Release Details

LENNOX INTERNATIONAL INC. AND SUBSIDIARIES

Consolidated Statements of Operations

(Unaudited)

(Amounts in millions, except per share data)

For the Three Months Ended March 31,

2015

2014

Net sales

$

685.8

$

695.4

Cost of goods sold

522.8

527.3

  Gross profit

163.0

168.1

Operating Expenses:

Selling, general and administrative expenses

133.4

135.6

Losses (gains) and other expenses, net

5.6

2.4

Restructuring charges

0.3

0.1

Income from equity method investments

(3.3)

(3.9)

Operational income from continuing operations

27.0

33.9

Interest expense, net

5.7

3.3

Other expense (income), net

—

—

Income from continuing operations before income taxes

21.3

30.6

Provision for income taxes

7.3

10.7

Income from continuing operations

14.0

19.9

Discontinued Operations:

Loss from discontinued operations before income taxes

(0.2)

—

Benefit from income taxes

(0.1)

—

Loss from discontinued operations

(0.1)

—

Net income

$

13.9

$

19.9

Earnings per share – Basic:

Income from continuing operations

$

0.31

$

0.41

Loss from discontinued operations

—

—

Net income

$

0.31

$

0.41

Earnings per share – Diluted:

Income from continuing operations

$

0.31

$

0.40

Loss from discontinued operations

—

—

Net income

$

0.31

$

0.40

Weighted Average Number of Shares Outstanding - Basic

44.7

49.0

Weighted Average Number of Shares Outstanding - Diluted

45.5

49.9

Cash dividends declared per share

$

0.30

$

0.24

LENNOX INTERNATIONAL INC. AND SUBSIDIARIES

Segment Net Sales and Profit (Loss)

(Unaudited)

(Amounts in millions)

For the Three Months Ended March 31,

2015

2014

Net Sales

Residential Heating & Cooling

$

362.5

$

342.1

Commercial Heating & Cooling

159.9

173.0

Refrigeration

163.4

180.3

$

685.8

$

695.4

Segment Profit (Loss) ⁽¹⁾

Residential Heating & Cooling

$

31.2

$

24.4

Commercial Heating & Cooling

7.7

10.2

Refrigeration

4.0

12.1

Corporate and other

(11.7)

(11.4)

Subtotal that includes segment profit and eliminations

31.2

35.3

Reconciliation to income from continuing operations before income taxes:

Special product quality adjustments

(0.2)

—

Items in Losses (gains) and other expenses, net that are excluded from segment profit (loss) ⁽¹⁾

4.1

1.3

Restructuring charges

0.3

0.1

Interest expense, net

5.7

3.3

Special inventory write down

—

—

Other expense (income), net

—

—

Income from continuing operations before income taxes

$

21.3

$

30.6

⁽¹⁾

The Company defines segment profit and loss as a segment's income or loss from continuing operations before income taxes included in the accompanying Consolidated Statements of Operations, excluding:

• Special product quality adjustments;

• The following items in Losses (gains) and other expenses, net:

- Net change in unrealized gains and/or losses on unsettled futures contracts,

- Special legal contingency charges,

- Asbestos-related litigation,

- Environmental liabilities, and

- Other items, net;

• Restructuring charges;

• Goodwill, long-lived asset, and equity method investment impairments;

• Interest expense, net;

• Special inventory write down; and

• Other expense, net.

LENNOX INTERNATIONAL INC. AND SUBSIDIARIES

Consolidated Balance Sheets

(Amounts in millions, except shares and par values)

As of March 31, 2015

As of December 31, 2014

(unaudited)

ASSETS

Current Assets:

Cash and cash equivalents

$

36.7

$

37.5

Accounts and notes receivable, net of allowances of $7.5 and $7.9 in 2015 and 2014, respectively

449.4

421.4

Inventories, net

533.1

463.3

Deferred income taxes, net

32.7

32.5

Other assets

88.4

59.3

Total current assets

1,140.3

1,014.0

Property, plant and equipment, net of accumulated depreciation of $655.3 and $654.1 in 2015 and 2014, respectively

356.0

358.6

Goodwill

204.5

209.4

Deferred income taxes

91.5

97.5

Other assets, net

87.2

84.8

Total assets

$

1,879.5

$

1,764.3

LIABILITIES AND STOCKHOLDERS' (DEFICIT) EQUITY

Current Liabilities:

