Release Details

LENNOX INTERNATIONAL INC. AND SUBSIDIARIES

Consolidated Statements of Operations

(Unaudited)

(Amounts in millions, except per share data)

For the Three Months Ended June 30,

For the Six Months Ended June 30,

2014

2013

2014

2013

Net sales

$

960.7

$

913.1

$

1,656.1

$

1,581.5

Cost of goods sold

698.1

659.1

1,225.4

1,165.5

Gross profit

262.6

254.0

430.7

416.0

Operating Expenses:

Selling, general and administrative expenses

148.9

151.3

284.5

287.0

Losses (gains) and other expenses, net

(1.0)

2.1

1.4

3.2

Restructuring charges

0.2

2.4

0.3

2.9

Income from equity method investments

(4.6)

(4.2)

(8.5)

(7.4)

Operational income from continuing operations

119.1

102.4

153.0

130.3

Interest expense, net

3.7

3.6

7.0

7.0

Other expense (income), net

—

(0.2)

—

(0.1)

Income from continuing operations before income taxes

115.4

99.0

146.0

123.4

Provision for income taxes

40.8

34.7

51.5

43.3

Income from continuing operations

74.6

64.3

94.5

80.1

Discontinued Operations:

Loss from discontinued operations before income taxes

(1.1)

—

(1.1)

(13.4)

Benefit from income taxes

(0.4)

—

(0.4)

(5.6)

Loss from discontinued operations

(0.7)

—

(0.7)

(7.8)

Net income

$

73.9

$

64.3

$

93.8

$

72.3

Earnings per share – Basic:

Income from continuing operations

$

1.53

$

1.28

$

1.93

$

1.60

Loss from discontinued operations

(0.02)

—

(0.01)

(0.16)

Net income

$

1.51

$

1.28

$

1.92

$

1.44

Earnings per share – Diluted:

Income from continuing operations

$

1.50

$

1.26

$

1.90

$

1.57

Loss from discontinued operations

(0.01)

—

(0.01)

(0.15)

Net income

$

1.49

$

1.26

$

1.89

$

1.42

Weighted Average Number of Shares Outstanding - Basic

48.8

50.2

48.9

50.2

Weighted Average Number of Shares Outstanding - Diluted

49.6

50.9

49.7

51.0

Cash dividends declared per share

$

0.30

$

0.24

$

0.54

$

0.44

LENNOX INTERNATIONAL INC. AND SUBSIDIARIES

Segment Net Sales and Profit (Loss)

(Unaudited)

(Amounts in millions)

For the Three Months Ended June 30,

For the Six Months Ended June 30,

2014

2013

2014

2013

Net Sales

Residential Heating & Cooling

$

527.7

$

476.2

$

869.8

$

790.7

Commercial Heating & Cooling

241.0

229.6

414.0

392.6

Refrigeration

192.0

207.3

372.3

398.2

$

960.7

$

913.1

$

1,656.1

$

1,581.5

Segment Profit (Loss) (1)

Residential Heating & Cooling

$

85.0

$

66.2

$

109.4

$

86.7

Commercial Heating & Cooling

39.0

34.6

49.2

45.7

Refrigeration

13.7

25.8

25.8

42.5

Corporate and other

(19.2)

(20.9)

(30.6)

(39.6)

Subtotal that includes segment profit and eliminations

118.5

105.7

153.8

135.3

Reconciliation to income from continuing operations before income taxes:

Special product quality adjustments

(0.4)

0.1

(0.3)

(0.1)

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

(0.4)

0.8

0.8

2.2

Restructuring charges

0.2

2.4

0.3

2.9

Interest expense, net

3.7

3.6

7.0

7.0

Other expense (income), net

—

(0.2)

—

(0.1)

Income from continuing operations before income taxes

$

115.4

$

99.0

$

146.0

$

123.4

LENNOX INTERNATIONAL INC. AND SUBSIDIARIES

Consolidated Balance Sheets

(Amounts in millions, except shares and par values)

