Lennox International, Inc.

Ladies and gentlemen, thank you for standing by. Welcome to the Lenox International Fourth Quarter Earnings Conference Call. At the request of your host, all lines are currently in a listen-only mode. There will be a question and answer session at the end of the presentation. You may enter the queue to ask a question by pressing 1 and 0 on your phone. Pressing 1 and 0 again exits the queue. As a reminder, this call is being recorded. I would now like to turn the conference over to Mr. Steve Harrison, Vice President of Investor Relations. Please go ahead.

Good morning. Thank you for joining us for this review of Linux International's financial performance for the fourth quarter and full year of 2020. I'm here today with Chairman and CEO Todd Bludorn and CFO Joe Reitmeyer. Todd will review key points for the quarter, and Joe will take you through the company's financial performance for the quarter and year, as well as the outlook for 2021. To give everyone time to ask questions during the Q&A, please limit yourself to a couple of questions or follow-ups and re-queue for any additional questions. In the earnings release we issued this morning, we have included the necessary reconciliation of the non-GAAP financial measures that will be discussed to GAAP measures. All comparisons mentioned today are against the prior year period. You can find a direct link to the webcast of today's conference call on our website at www.linuxinternational.com. The webcast will be archived on the site for replay. We'd like to remind everyone that in the course of this call, to give you a better understanding of our operations, we will be making certain forward-looking statements. These statements are subject to numerous risks and uncertainties that could cause actual results that differ materially from such statements. For information concerning these risks and uncertainties, see Linux International's publicly available filing with the SEC. the company disclaims any intention or obligation to update or revise any forward-looking statements, whether as a result of new information, future events, or otherwise. Now let me turn the call over to Chairman and CEO, Todd Bluedorn. Thanks, Steve.

Good morning, everyone, and thank you for joining us. In the fourth quarter, we continue to see strong momentum in our residential business and year-over-year improvement in commercial and refrigeration. Overall for the company, revenue is up 3%. and hit a new fourth quarter high of $914 million. GAAP operating income was $139 million compared to $192 million in the prior year quarter, then included $93 million net gain from insurance recoveries. GAAP EPS from continuing operations was $2.91 compared to $2.92 in the prior year quarter, then included $93 million in insurance benefits. I mentioned in a 39 million pre-tax pension settlement. In addition to record fourth quarter revenue, the company set new fourth quarter highs for total segment profit and margin and adjusted EPS from continuum operations. As reported, total segment profit was a fourth quarter record, 139 million, a 5% from the prior year quarter that included 25 million of insurance recovery. Total segment margin was a fourth quarter record 15.2% up 10 basis points. Adjusted EPS from continuing operations rose 18% to a fourth quarter record of $2.89. From an operating perspective, excluding the 25 million of insurance benefit in the prior year quarter, total segment profit was up 29% and segment margin expanded 300 basis points. Looking at our business segments for the fourth quarter, Residential set new fourth quarter records for revenue, profit, and margin. Residential revenue is up 11% on double-digit growth in both replacement and new construction business. Residential indoor air quality revenue is up more than 30% in the quarter. Segment profit rose 18%, and segment margin expanded 130 basis points to 20.9%. From an operational perspective, Adjusting for the $25 million of insurance benefit in the prior year quarter, residential profit rose 58% and margin expanded 630 basis points. In commercial, fourth quarter revenue was down 13% and profit was down 11%. Segment margin expanded 40 basis points to a fourth quarter record 19.4%. We continue to see year-over-year improvement in the business in both replacement and new construction, as well as in national accounts and regional and local business. Commercial equipment revenue overall was down mid-teens in the quarter. Within this, replacement revenue was down low single digits of constant currency, with planned replacement down high single digits and emergency replacement up low double digits. New construction revenue was down a mid-20s percentage. Breaking out revenue another way, regional and local business revenue was down low double digits and National accounts equipment revenue is down mid-teens. On the service side, Lenox national account service revenue is down high single digits. Some highlights to mention for commercial. Our team added six new national account equipment customers in the quarter to bring the total to 32 for the year. While small today, we are seeing fast indoor air quality revenue growth led by our new Building Better Air initiative. And in the first quarter, we are on track with the launch of our new Model L rooftop units. as we continue to lead the field in energy efficiency. The Model L features variable speed technology and an all-new advanced control system. We are seeing high customer interest in this industry-leading product for 2021. Overall, commercial backlog is up double digits. In refrigeration for the fourth quarter, revenue is up 7%, as reported, and up 3% of constant currency. North America revenue is up low single digits. Europe refrigeration revenue was up mid-single digits, as reported, and low single digits at constant currency. Europe HVAC revenue was up mid-teens, as reported, and up high single digits at constant currency. Refrigeration segment profit declined 28%, and margin contracted to 360 basis points to 7.5%. On the timing of expenses in the quarter, an unfavorable mix with the strong growth in Europe HVAC. Currently, refrigeration backlog is up double digits, led by North America, and we are seeing strong order flow. We expect segment margin to be up year over year starting in the first quarter and be up for the full year in 2021. For the company overall in 2021, we are reiterating guidance. We expect revenue growth of 48% this year and gap in adjusted EPFs from continuing operations of $10.55 to $11.15 for the full year. While there's an economic and market uncertainty, momentum continues for the company. We're well positioned for a year of strong growth and profitability. Given the outlook and the company's strong balance sheet and cash generation, we are restarting our stock purchase program in 2021 and plan to buy back $400 million this year. I'll now turn it over to Joe.