Q4 2021 Lennox International Inc Earnings Call
Ladies and gentlemen, thank you for standing by welcome to the Lennox International fourth quarter Conference call at the request of your host all lines are currently in a listen only mode. There will be a question and answer session at the end of the presentation.
You may enter the queue to ask a question by pressing one and zero on your telephone keypad pressing one is zero again exits the queue. As a reminder, this call is being recorded I will now turn the conference over to Steve Harrison Vice President of Investor Relations. Please go ahead. Good morning, everyone. Thank you for joining US for this review of Lennox <unk>.
International's financial performance for the fourth quarter and full year 2021.
Here today, with chairman and CEO , Todd <unk> and CFO , Joe Reitmeier.
Todd will review key points for the quarter and Joe will take you through the Companys financial performance for the quarter and the year as well as the outlook for 2022.
Give everyone time to ask questions. During the Q&A. Please limit yourself to a couple of questions or follow ups and re queue for any additional questions.
In the earnings release, we issued this morning, we have included the necessary reconciliation of the non-GAAP financial measures that will be discussed to GAAP measures. All comparisons mentioned today are against the prior year period.
You can find a direct link to the webcast of today's conference call on our website at Www Dot Lennox International Dot com the.
The webcast will be archived on the site for replay.
I'd 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.
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 <unk>.
Thanks, Steve Good morning, everyone and thanks for joining US let me start with the financial highlights for 2021 overall, and then walk through the fourth quarter as the company closed out a year of record revenue and earnings per share.
Overall for 2021 gross 15.
15% to a record $4 2 billion.
Constant currency revenue was up 14% GAAP operating income rose, 23% to $590 million GAAP EPS from continuing operation shows 34% to a record $12 39.
Total segment profit for the full year rose, 19% to $604 million and the total segment margin expanded 50 basis points to 14, 4%.
Adjusted EPS from continuing operations rose, 27% to a record $12 60.
Turning to the fourth quarter financial results were impacted by 6% fewer days in the prior year quarter.
As well as the continued impact from COVID-19, and supply chain disruptions that significantly impacted performance.
The benefit to the quarter tax timing of onetime tax benefits lowered the effective tax rate to 7% on a GAAP basis.
And 8% on an adjusted basis that brought the effective tax rate for the full year to 17% on a GAAP basis and 18% on an adjusted basis.
Company revenue in the quarter was up 6% to a fourth quarter record $965 million.
GAAP operating income was $98 million compared to $139 million in the prior year quarter GAAP EPS from continuing operations was $2 27.
Compared to $2 91 in the prior year quarter.
Total segment profit for the fourth quarter was $102 million compared to $139 million in the prior year quarter and total segment margin was 10, 6% compared to 15, 2% in the fourth quarter a year ago.
Adjusted EPS from continuing operations $2 35.
Compared to $2 89 in the prior year quarter looking.
Looking at our business segments for the fourth quarter and residential revenue was up 12% to a fourth quarter record of $620 million and again I will underline that sub 6% fewer days, both replacement and new construction business were up double digits residential segment profit was down 5% and segment margin was down 310.
10 basis points to 17, 8% from the prior year quarter.
In commercial the business continued to be hit the hardest by COVID-19, and global supply chain disruptions for fourth quarter revenue was down 11% segment profit was down 64% and segment margin was down about 170 basis points to seven 7%.
Commercial equipment revenue was down mid teens in the quarter.
Within this replacement revenue was down mid teens with planned emergency excuse me planned replacement down-low single digits and emergency replacement down more than 40%.
New construction revenue was down high teens in the quarter.
Breaking out revenue another way regional and local business revenue was down mid teens national.
Equipment revenue was down high teens.
On the service side Lennox National account service revenue revenue was up low single digits again on 6% fewer days.
The commercial business continue to work through significant disruptions and constraints in the fourth quarter. Looking ahead, we expect revenue to resume year over year growth in the first quarter profitability to be up by mid 2022 and for the full year.
