Lennox International, Inc. (NYSE:LII) Q3 2019 Earnings Conference Call - Final Transcript

Oct 21, 2019 • 09:30 am ET

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Lennox International, Inc. (NYSE:LII) Q3 2019 Earnings Conference Call - Final Transcript

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Q & A
Executive
Todd M. Bluedorn

entertainment, theaters and light health care. So there is verticals continued to stand up and we were pleasantly surprised in the quarter.

Analyst
Julian Mitchell

Great. Thank you.

Executive
Todd M. Bluedorn

Thanks.

Operator
Operator

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

Analyst
Jeffrey Hammond

Hey, good morning guys.

Executive
Todd M. Bluedorn

Hey, Jeff.

Analyst
Jeffrey Hammond

Just going back, I'm kind of the moving pieces with insurance recovery in the lost EBIT. So I guess of the $54 million of lost EBIT in '19 -- just given some of the share recapture that you're not getting, how much of that do you expect to get back ultimately and with some of the mix dynamics?

Executive
Joseph W. Reitmeier

I would pausing to make sure I have thought about it that right way. I would -- out of the 54 for lost profits, I'm going to sort of fire from the hip and say I will look over a two-year period. So I look at what we lost in '18 and what we lost in '19 and we're going to get 70% [Phonetic]. We're going to get 85% to 90% of that back both on revenue and on profit. So I wouldn't look narrowly at the 54, I'd have to look at sort of the two years combined and say, we're going to get 75% or 85% to 90% of that back. That's average Steve?

Executive
Steve L. Harrison

Yeah.

Analyst
Jeffrey Hammond

Okay. There is no mix dynamic from that being higher mix share that you're not getting fully back or...

Executive
Todd M. Bluedorn

No, I think over the longer term, the mix will be fine. I mean, we've got it all in 2020. I think there is some absorption and productivity issues that were buried in that 54, that may not come back, but it will be absence of bad and this is good, and this is one way to think about it.

Analyst
Jeffrey Hammond

Okay. And then just a couple on Refrigeration, one maybe just give us a view of the demand outlook into 2020? And I think you mentioned so manufacturing and efficiency just talk about what's going on there? Thanks.

Executive
Todd M. Bluedorn

Yes, I mean and Refrigeration on an end market, we were flat, and revenue was flat in third quarter. What we're seeing in North America as the market continues to be hanging in there, low-single digits, we were up mid-single digits for the quarter. Europe, we're seeing some slow down, specifically in Germany, where we have a process Cooling business where auto is a large vertical, and as everyone understands that slowing down. And even in our commercial HVAC business, which is predominantly France and Spain, we've seen some slowdown. So this continues to bubble along in North America, slowing down in Europe. And then I think there was a question about factory productivity. The issue that we're seeing in Resident and Refrigeration, and then also quite frankly in Commercial, is a very tight labor market where our factories are located at and Refrigeration in North America, it's Georgia, and Commercial, it's Arkansas. And in the product, the lack of improved efficiency year-over-year in