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,

2020

2019

Net sales

$

723.8

$

790.3

Cost of goods sold

558.1

588.7

Gross profit

165.7

201.6

Operating Expenses:

Selling, general and administrative expenses

131.1

145.8

(Gains) losses and other expenses, net

(1.0)

1.1

Restructuring charges

0.5

0.5

Loss on sale of business

—

8.5

Insurance proceeds for lost profits

—

(39.5)

Loss (gain) from natural disaster, net of insurance recoveries

1.6

(6.9)

Income from equity method investments

(2.9)

(2.6)

Operating income

36.4

94.7

Interest expense, net

8.7

10.9

Other expense (income), net

1.2

0.8

Income from continuing operations before income taxes

26.5

83.0

Provision for income taxes

14.0

13.6

Income from continuing operations

12.5

69.4

Discontinued Operations:

Loss from discontinued operations before income taxes

—

(0.1)

Income tax benefit

(0.4)

—

Income (loss) from discontinued operations

0.4

(0.1)

Net income

$

12.9

$

69.3

Earnings per share – Basic:

Income from continuing operations

$

0.33

$

1.75

Income from discontinued operations

0.01

—

Net income

$

0.34

$

1.75

Earnings per share – Diluted:

Income from continuing operations

$

0.32

$

1.73

Income from discontinued operations

0.01

—

Net income

$

0.33

$

1.73

Weighted Average Number of Shares Outstanding - Basic

38.4

39.7

Weighted Average Number of Shares Outstanding - Diluted

38.7

40.1

LENNOX INTERNATIONAL INC. AND SUBSIDIARIES

Adjusted Segment Net Sales and Profit (Loss)

(Unaudited)

(Amounts in millions)

For the Three Months
Ended March 31,

2020

2019

Adjusted Net Sales

Residential Heating & Cooling

$

442.1

$

465.6

Commercial Heating & Cooling

178.4

173.3

Refrigeration ⁽¹⁾

$

103.3

117.1

$

723.8

$

756.0

Adjusted Segment Profit (Loss) ⁽²⁾

Residential Heating & Cooling

$

32.5

$

86.7

Commercial Heating & Cooling

18.7

15.1

Refrigeration ⁽¹⁾

0.7

9.4

Corporate and other

(14.3)

(12.1)

Total adjusted segment profit

37.6

99.1

Reconciliation to Operating Income:

Loss on sale of business

—

8.5

Loss (gain) from natural disaster, net of insurance recoveries

1.6

(6.9)

Items in (gains) losses and other expenses, net that are excluded from segment profit (loss) ⁽²⁾

(0.9)

1.3

Restructuring charges

0.5

0.5

Operating loss from non-core business ⁽¹⁾

—

1.0

Operating income

$

36.4

$

94.7

⁽¹⁾

 Excludes the non-core business results related to Kysor Warren, which was sold in March 2019.

⁽²⁾

 We define segment profit (loss) as a segment's operating income included in the accompanying Consolidated Statements of Operations, excluding:

• The following items in (Gains) losses and other expenses, net:
• Net change in unrealized losses (gains) on unsettled futures contracts,
• Special legal contingency charges,
• Asbestos-related litigation,
• Environmental liabilities,
• Other items, net,
• Loss on sale of business,
• Loss (gain) from natural disaster, net of insurance recoveries,
• Operating loss (income) from non-core businesses; and
• Restructuring charges.

LENNOX INTERNATIONAL INC. AND SUBSIDIARIES

Consolidated Balance Sheets

(Amounts in millions, except shares and par values)

As of March 31,
2020

As of December 31,
2019

(Unaudited)

ASSETS

Current Assets:

Cash and cash equivalents

$

39.1

$

37.3

Short-term investments

3.7

2.9

Accounts and notes receivable, net of allowances of $7.0 and $6.1 in 2020 and 2019, respectively

492.7

477.8

Inventories, net

611.8

544.1

Other assets

77.8

58.8

Total current assets

1,225.1

1,120.9

Property, plant and equipment, net of accumulated depreciation of $836.5 and $824.3 in 2020 and 2019, respectively

