lost is number. much the So the of that call some of so we've how up justifying and end impact in how sort a in the

So I got numbers. so many

I think, XXX, right? its

XXX.

have we've [Speech XXX that still a to that's Not, XXX XXX dates. received our Overlap] XXX. to negotiate and best and We estimate.

the dealer chatter just picking half detail. any cover back pricing, XQ, is of the There's Have on XQ. in a quick dimension this been of year? a that to a pricing. seen within that risk about The time and during then up bit you in incentives And one great. for Okay, little

people that risk the when volumes to It's start year. the thing. did frankly, not soft weather is the volume. a And we the try quite back same spiffing cool half and It's a had for of new the and

guys. Good Thanks, Okay. luck.

you. Thank

with UBS. Damian ahead. from final be question go Our will Please Karas

Hey. Good morning, guys.

Hi, Damian.

Appreciate here. your fitness in

client a capacity. clarification Just on

So some there looking result exactly you'll do to tornado facilities before still respect now, things additional across you three with shifting down split to be had the do is a the Where that production to stand the some your production future? comparing the And tornado. shifted Mexico, in as that to Marshalltown? of

shift Yes, the future. in we to are always looking

still footprint out to try to lowest cost. and that's drive, continues there look So our continue that out be and the and there at we'll to

Carolina we shifted move the Mexico still the to prior the tornado, capability all remains for and the running both tornado up of were capability Marshalltown volume we terms there, that also. producing we're to that to products In and in South but

just And coming one on it. curious, any from some push customers of having have out product signature they've branded now? felt Got of back you Mexico that

exact whether visited been quality. facility, Mexican it's I a US, facility now for decade almost the in pushed don't it's and care they many they Zero building the where made it's know largest or back, of mean, we've in quality the our is dealership same whether and in made Mexico

Thanks. helpful. Very

Thanks.

comments. to company for that, turn I'll with the any it closing back And

we've and for up, the markets in To and lot, on guidance outlook adverse second the a Commercial reset North the Thanks weather significantly year. Refrigeration wrap in reduced quarter America operator. have end after

Looking you ahead, and products we all XXXX. today. the continues residential Thank trending for joining the more second side, up the XXXX commodity costs half robust, for to cost of weather us moving for and distribution set are market made and down look investments price benefit forward for in have us well

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

You may now disconnect.