In refrigeration for the fourth quarter revenue was up 6% as reported and up 8% at constant currency North America revenue was up more than 20% Europe refrigeration revenue was down low single digits as reported up low single digits at constant currency.
In Europe , HVAC revenue was down mid teens as reported down low double digits constant currency refrigeration segment profit Rose 50 50.
50% with segment margin expanded 190 basis points to eight 9%.
For the company overall in 2022, we are reiterating guidance for revenue growth of 5% to 10% we are raising guidance for GAAP and adjusted EPS from continuing operations from a range of $13 $40 to $14 40 to a new range of $13 50 to $14 50 for the full year.
This reflects a net benefit of lower effective tax rate of 18% to 20% and higher interest rate expenses expense assumptions.
We are reiterating plans for $400 million of stock repurchases in 2022.
They track in refrigeration market demand remains high.
COVID-19, and our global supply chain improved Lennox International's positioned to further capitalize on the growth opportunities and higher profitability now I'll turn it over to Joe.
Thank you Todd and good morning, everyone I'll provide some additional comments and financial details on the business segments for the fourth quarter and the year overall, starting with residential heating <unk> cooling.
In the fourth quarter revenue from residential heating <unk> cooling was a fourth quarter record $620 million up 12% volume was up 3% price was up 8% and mix was up 1% foreign exchange was neutral to revenue.
Residential profit was $110 million down 5%.
Segment margin was 17, 8% down 310 basis points.
Segment profit was primarily impacted by 6% fewer days than the prior year quarter. The COVID-19, pandemic global supply chain disruptions higher material freight and other product costs and higher SG&A.
Positive impacts included higher volume favorable price mix foreign exchange and warranty and distribution efficiency programs.
For the full year residential segment revenue was a record $2 78 billion.
<unk> up 18%.
Volume was up 13% price was up 4% and mix was flat with foreign exchange being a 1% favorable benefit to revenue.
Residential profit was a record $540 million up 26% segment margin was 19, 5% up 140 basis points.
Now turning to our commercial heating and cooling business in the fourth quarter commercial revenue was $201 million down 11% volume was down 21% price was up 2% and mix was up 8% foreign exchange was neutral to revenue.
Commercial segment profit was $16 million down 64% segment margin was seven 7% down 1100 70 basis points.
Segment profit was primarily impacted by 6% fewer days than the prior year quarter. The COVID-19, pandemic global supply chain disruptions lower volume higher material warranty tariff freight and other product costs and higher SG&A.
Partial offsets included favorable price and mix.
For the full year commercial revenue was $865 million up 8% volume was up 3% price was up 1% and mix was up 3% foreign exchange was a 1% favorable benefit to revenue.
Segment profit was $111 million down, 19% and segment margin was 12, 8% down 430 basis points.
In refrigeration revenue was a fourth quarter record $143 million up 6% volume was up 4% price was up 1% and mix was down 1% foreign exchange had a favorable 2% impact on revenue.
Refrigeration segment profit was $13 million in the fourth quarter, which was up 29% <unk>.
Segment margin was nine 2% up 170 basis points.
Segment profit was positively impacted by higher volume favorable price and mix and lower SG&A.
Partial offsets included 6% fewer days in the prior year quarter. The COVID-19, pandemic global supply chain disruptions and higher material freight and other product costs.
For the full year refrigeration revenue was $554 million up 17%.
Volume was up 13% price was up 3% and mix was flat.
Foreign exchange had a favorable 1% impact.
Segment profit was $49 million up 50% and segment profit margin was eight 9% up 190 basis points.
Regarding special items. The company had net after tax charges of $3 2 million for the fourth quarter and $7 4 million for the full year.
Corporate expenses were $37 million in the fourth quarter and $96 million for the full year.
Overall, SG&A was $152 million in the fourth quarter or 15, 7% of revenue the same as the prior quarter.
For 2021, overall, SG&A was $599 million or 14, 3% of revenue down from 15, 3% in the prior year.