Short-term debt

$

185.3

$

226.6

Current maturities of long-term debt

31.5

24.0

Accounts payable

347.6

324.3

Accrued expenses

204.9

239.0

Income taxes payable

1.2

13.4

Total current liabilities

770.5

827.3

Long-term debt

869.0

675.0

Post-retirement benefits, other than pensions

4.0

4.5

Pensions

131.0

129.9

Other liabilities

121.2

118.6

Total liabilities

1,895.7

1,755.3

Commitments and contingencies

Stockholders' (deficit) equity:

Preferred stock, $.01 par value, 25,000,000 shares authorized, no shares issued or outstanding

—

—

Common stock, $.01 par value, 200,000,000 shares authorized, 87,170,197 shares issued

0.9

0.9

Additional paid-in capital

839.4

824.9

Retained earnings

1,022.5

1,022.1

Accumulated other comprehensive loss

(178.7)

(153.5)

Treasury stock, at cost, 42,181,306 shares and 42,535,126 shares in 2015 and 2014, respectively

(1,700.9)

(1,686.0)

Noncontrolling interests

0.6

0.6

Total stockholders' (deficit) equity

(16.2)

9.0

Total liabilities and stockholders' (deficit) equity

$

1,879.5

$

1,764.3

 LENNOX INTERNATIONAL INC. AND SUBSIDIARIES

 Consolidated Statements of Cash Flows

 (Unaudited)

(Amounts in millions)

For the Three Months Ended March 31,

2015

2014

Cash flows from operating activities:

Net income

$

13.9

$

19.9

Net loss from discontinued operations

0.1

—

Adjustments to reconcile net income to net cash provided by operating activities:

Income from equity method investments

(3.3)

(3.9)

Dividends from affiliates

Restructuring expenses, net of cash paid

(0.1)

(0.1)

Provision for bad debts

0.9

(0.1)

Unrealized losses on derivative contracts

0.2

0.6

Stock-based compensation expense

3.5

3.8

Depreciation and amortization

15.5

15.0

Deferred income taxes

(1.1)

0.5

Other items, net

0.1

12.8

Changes in assets and liabilities, net of effects of divestitures:

Accounts and notes receivable

(40.1)

(33.8)

Inventories

(78.5)

(122.9)

Other current assets

1.0

(1.7)

Accounts payable

29.6

59.5

Accrued expenses

(29.0)

(33.1)

Income taxes payable and receivable

(40.1)

(29.3)

Other

5.3

(12.2)

Net cash used in discontinued operations

(0.1)

—

Net cash used in operating activities

(122.2)

(125.0)

Cash flows from investing activities:

Proceeds from the disposal of property, plant and equipment

—

Purchases of property, plant and equipment

(18.0)

(17.3)

Net proceeds from sale of business

—

Net cash used in discontinued operations

—

Net cash used in investing activities

(18.0)

(17.3)

Cash flows from financing activities:

Short-term borrowings, net

(0.2)

2.5

Asset securitization borrowings

(40.0)

—

Asset securitization payments

—

—

Long-term debt payments

—

(0.4)

Borrowings from revolving credit facility

580.5

479.0

Payments on revolving credit facility

(379.0)

(319.0)

Proceeds from employee stock purchases

0.6

0.5

Repurchases of common stock

—

—

Repurchases of common stock to satisfy employee withholding tax obligations

(20.5)

(10.7)

Excess tax benefits related to share-based payments

16.0

4.2

Cash dividends paid

(13.4)

(11.8)

Net cash provided by financing activities

144.0

144.3

Increase in cash and cash equivalents

3.8

2.0

Effect of exchange rates on cash and cash equivalents

(4.6)

(1.0)

Cash and cash equivalents, beginning of period

37.5

38.0

Cash and cash equivalents, end of period

$

36.7

$

39.0

Supplemental disclosures of cash flow information:

Interest paid

$

3.1

$

1.2

Income taxes paid (net of refunds)

$

32.2

$

35.4

LENNOX INTERNATIONAL INC. AND SUBSIDIARIES

Reconciliation to U.S. GAAP (Generally Accepted Accounting Principles) Measures

(Unaudited, in millions, except per share and ratio data)

Use of Non-GAAP Financial Measures

To supplement the Company's consolidated financial statements and segment net sales and profit presented in accordance with U.S. GAAP, additional non-GAAP financial measures are provided and reconciled in the following tables.  In addition to these non-GAAP measures, the Company also provides rates of revenue change at constant currency on a consolidated and segment basis. The Company believes that these non-GAAP financial measures, when considered together with the GAAP financial measures, provide information that is useful to investors in understanding period-over-period operating results.  The Company believes that these non-GAAP financial measures enhance the ability of investors to analyze the Company's business trends and operating performance.

