Lennox International, Inc. (NYSE:LII) Q1 2015 Earnings Conference Call Transcript
Apr 20, 2015 • 09:30 am ET
Ladies and gentlemen, thank you for standing by. Welcome to the Lennox International First Quarter 2015 Earnings Conference Call. At the request of your host, all lines are in a listen-only mode. There will be a question-and-answer session at the end of the presentation. As a reminder, this call is being recorded.
I would now like to turn the conference over to Mr. Steve Harrison, VP of IR. Please go ahead.
Good morning. Thank you for joining us for this review of Lennox International's financial performance for the first quarter of 2015. I'm here today with Chairman and CEO, Todd Bluedorn; and CFO, Joe Reitmeier. Todd will review key points for the quarter and year, and Joe will take you through the company's financial performance and outlook.
Financial results reflect sold businesses in discontinued operations. In the earnings release we issued this morning, we have included the necessary reconciliation of the financial metrics that will be discussed to GAAP measures. You can find a direct link to the webcast of today's conference call on our website at www.lennoxinternational.com. We will archive the webcast on that site for replay.
(Forward-Looking Cautionary Statements)
Now, let me turn the call over to Chairman and CEO, Todd Bluedorn.
Thanks, Steve. Good morning, everyone, and thank you for joining us. Let me start with a few high-level comments on our businesses for the first quarter.
In Residential, our strong business momentum continued. Residential revenue was up 7% at constant currency in the face of unfavorable weather conditions in the first quarter. Residential profit rose 28% over the prior year quarter and segment margin expanded 150 basis points to 8.6%.
Revenue from Replacement business was up high-single digits, while New Construction revenue was flat from the impact of severe weather in much of the country. With the onset of spring and summer, we are confident our business in the New Construction market will see a rebound.
On the operational front, we are on track in Mexico for $4 million of savings in 2015 and an additional $11 million in 2016 following the opening of our second plant in the second half of last year. The facility performed well with furnished production for the winter season and we continue to grow and expand our operations there.
Our Residential distribution expansion also continues. We opened two new Lennox PartsPlus stores in the first quarter to a now total 163 stores across North America on our way to a total of 250 stores in 2017.
Turning to our Commercial business. Revenue is down 3% at constant currency and segment margin and profit were down from a year ago. National account equipment revenue was down high-teens as we saw the timing of orders shift beyond the first quarter into the second, third and fourth quarters for this year. This is due to severe winter weather in much of the country, as well as some timing decisions by specific national account customers.
While Commercial national accounts business was down in the first