Our 2021 income tax rate declined year over year attributable to geographic mix yearend adjustments of taxes on export sales and Finalization and settlement of our prior year tax obligations.
For 2021, the company had cash from operations of $516 million compared.
Compared to $612 million in the prior year as working capital increased primarily due to sales growth increasing accounts receivable and inventory increasing due to mitigation strategies to combat supply chain disruptions, along with deflationary effects year over year on product costs.
Capital expenditures were $106 million for the full year compared to $77 million in the prior year.
Free cash flow was $410 million for the year compared to $535 million in the prior year.
In 2021, the company paid approximately $127 million in dividends and repurchased $600 million of company stock.
Total debt was $1 4 billion at the end of the fourth quarter and we ended the year with a debt to EBITDA ratio of one eight.
Cash and cash equivalents were $31 million at the end of the year.
Now before I turn it over to Q&A I'll review our outlook for 2022.
Our underlying market assumptions for the year remain the same we expect the industry to see low single digit shipment growth in residential and mid single digit shipment growth and commercial unitary and refrigeration markets in North America.
Our guidance for 2022 revenue growth remains 5% to 10% with neutral foreign exchange impact and we are raising our guidance for GAAP and adjusted EPS from continuing operations from a range of $13 40.
$2014 40.
To a new range of $13 50 to $14 50.
This reflects the net of a lower expected effective tax rate of 18% to 20%.
<unk> to our prior guidance of approximately 20% as well as higher interest and other expense of approximately $40 million compared to prior guidance of $35 million.
Now let me run you through some of the other key assumptions in our guidance and the puts and takes for 2022 all of which are unchanged.
Pricing is expected to be a benefit of $235 million for the year, which is about a 5% yield.
Factory productivity and production from our third Mexico plant is expected to be a $20 million benefit.
We are guiding for residential mix to be neutral tariffs are also expected to be neutral and we assume neutral foreign exchange impact.
For the headwinds in 2022.
We still expect a $110 million headwind from commodities.
A headwind of $60 million from components have offset by $30 million of cost takeouts for a net $30 million headwind.
Freight is still expected to be a $5 million headwind.
We will be at more at a more normal run rate with distribution investments this year with 30, new Lennox stores planned.
SG&A is expected to be up $45 million this year, including our investments in research and development and information technology.
A few other points.
Corporate expenses are still targeted at $95 million and we are planning capital expenditures to be approximately $125 million this year.
Free cash flow is targeted at $400 million.
And finally, we expect the weighted average diluted share count for the full year to be between 36 to 37 million shares which incorporates our plans to repurchase $400 million of stock this year.
And with that let's go to Q&A.
And ladies and gentlemen, just a quick reminder, if you would like to ask a question. Please press. One then zero on your telephone keypad you may withdraw your question at any time by repeating the ones Hero command.
And first go to line of Nicole <unk> with Deutsche Bank. Please go ahead, yes.
Yes, thanks, good morning good.
Good morning, Nicole.
I guess, maybe we could start with.
Looking across 2020 period seems like it might be a bit of an unusual year any update on your thoughts on the quarterly cadence of earnings and maybe just like category relative to the normal seasonality you are seeing it now.
The way, we planned right now and we expect it to be as well. The last couple of years have been abnormal last two or three go all the way back to tornado I think if you go back past pre.
Pre COVID-19 pre tornado I think it's more of a normal cadence so.
Sort of our best guess is that's how it's going to lay out sort of normal to prior years.
Okay got it thanks, Scott and I guess from a commodity perspective I'll. Let you guys maintained exactly what you said at the analyst day last month commodity costs that continue to tail off a little bit.
Is that a potential source of upside if that trend continues or is the advance purchases hedging you guys do does that make that difficult prior 2022.
Now if commodities go down, especially steel, which is our largest and we don't hedge it.
It will certainly be a benefit I mean, we're not changing that because it's sort of wiggles, one way or another.