Reconciliation of Income from Continuing Operations, a GAAP measure, to Adjusted Income from Continuing Operations, a Non-GAAP measure

For the Three Months Ended March 31,

2015

2014

Income from continuing operations, a GAAP measure

$

14.0

$

19.9

Restructuring charges, after tax

0.2

0.1

Special product quality adjustments, after tax ^(b)

(0.1)

—

Special legal contingency charges, after tax ^(a)

2.2

0.2

Asbestos-related litigation, after tax ^(a)

0.1

0.1

Net change in unrealized losses (gains) on unsettled future contracts, after tax^(a)

(0.1)

0.4

Environmental liabilities, after tax ^(a)

0.5

—

Other items, net, after tax ^(a)

—

0.1

Adjusted income from continuing operations, a non-GAAP measure

$

16.8

$

20.8

Income per share from continuing operations - diluted, a GAAP measure

$

0.31

$

0.40

Special legal contingency charges, after tax ^(a)

0.05

0.01

Net change in unrealized losses (gains) on unsettled future contracts, after tax^(a)

—

0.01

Environmental liabilities, after tax ^(a)

0.01

—

Adjusted earnings per share from continuing operations - diluted, a non-GAAP measure

$

0.37

$

0.42

^{(a) Recorded in Losses (gains) and other expenses, net in the Consolidated Statements of Operations}

^{(b) Recorded in Cost of goods sold in the Consolidated Statements of Operations}

For the Three Months Ended March 31,

2015

2014

Components of Losses (gains) and other expenses, net (pre-tax):

Realized losses on settled future contracts ^(a)

$

0.4

$

0.2

Foreign currency exchange losses (gains) ^(a)

1.1

0.8

Loss on disposal of fixed assets ^(a)

—

0.1

Net change in unrealized losses (gains) on unsettled futures contracts ^(b)

(0.1)

0.6

Special legal contingency charges ^(b)

3.4

0.4

Asbestos-related litigation ^(b)

0.1

0.2

Environmental liabilities ^(b)

0.7

—

Other items, net ^(b)

—

0.1

Losses (gains) and other expenses, net (pre-tax)

$

5.6

$

2.4

   ^{(a) Included in segment profit (loss) and Adjusted income from continuing operations}

   ^{(b) Excluded from segment profit (loss) and Adjusted income from continuing operations}

Reconciliation of Estimated Adjusted Income per Share from Continuing Operations - Diluted, a Non-GAAP measure, to Income per Share from Continuing Operations - Diluted, a GAAP measure

For the Year Ended December 31, 2015
ESTIMATED

 Adjusted income per share from continuing operations - diluted, a Non-GAAP measure

$5.20 - $5.60

Special legal contingency charges and other items

(0.06)

 Income per share from continuing operations - diluted, a GAAP measure

$5.14 - $5.54

Reconciliation of Net Cash Provided by Operating Activities, a GAAP measure, to Free Cash Flow, a Non-GAAP measure (dollars in millions)

For the Three Months Ended March 31,

2015

2014

Net cash provided by operating activities, a GAAP measure

$

(122.2)

$

(125.0)

 Purchases of property, plant and equipment

(18.0)

(17.3)

 Free cash flow, a Non-GAAP measure

$

(140.2)

$

(142.3)

Calculation of Debt to EBITDA Ratio (dollars in millions):

Trailing
Twelve 
Months to 
March 31, 2015

 Adjusted EBIT (a)

$

336.8

 Depreciation and amortization expense (b)

61.3

 EBITDA (a + b)

$

398.1

 Total debt at March 31, 2015 (c)

$

1,085.8

 Total Debt to EBITDA ratio ((c / (a + b))

2.7

Reconciliation of Adjusted EBIT, a Non-GAAP measure, to Income From Continuing Operations Before Income Taxes, a GAAP measure (dollars in millions)

Trailing
Twelve 
Months to 
March 31, 2015

 Adjusted EBIT per above, a Non-GAAP measure

336.8

 Special product quality adjustments

(1.6)

 Items in Losses (gains) and other expenses, net that are excluded from segment profit

7.5

 Restructuring charges

2.1

 Interest expense, net

19.6

 Special inventory write down

1.0

 Other expenses, net

(0.1)

 Income from continuing operations before income taxes, a GAAP measure

308.3