Wells Fargo Securities Industrial & Construction Conference. May 2015

Transcription

1 Wells Fargo Securities Industrial & Construction Conference May 2015

2 FORWARD-LOOKING STATEMENTS This presentation contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of These statements are subject to numerous risks and uncertainties that could cause actual results to differ materially from such statements. Such risks and uncertainties include, but are not limited to, the impact of higher raw material and commodity prices, the impact of unfavorable weather, and the ability of the company to execute its strategic plans. For more information concerning these and other risks and uncertainties, see Lennox International s Form 10-K and other publicly available filings with the Securities and Exchange Commission. LII disclaims any intention or obligation to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise. Use of Non-GAAP Financial Measures A reconciliation of non-gaap financial measures appearing in this presentation to financial measures prepared in accordance with U.S. Generally Accepted Accounting Principles (GAAP) is posted on the company s website at 2

3 Who We Are Businesses & Strategic Priorities Financial Guidance 3

4 Lennox International is participating in growth markets with significant pent-up demand is well positioned for margin expansion is winning in the market place with investments in products & distribution is driving shareholder value with a disciplined use of free cash flow 4

5 Focused on Three Related Businesses 2014 Revenue 2014 Segment Profit 1 22% 13% 26% 52% 30% 57% Residential Heating & Cooling Commercial Heating & Cooling Refrigeration 1 Excludes eliminations, unallocated corporate expense and discontinued operations 5

6 Business Mix 9% 5% 86% 31% 69% 48% 52% Geography Americas Europe Asia Pacific End Market Replacement New Construction Customer Residential Commercial Based on 2014 total LII revenue from continuing operations. 6

7 SALES (US$ Billions) ROS % Regional Standards Sales, Earnings, and Cash Flow $3 Revenue & ROS $3.4 $3.2 $2.8 $ % ~$3.6 ~11.0% 12% 10% Free Cash Flow ($Millions) ~$265 $77 9.4% 8% $2 7.0% 7.6% 6% $1 4% 2% $171 $134 $98 ~$188 $ E 0% $ E Core EPS $2.25 $2.70 $3.70 $4.38 $5.20-$5.60 FCF % NI* 40% 190% 78% 47% ~110% * Free cash flow as a percent of GAAP net income. 7

8 Who We Are Businesses & Strategic Priorities Financial Guidance 8

9 SALES (US$ Millions) ROS % Residential Heating & Cooling Segment Revenue & ROS LII Residential Sales $1,737 16% Replacement $1,500 $1,583 $1,376 $1,339 $1, % 14% 12% NC NC New Construction Replacement 11.0% 11.4% 10% Replacement 8% 7.0% 7.5% 6% 4% Allied Allied 2% Lennox $ % Lennox % HVAC Sales 9

10 North America Residential Market 20% 15% % Y-O-Y Change in Units Recovering New Construction Release of Pent-Up Demand 10% 11% 8% Regional Standards 5% 4% Mid Single Digits Macroeconomic / Political Uncertainty 1% 2% 0% E Source: Industry data and company estimates 10

11 Residential Industry Leading Products Ultimate Comfort System TM Continued Investment in Industry Leading Products 11

12 Residential PartsPlus Strategy Number of PartsPlus Stores Targeting 250 Stores in E 2017 Target Tgt 12

13 Dealer Support DaveNet No Boundaries Industry Leading Dealer Support 13

14 Residential Manufacturing Strategy Saltillo Mexico Factory Labor Hours Worked (000s) 1,600 1, E $4M Incremental EBIT in

15 SALES (US$ Millions) ROS % Commercial Heating & Cooling Segment Revenue & ROS LII Commercial Sales $776 $785 $844 $879 NEOSYS Air Cooled Chiller / Heat Pump Rooftop $ % 14.1% 11.2% 11.3% 12.7% Energy Rooftop Europe HVAC NAS North America HVAC Rooftop

16 North America Commercial Unitary Market 20% 15% % Y-O-Y Change in Units Retail Planned Replacement Continued Growth in Emergency Replacement 10% 8% Soft Holiday Season 5% 3% 4% 3% 4% Low Single Digits Macroeconomic / Political Uncertainty 0% E 16 Source: Industry data and company estimates