And we take guesses on what the balance of the year is based on what futures are predicted to be short answers of commodities goes down thats. Good news.
Got it thanks I'll pass it on.
Thanks.
And next we'll go to Julian Mitchell with Barclays. Please go ahead.
Thanks, very much good morning.
Maybe.
Just starting out.
Youll sort of views around volume growth.
In residential.
For the year any commentary on how the year has started out the resi volumes.
Or any kind of major.
Cadence as we go through the year I think relative to your kind of low to mid single digit volume growth that Ramsey that's in the guide.
It's.
The short answer is we're starting out strong I mean, we've got lots of quote unquote orders of backlog all of that's tough in this this business, but given supply can soups.
Fly constraints, we have lots of people, telling us they need things.
So the orders remained strong.
As you well know.
It's tough to predict much from January I think.
The short answer is consumer seems strong still buying.
We get a warm summer.
I think its coming at another record year.
Thanks, very much and then in.
Commercial maybe a couple of things one is just.
Any finer points on the confidence on that profit expansion by midyear other than sort of easy comps on profitability.
And then how do you see that kind of backlog in commercial playing out I think in a lot of.
Industrial facing and commercial businesses backlogs may be peaking right now and then and then start to bleed down a bit.
You see that is likely to happen this year.
I don't think so.
Again.
I get the year's confused but in 2020, the industry was down 20% and so it's sort of the HVAC discretionary spending went way down it's.
It's come back Parkway this year and I expect it to continue to grow in 2022, and we certainly have record backlog again, driven by supply constraints production constraints, but everything we can see it still feels very strong and very solid when we talk to our large national accounts.
Obviously commercial fourth quarter had a tough year on the margins. There is couple of reasons for that.
One is we have one factory in Stuttgart, Arkansas been very hard hit by Covid there were days.
And fourth quarter, where.
Over 25% over quarter, the hourly workers didn't come in because of Covid.
Had it or they were close contacts similar impact we have with them Omicron in January I think the good news is that's starting with its like the pipe Python swallowing. The rat I think it's now gone through the system and we're on the downside also been hit by supply chain issues harder there than anywhere else and I think we've worked through those we have a strong production.
<unk> team there I think we're focused on the right things and then Youre right I mean.
Got it got a lower baseline come from so I feel pretty confident we will.
B back.
Year over year growth and profitability by midyear.
Great. Thank you.
Thanks.
Our next question is from Jeff Hammond with Keybanc. Please go ahead.
Hey, good morning, everyone.
Hey, Jeff Hey, Joe Hey.
Just maybe just update us on.
Your inventory your inventory levels, what you think.
Channel inventories look like I know these seasonal weak weaker periods, you've been trying to catch up.
Yes, I mean were still low on inventory both in residential and specifically in commercial that's why you saw emergency replacement out 40% of our ability to.
Just sort of have the inventory on the ground. So we're focused on driving it up I mean people who look at the.
The detailed sort of charts will see our inventory levels are up year over year for fourth quarter, but that's driven by a couple of things thats driven by.
The increased cost of components and labor inflationary pressures and also we have a lot of width and raw material. So we're sort of pulling together material and we'll miss a piece or a parked and we won't be able to finish the unit and so some of thats built in there but.
And then I think to distributor channel through our Allied business I still think thats relatively lean. So I don't think we've peaked out in any way I think they are in.
Our sell into competitors carrier and trane.
I think theyre.
Distributions the same way I don't I don't think I don't think watsco is too much inventory at I think people are still buying.
Okay, and then just on supply chain can you talk about where.
You think youre starting to see some stabilization of relief.
Versus maybe where.
Things are still very problematic.
It's continuing.
Changing picture if you will.
Back in December when we spoke I was confident and remain confident.
But omicron sort of I think.
I think I know had an impact sort of backed everybody up a bit and specifically in our factories.
<unk> hit hard in January .
We still feel confident for the quarter, but had an impact in January .
The supply chain is healing, although I would tell you.
