Lennox International, Inc.

Ladies and gentlemen, thank you for standing by. Welcome to the Lenox International fourth quarter 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 telephone keypad. Pressing 1 and 0 again exits the queue. As a reminder, this call is being recorded. I will now turn the conference over to Steve Harrison, Vice President of Investor Relations. Please go ahead.

Good morning, everyone. Thank you for joining us for this review of Linux International's financial performance for the fourth quarter and full year 2021. I'm here today with Chairman and CEO Todd Bludorn and CFO Joe Reitmeyer. Todd will review key points for the quarter. Joe will take you through the company's financial performance for the quarter and year, as well as the outlook for 2022. 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. I'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 to differ materially from such statements. For information concerning these risks and uncertainties, see Linux International's publicly available filings with the SEC The company disclaims any intention or obligation to update or revise any forward-looking statements, whether as a result of new information, future events, or otherwise. Now, let me turn the call over to Chairman and CEO, Todd Bludorn.

Thanks, Steve. Good morning, everyone, and thanks for joining us. Let me start with the financial highlights for 2021 overall and then walk through the fourth quarter as the company closed out a year of record revenue and earnings per share. Overall for 2021, revenue rose 15% to a record $4.2 billion. Constant currency revenue is up 14%. GAAP operating income rose 23% to $590 million. GAAP EPS from continuing operations rose 34% to a record $12.39. Total segment profit for the full year rose 19% to $604 million. and the total segment margin expanded 50 basis points to 14.4%. Adjusted EPS from continuing operations rose to 27% to a record $12.60. Turning to the fourth quarter, financial results were impacted by 6% fewer days than the prior year quarter, as well as a continued impact from COVID-19 and supply chain disruptions that significantly impacted performance. As a benefit to the quarter, tax timing and one-time tax benefits lowered the effective tax rate to 7% on a GAAP basis and 8% on an adjusted basis. That brought the effective tax rate for the full year to 17% on a GAAP basis and 18% on an adjusted basis. Company revenue in the quarter was up 6% to a fourth quarter record $965 million. GAAP operating income was $98 million compared to $139 million in the prior year quarter Gap EPS from continuing operations was $2.27 compared to $2.91 in the prior year quarter. Total segment profit for the fourth quarter was $102 million compared to $139 million in the prior year quarter, and total segment margin was 10.6 percent compared to 15.2 percent in the fourth quarter a year ago. Adjusted EPS from continuing operations was $2.35 compared to $2.89 in the prior year quarter. Looking at our business segments for the fourth quarter and residential revenue was up 12% to a fourth quarter record 620 million. And again, I'll underline that's on 6% fewer days. Both replacement and new construction business were up double digits. Residential segment profit was down 5% and segment margin was down 310 basis points to 17.8% from the prior year quarter. In commercial, the business continued to be hit the hardest by COVID-19 and global supply chain disruptions in fourth quarter. Revenue was down 11%, segment profit was down 64%, and segment margin was down 1,170 basis points to 7.7%. Commercial equipment revenue was down mid-teens in the quarter. Within this, replacement revenue was down mid-teens with planned replacement down low single digits and emergency replacement down more than 40%. New construction revenue was down high teens in the quarter. Breaking out revenue another way, regional and local business revenue was down mid-teens. National equipment revenue was down high teens. On the service side, Lenox National Account Service revenue was up low single digits, again on 6% fewer days. While the commercial business continued to work through significant disruptions and constraints in the fourth quarter, looking ahead, we expect revenue to resume year-over-year growth in the first quarter and profitability to be up by mid-2022 and for the full year. And refrigeration for the fourth quarter revenue was up 6% as reported and up 8% of constant currency. North America revenue is up more than 20%. Europe refrigeration revenue was down low single digits as reported, up low single digits of constant currency. And Europe HVAC revenue was down mid-teens as reported, down low double digits of constant currency. Refrigeration segment profit rose 50% but segment margin expanded 190 basis points to 8.9%. For the company overall in 2022, we are reiterating guidance for revenue growth of 5% to 10%. We are raising guidance for gap and adjusted EPS from continuing operations from a range of 1340 to 1440 to a new range of 1350 to 1450 for the full year. This reflects the net benefit of lower effective tax rate of 18% to 20%. and higher interest rate expense assumptions. We are reiterating plans for $400 million of stock repurchases in 2022. HVAC and refrigeration market demand remains high, and as COVID-19 and the global supply chain improve, Lenox International is positioned to further capitalize on the growth opportunities and higher profitability. Now I'll turn it over to Joe.