442.1

445.4

Right-of-use assets from operating leases

183.2

181.6

Goodwill

186.5

186.5

Deferred income taxes

16.3

21.5

Other assets, net

75.2

79.0

Total assets

$

2,128.4

$

2,034.9

LIABILITIES AND STOCKHOLDERS' DEFICIT

Current Liabilities:

Current maturities of long-term debt

252.3

321.9

Current operating lease liabilities

52.2

52.7

Accounts payable

355.0

372.4

Accrued expenses

235.1

255.7

Total current liabilities

894.6

1,002.7

Long-term debt

1,189.9

849.3

Long-term operating lease liabilities

133.2

131.0

Pensions

89.8

87.4

Other liabilities

139.2

134.7

Total liabilities

2,446.7

2,205.1

Commitments and contingencies

Stockholders' deficit:

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

1,095.2

1,093.5

Retained earnings

2,130.9

2,148.7

Accumulated other comprehensive loss

(133.1)

(103.8)

Treasury stock, at cost, 48,918,495 shares and 48,575,901 shares for 2020 and 2019, respectively

(3,412.2)

(3,309.5)

Total stockholders' deficit

(318.3)

(170.2)

Total liabilities and stockholders' deficit

$

2,128.4

$

2,034.9

LENNOX INTERNATIONAL INC. AND SUBSIDIARIES

Consolidated Statements of Cash Flows

(Unaudited)

(Amounts in millions)

For the Three Months Ended
March 31,

2020

2019

Cash flows from operating activities:

Net income

$

12.9

$

69.3

Adjustments to reconcile net income to net cash used in operating activities:

Loss on sale of business

—

8.5

Gain from insurance recoveries, net of losses incurred

—

(6.9)

Income from equity method investments

(2.9)

(2.6)

Restructuring charges, net of cash paid

0.1

0.3

Provision for bad debts

1.2

1.6

Unrealized losses (gains) on derivative contracts

1.5

(0.6)

Stock-based compensation expense

3.7

5.2

Depreciation and amortization

19.0

18.2

Deferred income taxes

8.8

15.5

Pension expense

2.7

2.0

Pension contributions

(0.6)

(2.5)

Other items, net

0.2

0.2

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

Accounts and notes receivable

(18.7)

(62.7)

Inventories

(71.0)

(120.9)

Other current assets

(0.7)

4.5

Accounts payable

(8.7)

(1.7)

Accrued expenses

(33.0)

(35.0)

Income taxes payable / receivable

(17.3)

(34.1)

   Leases, net

0.1

0.5

Other, net

3.9

0.2

Net cash used in operating activities

(98.8)

(141.0)

Cash flows from investing activities:

Proceeds from the disposal of property, plant and equipment

0.1

0.3

Purchases of property, plant and equipment

(24.7)

(37.2)

Net proceeds from sale of business

—

43.6

Purchases of short-term investments

(1.1)

—

Insurance recoveries received for property damage incurred from natural disaster

—

6.9

Net cash (used in) provided by investing activities

(25.7)

13.6

Cash flows from financing activities:

Asset securitization payments

(70.0)

(43.5)

Long-term debt payments

(2.6)

(31.7)

Long-term debt borrowings

—

3.3

Borrowings from credit facility

682.5

844.5

Payments on credit facility

(342.5)

(525.5)

Proceeds from employee stock purchases

0.8

0.8

Repurchases of common stock

(100.0)

(100.0)

Repurchases of common stock to satisfy employee withholding tax obligations

(5.5)

(13.5)

Cash dividends paid

(29.7)

(25.5)

Net cash provided by financing activities

133.0

108.9

Increase (decrease) in cash and cash equivalents

8.5

(18.5)

Effect of exchange rates on cash and cash equivalents

(6.7)

3.9

Cash and cash equivalents, beginning of period

37.3

46.3

Cash and cash equivalents, end of period

$

39.1

$

31.7

Supplemental disclosures of cash flow information:

Interest paid

$

6.8

$

8.4

Income taxes paid (net of refunds)

$

21.3

$

32.0

Insurance recoveries received  

$

—

$

76.0

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 if different than the reported  measures. 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. During the first quarter of 2019, the Company completed the sale of its Kysor Warren business. The results from operations for these businesses have been shown in the tables below as "Non-core business results".