There is still a card or two on omicron that has to be turned over on the impact that's had on the supply chain, we're having fewer issues on the things we had big issues with controls steel aluminum packaging sort of all those things I think are nowhere view mirror.
We have a great team focused on this we are doing all the things you'd expect us to do and I talked about were in suppliers' locations where.
Investing in inventory.
Were spending millions of dollars air Freighting in components from Asia to make sure we have safety stock. So we're doing all the right things.
I just think every time I wanted to declare victory or excuse me <unk>. It takes a slightly different direction or a large direction I.
I think of <unk> the last piece.
I think that's now behind us and our factories I think it's broadly behind our supply base and I think we heal quickly.
Because again, what our factories have seen with them across to everyone.
<unk> went up rocket one is coming down like a rocket.
But you tell me what Covid is going to do that ill be certain hydro is going down.
Okay I appreciate the color. Thanks.
Next we'll go to Ryan Merkel with William Blair. Please go ahead.
Hey, good morning. Thanks. So first question Paul It looks like production was sort of right down the middle and <unk> any change to the outlook for production in the first half either way.
I'm not sure I understand the question.
Production rates, meaning factory productivity any change to how youre thinking about that.
Now our guides to guide I mean and again.
So as you know multi variable equation, we hope to do better and so we'll see.
Got it okay.
And then what are sort of the key focus points and opportunities Youre looking at over the next couple of quarters I assume supply chain and solving that's number one but what else is there.
Supply chain.
Price.
Drive productivity in our factories as we stabilize the production and inventory rates and then third is <unk>.
Our strategic investments, whether it's in product and we have some great new product coming out over the next 18 months.
Digitization, which you know a lot about.
And then continuing to build out our distribution our store strategy in North America. So that our team is laser focused on keeping the product flowing or improving production.
Driving driving productivity getting price.
Continuing to focus on strategic investments.
Perfect. Thanks.
Yes.
Next question.
<unk> from Tommy Moll with Stephens. Please go ahead.
Morning, and thanks for taking my questions.
Hey, Jonathan.
Todd I wanted to focus on labor and wages today, what context can you give us on on the level of wage inflation youre seeing here in the U S versus maybe in Mexico as well.
The level of difficulty.
Hiring new employees at this point, what update can you give us there.
We've been fighting that battle for a year and a half maybe two years and we've raised wages in our factories pretty significantly.
And 15% depending on the factories time, even before we pay.
Premiums to sort of get people to work second and third shifts in our factories, both in Mexico and in North America.
I think it's all pre stabilized at this point I think the one factory that we've had the most issues with but I think we're now focused on the right levers is the one that's been hit hardest in margins, which is our Stuttgart, Arkansas factory that may be the most or all of our factories and just sort of hard to to get to employees, but I think we've balanced the wage rates.
To get that and that's obviously all in the guide.
And again as you know our cost of goods sold is.
Less than 10% direct labor. So we have some flexibility to pay what we need to do to get people in.
Thanks, that's helpful Todd.
Just to follow up on your stores rollout. This year I think you said 30 earlier can you give us any sense of the timing across the quarters and what if any revenue benefit from those new locations is embedded in your guidance.
I don't think much revenue I think I think mathematically mechanically people sort of backs I mean, I think it's more of the stores. We opened this year start to kick in and or excuse me 2021, kicking in and have some revenue impact.
Typically are backend loaded on stores.
Because we start to freeze things up in March as we prepare for the summer selling season, and we don't want to distract the sales force.
So I don't have the list in front of me, but historically, it's been two thirds or so second half of the year and my guess is that's what it will be this year.
I appreciate it I'll turn it back.
Thanks.
Next question is from Gautam Khanna with Cowen. Please go ahead.
Todd I got to ask so where are we on the CEO search.
It contains.
Yeah, I mean, it's the same placeholder answer that I mean, given sense since it began right in.
It will be.
The independent directors have are engaged in the search and when they have somebody.
As my replacement, we'll announce it.
