Wells Fargo Industrials Conference - Lennox · PDF fileFORWARD-LOOKING STATEMENTS . This...
Transcript of Wells Fargo Industrials Conference - Lennox · PDF fileFORWARD-LOOKING STATEMENTS . This...
Wells Fargo Industrials Conference May 2017
FORWARD-LOOKING STATEMENTS
This presentation contains forward-looking statements within the meaning of the Private
Securities Litigation Reform Act of 1995. 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 Internationals 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 companys website at www.lennoxinternational.com.
2
3
LII Overview
Business Segment Review
Financial Guidance
Lennox International
is winning in the market place with investments in products & distribution
is well-positioned for margin expansion
is capitalizing on growth markets
is driving shareholder value with a disciplined use of free cash flow
4
55%25%
20%
62%26%
12%
Refrigeration Residential Heating & Cooling
Focus on Three Related Businesses
2016 Revenue 2016 Segment Profit 1
Commercial Heating & Cooling
1 Excludes eliminations and unallocated corporate expense
5
http://www.heatcrafteurope.com/media/com_hikashop/upload/peg_1327917184.pngChart1
0.55
0.25
0.2
revenue
Sheet1
revenue
residential55%1773
commercial25%670
refrigeration20%942
3385
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Chart1
0.62
0.26
0.12
Sement Profit
Sheet1
Sement Profit
residential62%
commercial26%
refrigeration12%
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72%
28%
Business Mix
Customer
Residential Commercial
Americas Europe Asia Pacific
Geography
Replacement New Construction
End Market
89%
7%4%
55%45%
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Chart1
0.72
0.28
End Market
Sheet1
End Market
Replacement72%
New Construction28%
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Chart1
0.89
0.07
0.04
Geography
Sheet1
Geography
Americas89%
Europe7%
Asia Pacific4%
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Chart1
0.55
0.45
Customer
Sheet1
Customer
residential55%
commercial45%
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$171
$134 $98
$261 $270** ~$285
2012 2013 2014 2015 2016 2017E
*Free cash flow as a percent of GAAP net income. **After impact of $50M pension contribution following cash repatriation. Before impact, $320M FCF and 115% FCF % NI.
FCF % NI*
Sales, Earnings, and Cash Flow Revenue & ROS Free Cash Flow
($Millions)
Core EPS
$2.9 $3.2
$3.4 $3.5 $3.6 ~$3.8
7.6% 9.4%
10.1% 10.9%
12.9% ~13.7%
$0
$1
$2
$3
$4
2012 2013 2014 2015 2016 2017E
SALE
S (U
S$ B
illio
ns)
7
$6.95
GAAP EPS
$5.14
$4.11 $6.34
$4.38
$4.28
$3.70
$3.55
$2.70
$2.63 190% 78% 47% 140% 97%** ~90%
$7.55- $8.15
$7.65- $8.25
$2.9B$3.2B
$3.4B $3.5B$3.6B
$4.3B
7.6%
9.4%10.1%
10.9%
12.9%
~15.5%
2012 2013 2014 2015 2016 2019E
RO
S %
SALE
S (U
S$ B
illio
ns)
LII 2019 Targets
30% Incremental
Margin
8
6% Revenue
CAGR
Chart1
2.920120.076
3.220130.094
3.420140.101
3.520150.109
3.620160.129
4.32019E0.155
Series 1
Series 2
Series 3
SALES (US$ Billions)
ROS %
$2.9B
$3.2B
$3.4B
$3.5B
$3.6B
~$4.1B
$4.3B
$4.0
10.9%
12.9%
~14%
~15.5%
Sheet1
Series 1Series 2Series 3
2011$2.87.0%
2012$2.97.6%
2013$3.29.4%
2014$3.410.1%
2015$3.510.9%
2016$3.612.9%
2019E$4.315.5%
Designed-Out Costs
9
Low-Cost Sources
LII Material Cost Reduction
Old
Computational Analytics
Advanced Heat Exchanger Technology
Material Substitution (Copper to Aluminum)
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Leveraging Technology Controls
Dealer Apps Homeowner Apps
11
Leveraging Technology E-Commerce
E-Commerce Platforms
12
LII Overview
Business Segment Review
Financial Guidance
13
Product Glamour shot
Factory Glamour shot
RDC Glamour shot
$1,376
$1,583
$1,737 $1,867
$2,001
7.5%
11.4%
13.6%
14.9%
17.4%
0%
2%
4%
6%
8%
10%
12%
14%
16%
18%
$0
$1,500
2012 2013 2014 2015 2016
ROS
%
SALE
S (U
S$ M
illio
ns)
Residential Heating & Cooling Segment Revenue & ROS
Replacement
NC
LII Residential Sales
Allied
Lennox
NC
Replacement
Allied
Lennox
% HVAC Sales
New Construction
Replacement
14
2%
11%
8%
1%
6%Mid
SingleDigits
0%
5%
10%
15%
20%
2012 2013 2014 2015 2016 2017E
North America Residential Market
Source: Industry data and company estimates
% Y-O-Y Change in Units
15
New Construction
Replacement Market
Positive Mix
Summer Heat Y-Y
Comparison
Macroeconomic / Political Uncertainty
Chart1
0.02
0.11
0.08
0.01
0.06
0.05
6%
MidSingleDigits
~6%
MidSingle Digits
Sheet1
040520082009201220132014201520162017E
ROS8%11%(11%)(8%)2%11%8%1%6%5%
16
Brands Consumer Contractor Distributor
Independent
How LII Residential Goes to Market
Company Owned
17
2017 Tgt
Residential PartsPlus Strategy Number of PartsPlus Stores
62 76
108
136 161
186 209
235
0
325
2010 2011 2012 2013 2014 2015 2016 2017E 2020Vision2020
Vision
Physical Distribution Up ~280% over 7 Years
2010 2011 2012 2013 2014 2015 2016 2017E
18
Significant Growth Opportunity Remains with PartsPlus Strategy
Target market for store is 30-minute
drive radius
Current footprint of stores supports 35% of total market with target
coverage
PartsPlus Current Market Penetration
19
2017 Tgt
Residential PartsPlus Strategy Number of PartsPlus Stores
Physical Distribution Up ~425% over 10 Years
62 76
108 136
161 186
209 235
2010 2011 2012 2013 2014 2015 2016 2017E 2020Vision
2010 2011 2012 2013 2014 2015 2016 2017E 2020 Vision
325+
Distribution
Marketing
Digital Tools HVAC Contractor
LII Dealer Support is a Differentiator
20
Training
Smart Product
21
Residential Industry Leading Products
Continued Investment in Industry Leading Products
485810
1,100
1,800
2,900
2009 2011 2013 2015 2017E
Saltillo Mexico Factory Labor Hours Worked (000s)
~ $6M Incremental EBIT in 2017
22
Residential Mexico Strategy
Chart1
485
810
1100
1800
2900
Sheet1
20092011201320152017E
sales485810110