17 Commercial Emergency Replacement Strategy Commercial Distribution Points 85% Same Day Coverage Strategy Working Revenue Up 25% Over Last 2 Years 17

18 Lennox Commercial VRF Full Product Line Dedicated Team Training & Technical Support 2018 Revenue Target $100M 18

19 Commercial National Account Services Commercial Service Revenue $160M $160M $111M $117M $80M $85M E 19

20 SALES (US$ Millions) ROS % Refrigeration Segment Revenue & ROS LII Refrigeration Sales $805 $788 $772 $752 Asia Pacific Europe North America $551 South America 11.1% 9.6% 10.4% 11.7% LII Markets 7.4% Non- Food Cold Storage Grocery Food Service Convenience Store 20

21 Refrigeration 2015 Overview Major Refrigeration End Markets LII Refrigeration North America Europe Australia South America Low Single Digits Low Single Digits Low Single Digits High Single Digits NA Grocery Revenue Growth Operational Improvements Material Cost Reduction Australia Refrigerant NA Grocery Mix 21 China High Single Digits

22 Material Cost Reduction Move to Low-Cost Sources Platform / Subsystem Redesign Copper to Aluminum Substitution Value Engineering Continued Strong Progress in Material Cost Reduction 22

23 Who We Are Businesses & Strategic Priorities Financial Guidance 23

24 2015 Overview + - End Market Growth Macroeconomic Uncertainty Market Share Momentum Foreign Exchange Product Cost Reduction Australia Refrigerant Price / Commodities Investment in Growth 24

25 2015 Full-Year Guidance Revenue Up 4-8% at Constant Currency; Up 1-5% with -3% FX Headwind Corporate Expense of ~$75M Tax Rate of 34-35% Adjusted and GAAP EPS from Continuing Operations of $ $5.60 Capital Expenditures of ~$85M Completion of $450M Accelerated Share Repurchase Program 25

26 Cash Deployment Philosophy Cash Conversion to Approximate Net Income Debt-to-EBITDA Ratio Typically 1-2x Continue to Invest in the Business Projects to Drive Growth Organically Strategic Acquisitions Return Cash to Shareholders $55M+ in Dividends $450M ASR Completed in

27 SALES (US$ Billions) ROS % LII 2017 Targets $3.2B $3.4B ~$4.0B ~13% 6% Revenue CAGR $2.6B 8.5% $2.8B 7.0% $2.9B 7.6% 9.4% 10.1% 30% Incremental Margin

28 Lennox International is participating in growth markets with significant pent-up demand is well positioned for margin expansion is winning in the market place with investments in products & distribution is driving shareholder value with a disciplined use of free cash flow 28

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30 GAAP / Non-GAAP Reconciliations 30

31 Earnings & EPS Reconciliation 2011 to 2014 ($US in Millions, except per share amounts) Per Diluted Amount Share Per Diluted Amount Share Per Diluted Amount Share Per Diluted Amount Share Income from continuing operations, a GAAP measure $ $ 2.09 $ $ 2.63 $ $ 3.55 $ $ 4.28 Special product quality adjustments, after tax (2.8) (0.05) (1.5) (0.03) (0.9) (0.02) Restructuring charges, after tax Special legal contingency charges, after tax Asbestos-related litigation, after tax Inventory write-down, after tax Environmental liabilities, after tax Unrealized losses (gains) on unsettled futures contracts and other items, net, after tax (0.8) (0.02) Adjusted income from continuing operations $ $ 2.25 $ $187.3 $ 3.70 $ $

32 2015E EPS Reconciliation Per Diluted Share Adjusted ("Core") income from continuing operations $5.20 to $5.60 Restructuring and other items, net (0.06) Income from continuing operations, a GAAP Measure $5.14 to $

33 Free Cash Flow $US in Millions E Net cash provided by operating activities $76.2 $221.4 $210.3 $184.8 ~$350 Proceeds from the disposal of property, plant and equipment Purchase of property, plant and equipment (41.4) (50.2) (78.3) (88.4) ~(85) Free cash flow $35.0 $171.3 $134.4 $97.5 ~$265 33