Yes, Adam Chapter May say something different but when we have somebody will announce.
Okay.
For the for the flip.
Paul fans out there.
Yeah. It was just <unk>.
Confirmed as it turns out I think Brady just announced it.
Okay, well I have no announcements.
Okay.
Just related to the.
<unk> business can you update us on your views on IAA, Q and sort of what the.
Pace of inquiries has been around that.
Do you have any view that's changed.
Kind of what the average ticket size can be in the commercial space, whereas these days relative to the.
Cost of the system.
No.
<unk>.
I'll answer the second part of the question first our point of view from my point of view personally Hasnt changed I think it's.
An important product offering to have I think it's important to talk to your customers about I think when you sell it it can improve to tick up by 10, 15% 20%.
But it's not every application I think as we get through the <unk>.
Pandemic and it becomes an epidemic or whatever the right phrases.
I think some of the focus on this will start to pass I think it's important that we have it now I'll be honest with you over the last quarter or two we're so focused on taking care of core customer requirements given the production issues, we talked about <unk> and we're selling it.
But I would tell you the sales force is spending a lot of time, just taking care of our base requirements.
Thank you.
Thanks.
Next we'll go to Nigel Coe with Wolfe Research. Please go ahead.
Oh, Hi, good morning, Thanks, Todd.
So just going back to Nicole's question on normal seasonality quote unquote normal.
You mentioned, obviously pre Covid free.
Tornado.
The scanning the numbers suggest 10% or below is that does that.
Thinking toward in terms of that normal seasonality and the spirit of my question really is any expectations. We should have around <unk> margins the recovery and the sequential ramp from <unk> would.
Or would you expect <unk> to be fairly normal. This is one key question make any sense, just wondering expectations of our margins and that seasonality for <unk> specifically.
Yes, I mean I understand the specific question I'm not going to tighten I am not going to get too tight and answer because I just don't want to get into the habit of given quarterly guidance I. Just think if I was building a model I.
Would sort of normalize it based on sort of our track record pre COVID-19 pre tornado that's roughly what it is going to be.
I think Q4 may have some strength compared to prior Q4 s, if theres any kind of pre buy but right now I don't.
My Best guess is there won't be much of a one.
Q1 demand strong, but were supply constrained and so I don't I think that will sort of hinder what we can do in Q1, and some will bleed into Q2, So I think as always with us it's going to be a second and third quarter game.
Okay and then just my follow on is around the mix neutral and residential book FY 'twenty. Two I think we had some mixed down during 2021.
But get some relief on that especially with semi.
Semi supply, but again better so just curious whats driving that.
Assumptions for neutral mix.
Just wondering if the pre buy effects into them.
No I don't think the pre buys factories it factors in a major way because I just said, we're not counting much on that.
I think maybe there's some conservatism in that number I mean, we just got to get our.
As you know or at least what I've spoken about our Mexico factories performed the best for Us and that's where we tend to have more of the entry level product.
We've turned on some of our mid tier and high tier products that we hadn't allowed certain dealers to buy that's now turned on us.
If we continue to ramp up and our Marshalltown factory.
Then maybe we have some positive news on mix.
Great. Thanks.
Thanks.
Next question is from Jeff Sprague with vertical research. Please go ahead.
Hey, Thanks, good morning, everyone.
Just wondering if we could just touch on price a little bit more.
Tom It looks like on kind of the exit rate on Rosie you're.
Going to be in the ballpark of what you are anticipating for the year I'm just wondering how much how much incremental price relative to your exit rate you actually.
Kind of need to get in the market to hit that.
What is it $235 million or so for the year.
Well I think what happens as you lap part of that right. So part of the price that we got in the fourth quarter on.
On a sort of a year over year comp goes away as we go into 2022, because it was a price increase that we announced in early in first quarter of 2021. So the answer is we still got a good price and we've announced it and we're confident we're sticking it and.
So.
Again, the numbers, we're giving you our fourth quarter numbers first quarter, we're confident that we're going to get the price that we need and as you suggested.