As of June 30, 2014

As of December 31, 2013

(unaudited)

ASSETS

Current Assets:

Cash and cash equivalents

$

49.6

$

38.0

Accounts and notes receivable, net of allowances of $9.6 and $9.8 in 2014 and 2013, respectively

576.5

408.1

Inventories, net

514.9

378.8

Deferred income taxes, net

23.5

24.5

Other assets

58.2

53.0

Total current assets

1,222.7

902.4

Property, plant and equipment, net of accumulated depreciation of $643.5 and $617.3 in 2014 and 2013, respectively

350.5

335.5

Goodwill

219.7

216.8

Deferred income taxes

86.4

88.5

Other assets, net

90.8

83.5

Total assets

$

1,970.1

$

1,626.7

LIABILITIES AND STOCKHOLDERS' EQUITY

Current Liabilities:

Short-term debt

$

185.6

$

165.9

Current maturities of long-term debt

1.3

1.3

Accounts payable

400.9

283.1

Accrued expenses

236.6

232.1

Income taxes payable

22.9

31.6

Total current liabilities

847.3

714.0

Long-term debt

419.8

233.2

Post-retirement benefits, other than pensions

3.3

4.6

Pensions

60.7

70.0

Other liabilities

121.0

119.2

Total liabilities

1,452.1

1,141.0

Commitments and contingencies

Stockholders' 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

927.2

912.7

Retained earnings

937.9

870.5

Accumulated other comprehensive loss

(50.9)

(61.1)

Treasury stock, at cost, 38,430,840 shares and 38,066,794 shares in 2014 and 2013, respectively

(1,297.9)

(1,238.1)

Noncontrolling interests

0.8

0.8

Total stockholders' equity

518.0

485.7

Total liabilities and stockholders' equity

$

1,970.1

$

1,626.7

LENNOX INTERNATIONAL INC. AND SUBSIDIARIES

Consolidated Statements of Cash Flows

(Unaudited)

(Amounts in millions)

For the Six Months Ended June 30,

2014

2013

Cash flows from operating activities:

Net income

$

93.8

$

72.3

Net loss from discontinued operations

0.7

7.8

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

Income from equity method investments

(8.5)

(7.4)

Dividends from affiliates

1.7

1.7

Restructuring expenses, net of cash paid

—

(0.5)

Provision for bad debts

1.3

1.9

Unrealized losses (gains) on derivative contracts

(0.1)

2.3

Stock-based compensation expense

10.7

15.2

Depreciation and amortization

30.0

28.5

Deferred income taxes

0.6

(1.0)

Other items, net

0.3

13.8

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

Accounts and notes receivable

(168.2)

(177.1)

Inventories

(133.0)

(118.3)

Other current assets

(4.2)

(3.6)

Accounts payable

114.3

80.0

Accrued expenses

3.4

(10.6)

Income taxes payable and receivable

(6.0)

12.9

Other

(9.5)

5.8

Net cash used in discontinued operations

(0.7)

(12.0)

Net cash used in operating activities

(73.4)

(88.3)

Cash flows from investing activities:

Purchases of property, plant and equipment

(41.2)

(23.4)

Net proceeds from sale of business

—

4.8

Net cash used in discontinued operations

—

(0.1)

Net cash used in investing activities

(41.2)

(18.7)

Cash flows from financing activities:

Short-term borrowings, net

(0.6)

1.6

Asset securitization borrowings

20.0

270.0

Asset securitization payments

—

(180.0)

Long-term debt payments

(0.9)

(0.5)

Borrowings from revolving credit facility

1,018.5

700.5

Payments on revolving credit facility

(832.5)

(640.5)

Proceeds from employee stock purchases

1.0

1.0

Repurchases of common stock

(50.0)

(33.0)

Repurchases of common stock to satisfy employee withholding tax obligations

(10.8)

(5.8)