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,

(Unaudited)

2020

2019

Pre-Tax

    Tax Impact (e)

After Tax

Pre-Tax

    Tax Impact (e)

After Tax

Income from continuing operations, a GAAP measure

$

26.5

$

(14.0)

$

12.5

$

83.0

$

(13.6)

$

69.4

Restructuring charges

0.5

(0.1)

0.4

0.5

(0.1)

0.4

Special legal contingency charges (a)

—

—

—

0.2

—

0.2

Asbestos-related litigation (a)

(1.7)

0.4

(1.3)

1.4

(0.3)

1.1

Net change in unrealized losses (gains) on unsettled future contracts (a)

0.6

(0.2)

0.4

(0.4)

0.1

(0.3)

Environmental liabilities (a)

0.2

(0.1)

0.1

—

—

—

Excess tax benefits from share-based compensation (c)

—

0.1

0.1

—

(4.4)

(4.4)

Other tax items, net (c)

—

8.2

8.2

—

—

—

Loss on sale of business

—

—

—

8.5

(3.5)

5.0

Loss (gain) from natural disaster, net of insurance recoveries (g)

1.6

(0.3)

1.3

(6.9)

1.7

(5.2)

Other items, net (a)

—

—

—

0.1

(0.1)

—

Non-core business results (f)

—

—

—

1.3

(0.3)

1.0

Adjusted income from continuing operations, a non-GAAP measure

$

27.7

$

(6.0)

$

21.7

$

87.7

$

(20.5)

$

67.2

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

$

0.32

$

1.73

Restructuring charges

0.01

0.01

Special legal contingency charges (a)

—

0.01

Asbestos-related litigation (a)

(0.03)

0.03

Net change in unrealized losses (gains) on unsettled future contracts (a)

0.01

(0.01)

Environmental liabilities (a)

—

—

Excess tax benefits from share-based compensation (c)

—

(0.11)

Other tax items, net (c)

0.21

—

Loss on sale of business

—

0.13

Loss (gain) from natural disaster, net of insurance recoveries (g)

0.04

(0.13)

Other items, net (a)

—

—

Non-core business results (f)

—

0.02

Change in share counts from share-based compensation (d)

—

—

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

$

0.56

$

1.68

(a) Recorded in (Gains) losses and other expenses, net in the Consolidated Statements of Operations

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

(c) Recorded in Provision for income taxes in the Consolidated Statements of Operations

(d) The impact of excess tax benefits from the change in share-based compensation also impacts the Company's diluted share counts.  The reconciliation of average outstanding diluted shares on a GAAP and non-GAAP basis is included in this amount..

(e) Tax impact based on the applicable tax rate relevant to the location and nature of the adjustment.

(f) Non-core business results represents the Kysor Warren business, not included elsewhere in the reconciliation. 

(g) Recorded in Loss (gain) from natural disaster, net of insurance recoveries in the Consolidated Statement of Operations.

For the Three Months
Ended December 31,

2020

2019

Components of (Gains) losses and other expenses, net (pre-tax):

Realized losses on settled future contracts ^(a)

$

0.1

$

0.1

Foreign currency exchange gains ^(a)

(0.5)

(0.5)

Loss on disposal of fixed assets ^(a)

0.1

0.2

Other operating losses ^(a)

0.2

—

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

0.6

(0.4)

Special legal contingency charges ^(b)

—

0.2

Asbestos-related litigation ^(b)

(1.7)

1.4

Environmental liabilities ^(b)

0.2

—

Other items, net ^(b)

—

0.1

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

$

(1.0)

$

1.1

(a) Included in both segment profit (loss) and Adjusted income from continuing operations

(b) Excluded from both segment profit (loss) and Adjusted income from continuing operations

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

For the Year Ended
December 31, 2020
ESTIMATED

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

$7.07 - $8.07

Other non-core EBIT charges and other non-core tax items, net, incurred in 1Q 2020, and 2Q 2020 announced personnel and exit charges related to cost savings actions

(0.43)

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

$7.50 - $8.50

Reconciliation of Average Shares Outstanding - Diluted, a GAAP measure, to Adjusted Average Shares Outstanding - Diluted, a Non-GAAP measure (shares in millions):