8% or so.
Fourth quarter <unk>.
Magnitude the number for next for 2022 full year, we need to get six I think Joe said, 5%, 6% of my notes it was probably five five.
In 2022, we're confident we're going be able to do that.
It is five 5% okay.
Okay great.
And just one little peculiarity in maybe I heard it wrong, but it looks like refrigeration got less price in the quarter.
Then in the year is that correct everything else seemed to be building over the course of the year.
I mean I'll jump on that one.
Joseph <unk>.
Joseph price up one I think for the quarter and.
And up three for the year, maybe I wrote that down wrong.
And what's your question about that.
Just wanted to confirm that's correct.
Yes.
Okay.
Yes, I mean, what I have in mind, what I have in my notes for the year, we've got about 5% pricing.
Uh huh.
And 2022, we need to get 5% price in refrigeration and we're confident we're going to able to do that.
And I think we are confirming our numbers one $1 million.
Quarter three for the year.
Great. Okay. Thank you.
Okay.
Next we'll go to Joe Ritchie with Goldman Sachs. Please go ahead.
Hi, Thanks, good morning, everyone.
Thank you.
Guys can you, maybe just parse out the margin headwinds and <unk> and <unk> just given given you did exit with eight points of price just trying to understand.
What what you felt the impact in and then should we be anticipating a similar impact in <unk> and the resi business.
I think one thing to think about is on a year over year basis, we had 6% fewer days.
That was worth.
Order of magnitude $10 million of EBIT.
And then the other impact in RSV.
Covid impact.
And I think that will be less in first quarter than it was in fourth quarter and that was order of magnitude another $10 million. So there is sort of $20 million of headwind between kogan at 6% fewer days on a year over year basis don't impact.
First quarter.
Okay great.
Helpful. And then I guess, maybe just kind of thinking through the.
<unk> business and getting back to like pre COVID-19 margins in that business.
It's kind of like the expectation for 2022, I mean, we don't quite get there, but you.
You will see meaningful improvement in the second half, maybe we start to see those kind of rates in Q H.
Yes.
I think I think that's right.
I don't think we get back.
To where we were pre COVID-19 in commercial in one year I think it will take a couple of years.
Set it will be mid year, when we start to improvement, but again I think all the pieces are there we got the products we have.
Customer demand, we just got to get the factory.
Got it helpful. Thank you.
Thanks.
Our final question will be from Josh <unk> with Morgan Stanley . Please go ahead.
Hi, This is Brian on for Josh how are you.
And how are you.
So question on commercial market share and now the timing.
Differences make it a little hard to compare the businesses, but do you have a sense for how your commercial business did in 2021 versus tier comparable light unitary markets.
I think we lost share I don't think theres any thought about that so I see the numbers I won't give the exact numbers, but we lost share.
I don't.
It's less than a point of share because share moves slowly and commercial but we lost share and I think on our residential businesses.
We are flat to slightly up.
But the production issues in commercial hurt us.
Okay. That's helpful and then on resin mix up 1% do you have an idea of what mix wisely and replacement.
How 2021 mixed within replacement compares to a typical year.
No I.
I don't have that in front of me I'll ask Steve pick that up and get back I think the answer is I think the answers to that but I have in the math in front of me is we didn't have the normal mix up in replacement.
Typically would because we were able to produce more product in our Mexico facility, which is more entry level and so we steered customers to more entry level product and we typically would and so I think on a full year basis replacement mix was probably flat to slightly down.
Great. Thanks, I appreciate that.
Thank you.
And I'll turn it back.
Yes, Yes go ahead with any closing comments okay.
Thanks, everyone for joining us to wrap up and challenging conditions Lennox International team is executing well capitalize on market opportunities and we look forward to a year of strong growth and profitability in 2022. Thanks.
Thanks, everyone again for joining us.
Ladies and gentlemen that does conclude your conference for today. Thank you for your participation you may now disconnect.