Excess tax benefits related to share-based payments

4.0

3.4

Cash dividends paid

(23.6)

(10.1)

Net cash provided by financing activities

125.1

106.6

Increase (decrease) in cash and cash equivalents

10.5

(0.4)

Effect of exchange rates on cash and cash equivalents

1.1

(6.1)

Cash and cash equivalents, beginning of period

38.0

51.8

Cash and cash equivalents, end of period

$

49.6

$

45.3

Supplemental disclosures of cash flow information:

Interest paid

$

7.8

$

7.7

Income taxes paid (net of refunds)

$

52.3

$

22.3

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 June 30,

For the Six Months Ended June 30,

2014

2013

2014

2013

Income from continuing operations, a GAAP measure

$

74.6

$

64.3

$

94.5

$

80.1

Restructuring charges, after tax

0.5

1.6

0.6

1.9

Special product quality adjustments, after tax ^(b)

(0.2)

0.1

(0.2)

(0.1)

Special legal contingency charges, after tax ^(a)

(0.1)

—

0.1

0.2

Asbestos-related litigation, after tax ^(a)

0.2

—

0.4

—

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

(0.5)

0.5

(0.1)

1.2

Other items, net, after tax ^(a)

0.4

—

0.5

0.2

Adjusted income from continuing operations, a non-GAAP measure

$

74.9

$

66.5

$

95.8

$

83.5

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

$

1.50

$

1.26

$

1.90

$

1.57

Restructuring charges, after tax

0.01

0.03

0.01

0.04

Special product quality adjustments, after tax ^(b)

—

—

—

—

Special legal contingency charges, after tax ^(a)

—

—

—

—

Asbestos-related litigation, after tax ^(a)

—

—

0.01

—

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

(0.01)

0.01

—

0.02

Other items, net, after tax ^(a)

0.01

0.01

0.01

0.01

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

$

1.51

$

1.31

$

1.93

$

1.64

^{(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 June 30,

For the Six Months Ended

June 30,

2014

2013

2014

2013

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

Realized losses on settled future contracts ^(a)

$

0.3

$

0.4

$

0.6

$

0.4

Foreign currency exchange losses (gains) ^(a)

(0.8)

0.9

0.1

0.6

Gain on disposal of fixed assets ^(a)

(0.1)

—

(0.1)

—

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

(0.8)

0.7

(0.2)

1.8

Special legal contingency charges ^(b)

(0.2)

—

0.2

0.2

Asbestos-related litigation ^(b)

0.4

—

0.6

—

Other items, net ^(b)

0.2

0.1

0.2

0.2

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

$

(1.0)

$

2.1

$

1.4

$

3.2

   ^{(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, 2014
ESTIMATED

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

$4.30 - $4.50

 Net change in unrealized losses on unsettled future contracts and other items

(0.03)

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

$4.27 - $4.47

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

For the Three Months Ended June 30,

For the Six Months Ended June 30,

2014

2013

2014

2013

Net cash provided by (used in) operating activities, a GAAP measure

$

51.6

$

49.0

$

(73.4)

$

(88.3)

 Purchases of property, plant and equipment

(23.9)

(11.3)

(41.2)

(23.4)

 Proceeds from the disposal of property, plant and equipment

—

—

—

—

Free cash flow, a Non-GAAP measure

$

27.7

$

37.7

$

(114.6)

$

(111.7)

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

Trailing
Twelve  Months to  June 30, 2014

  EBIT (a)

$

319.1

  Depreciation and amortization expense (b)

60.4

  EBITDA (a + b)

$

379.5

  Total debt at June 30, 2014 (c)

$

606.7

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

1.6

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

Trailing
Twelve Months to  June 30, 2014

 EBIT per above, a Non-GAAP measure

$

319.1

 Special product quality adjustments

(2.5)

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

7.4

 Restructuring charges

2.4

 Interest expense, net

14.5

 Other expenses, net

0.5

 Income from continuing operations before income taxes, a GAAP measure

$

296.8