For the Three Months
Ended March 31,

2020

2019

Average shares outstanding - diluted, a GAAP measure

38.7

$

40.1

Impact on diluted shares from excess tax benefits from share-based compensation

—

—

Adjusted average shares outstanding - diluted, a Non-GAAP measure

38.7

40.1

Reconciliation of Net Sales, a GAAP measure, to Adjusted Net Sales, a Non-GAAP measure (dollars in millions)

Refrigeration Segment

Consolidated

For the Three Months
Ended March 31,

For the Three Months
Ended March 31,

2020

2019

2020

2019

Net sales, a GAAP measure

$

103.3

$

151.4

$

723.8

$

790.3

Net sales from non-core businesses (a)

—

34.3

—

34.3

Adjusted net sales, a Non-GAAP measure

$

103.3

$

117.1

$

723.8

$

756.0

_{(a) Non-Core businesses represent the Kysor Warren business.}

Reconciliation of Gross Profit, a GAAP measure, to Adjusted Gross Profit, a Non-GAAP measure (dollars in millions)

Refrigeration Segment

Consolidated

For the Three Months
Ended March 31,

For the Three Months
Ended March 31,

2020

2019

2020

2019

Gross profit, a GAAP measure

$

27.5

$

42.5

$

165.7

$

201.6

Gross profit from non-core businesses (a)

—

3.6

—

3.6

Adjusted Gross profit, a Non-GAAP measure

$

27.5

$

38.9

$

165.7

$

198.0

_{(a) Non-Core businesses represent the Kysor Warren business.}

Reconciliation of Segment Profit, a GAAP measure, to Adjusted Segment profit, a Non-GAAP measure (dollars in millions)

Refrigeration Segment

Consolidated

For the Three Months
Ended March 31,

For the Three Months
Ended March 31,

2020

2019

2020

2019

Segment profit, a Non-GAAP measure

$

0.7

$

8.4

$

37.6

$

98.1

(Loss) profit from non-core businesses (a)

—

(1.0)

—

(1.0)

Adjusted Segment profit, a Non-GAAP measure

$

0.7

$

9.4

$

37.6

$

99.1

_{(a) Non-Core businesses represent the Kysor Warren business.}

Reconciliation of Selling, general and administrative expenses, a GAAP measure, to Adjusted Selling, general and administrative expenses, a Non-GAAP measure (dollars in millions)

Refrigeration Segment

Consolidated

For the Three Months
Ended March 31,

For the Three Months
Ended March 31,

2020

2019

2020

2019

Selling, general and administrative expenses, a GAAP measure

$

28.2

$

36.4

$

131.1

$

145.8

Selling, general and administrative expenses from non-core businesses (a)

—

4.8

—

4.8

Adjusted Selling, general and administrative expenses, a Non-GAAP measure

$

28.2

$

31.6

$

131.1

$

141.0

_{(a) Non-Core businesses represent the Kysor Warren business.}

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

For the Three Months
Ended March 31,

2020

2019

Net cash provided by operating activities, a GAAP measure

$

(98.8)

$

(141.0)

Purchases of property, plant and equipment

(24.7)

(37.2)

Proceeds from the disposal of property, plant and equipment

0.1

0.3

Insurance recoveries received for property damage incurred from natural disaster

—

6.9

Free cash flow, a Non-GAAP measure

(123.4)

(171.0)

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

Trailing
Twelve 
Months to
March 31,
2020

Adjusted EBIT (a)

$

548.5

Depreciation and amortization expense (b)

70.9

EBITDA (a + b)

$

619.4

Total debt at March 31, 2020 (c)

$

1,442.2

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

2.3

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,
2020

Income from continuing operations before income taxes, a GAAP measure

$

451.4

Items in (Gains) losses and other expenses, net that are excluded from segment profit

9.1

Special product quality adjustments

(0.6)

Restructuring charges

10.3

Interest expense, net

45.4

Pension settlements

99.2

Loss on sale of business

2.1

Insurance recoveries received for property damage incurred from natural disaster

(71.1)

Other expense (income), net

2.7

Adjusted EBIT per above, a Non-GAAP measure

$

548.5