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Lennox International, Inc. LII
Q2 2013 Earnings Call Transcript

Transcript Call Date 07/22/2013

Operator: Ladies and gentlemen, thank you for standing by. Welcome to the Lennox International Second Quarter 2013 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 Steve Harrison, Vice President of Investor Relations. Please go ahead.

Steve L. Harrison - VP, IR: Good morning. Thank you for joining us for this review of Lennox International's financial performance for the second quarter of 2013. I am here today with Chairman and CEO, Todd Bluedorn; and CFO, Joe Reitmeier. Todd will review key points on the quarter and Joe will take you through the Company's financial performance and outlook.

Financial results in prior periods have been revised to reflect sold businesses and 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 and make it available for replay.

I would 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 Lennox 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 Bluedorn.

Todd M. Bluedorn - Chairman and CEO, Lennox International: Thanks Steve. Good morning and thank you all for joining us. We continue to see strong momentum from our strategic initiatives and operational execution in the second quarter as the company set records for total segment profit and operating margin.

In the end market environment's still 25% to 30% below peak shipment levels for the industry.

For the company overall second quarter revenue was up 9% from the prior year quarter and total segment profit margin expense 200 basis points to a record 11.6%. Adjusted EPS from continuing operations was a record $1.31, up 34% and GAAP EPS from continuing operations was a record $1.26, up 31%.

The company's growth continuing to be led by our residential business with revenue up 16% in the second quarter driven by both replacement business and new construction. Residential profit was up 58%.

Despite weather being poor across the U.S. then in the second quarter last year replacement business revenue was up 17%. In addition to our market share gain initiatives we are seeing strong growth in replacement business as the market benefits from stabilization and unemployment and a general improvement in consumer confidence, home values, and existing home sales. Replacement accounts for more than 75% of our residential business.

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