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,

2015

2014

2015

2014

Net sales

$

992.5

$

960.7

$

1,678.3

$

1,656.1

Cost of goods sold

709.1

698.1

1,231.9

1,225.4

Gross profit

283.4

262.6

446.4

430.7

Operating Expenses:

Selling, general and administrative expenses

152.9

148.9

286.2

284.5

Losses (gains) and other expenses, net

3.3

(1.0)

8.9

1.4

Restructuring charges

1.8

0.2

2.1

0.3

Income from equity method investments

(5.5)

(4.6)

(8.8)

(8.5)

Operational income from continuing operations

130.9

119.1

158.0

153.0

Interest expense, net

6.4

3.7

12.2

7.0

Other expense (income), net

—

—

—

—

Income from continuing operations before income taxes

124.5

115.4

145.8

146.0

Provision for income taxes

42.9

40.8

50.2

51.5

Income from continuing operations

81.6

74.6

95.6

94.5

Discontinued Operations:

Loss from discontinued operations before income taxes

(0.7)

(1.1)

(0.8)

(1.1)

Benefit from income taxes

(0.3)

(0.4)

(0.3)

(0.4)

Loss from discontinued operations

(0.4)

(0.7)

(0.5)

(0.7)

Net income

$

81.2

$

73.9

$

95.1

$

93.8

Earnings per share – Basic:

Income from continuing operations

$

1.81

$

1.53

$

2.13

$

1.93

Loss from discontinued operations

(0.01)

(0.02)

(0.01)

(0.01)

Net income

$

1.80

$

1.51

$

2.12

$

1.92

Earnings per share – Diluted:

Income from continuing operations

$

1.79

$

1.50

$

2.10

$

1.90

Loss from discontinued operations

(0.01)

(0.01)

(0.01)

(0.01)

Net income

$

1.78

$

1.49

$

2.09

$

1.89

Weighted Average Number of Shares Outstanding - Basic

45.0

48.8

44.9

48.9

Weighted Average Number of Shares Outstanding - Diluted

45.6

49.6

45.6

49.7

Cash dividends declared per share

$

0.36

$

0.30

$

0.66

$

0.54

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,

2015

2014

2015

2014

Net sales

Residential Heating & Cooling

$

555.1

$

527.7

$

917.7

$

869.8

Commercial Heating & Cooling

253.6

241.0

413.5

414.0

Refrigeration

183.8

192.0

347.1

372.3

$

992.5

$

960.7

$

1,678.3

$

1,656.1

Segment Profit (Loss) ⁽¹⁾

Residential Heating & Cooling

$

99.9

$

85.0

$

131.2

$

109.4

Commercial Heating & Cooling

43.0

39.0

50.7

49.2

Refrigeration

13.3

13.7

17.2

25.8

Corporate and other

(22.0)

(19.2)

(33.7)

(30.6)

Subtotal that includes segment profit and eliminations

134.2

118.5

165.4

153.8

Reconciliation to Income from continuing operations before income taxes:

Special product quality adjustments

(1.1)

(0.4)

(1.4)

(0.3)

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

2.6

(0.4)

6.7

0.8

Restructuring charges

1.8

0.2

2.1

0.3

Interest expense, net

6.4

3.7

12.2

7.0

Other expense (income), net

—

—

—

—

Income from continuing operations before income taxes

$

124.5

$

115.4

$

145.8

$

146.0

⁽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,

- Contractor tax payments,

- Environmental liabilities, and

- Other items, net;

• Restructuring charges;

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

• Interest expense, net; and

• Other expense, net.

LENNOX INTERNATIONAL INC. AND SUBSIDIARIES

Consolidated Balance Sheets

(Amounts in millions, except shares and par values)

As of June 30, 2015

As of December 31, 2014

(unaudited)

ASSETS

Current Assets:

Cash and cash equivalents

$

47.5

$

37.5

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

609.3

421.4

Inventories, net

540.7

463.3

Deferred income taxes, net

31.6

32.5

Other assets

57.6

59.3

Total current assets

1,286.7

1,014.0

Property, plant and equipment, net of accumulated depreciation of $668.7 and $654.1 in 2015 and 2014, respectively

352.1

358.6

Goodwill

204.5

209.4

Deferred income taxes

95.0

97.5

Other assets, net

88.0

84.8

Total assets

$

2,026.3

$

1,764.3

LIABILITIES AND STOCKHOLDERS' EQUITY

Current Liabilities:

Short-term debt

$

226.1

$

226.6

Current maturities of long-term debt

16.3

24.0

Accounts payable

404.3

324.3

Accrued expenses

241.6

239.0

Income taxes payable

10.4

13.4

Total current liabilities

898.7

827.3

Long-term debt

813.2

675.0

Post-retirement benefits, other than pensions

3.4

4.5

Pensions

133.2

129.9

Other liabilities

121.5

118.6

Total liabilities

1,970.0

1,755.3

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

848.1

824.9

Retained earnings

1,087.3

1,022.1

Accumulated other comprehensive loss

(178.9)

(153.5)

Treasury stock, at cost, 42,149,601 shares and 42,535,126 shares in 2015 and 2014, respectively

(1,701.7)

(1,686.0)

Noncontrolling interests

0.6

0.6

Total stockholders' equity

56.3

9.0

Total liabilities and stockholders' equity

$

2,026.3

$

1,764.3

LENNOX INTERNATIONAL INC. AND SUBSIDIARIES

Consolidated Statements of Cash Flows

(Unaudited)

(Amounts in millions)

For the Six Months Ended June 30,

2015

2014

Cash flows from operating activities:

Net income

$

95.1

$

93.8

Net loss from discontinued operations

0.5

0.7

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

Income from equity method investments

(8.8)

(8.5)

Dividends from affiliates

3.4

1.7

Restructuring expenses, net of cash paid

1.2

—

Provision for bad debts

1.6

1.3

Unrealized losses on derivative contracts

0.3

(0.1)

Stock-based compensation expense

10.8

10.7

Depreciation and amortization

30.6

30.0

Deferred income taxes

(0.9)

0.6

Other items, net

0.2

0.3

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

Accounts and notes receivable

(199.2)

(168.2)

Inventories

(85.3)

(133.0)

Other current assets

(0.1)

(4.2)

Accounts payable

87.3

114.3

Accrued expenses

6.7

3.4

Income taxes payable and receivable

(1.4)

(6.0)

Other

6.2

(9.5)

Net cash used in discontinued operations

(0.5)

(0.7)

Net cash used in operating activities

(52.3)

(73.4)

Cash flows from investing activities:

Purchases of property, plant and equipment

(33.0)

(41.2)

Net cash used in investing activities

(33.0)

(41.2)

Cash flows from financing activities:

Short-term borrowings, net

0.4

(0.6)

Asset securitization borrowings

40.0

20.0

Asset securitization payments

(40.0)

—

Long-term debt payments

(23.0)

(0.9)

Borrowings from credit facility

999.0

1,018.5

Payments on credit facility

(845.5)

(832.5)

Proceeds from employee stock purchases

1.1

1.0

Repurchases of common stock

—

(50.0)

Repurchases of common stock to satisfy employee withholding tax obligations

(21.8)

(10.8)

Excess tax benefits related to share-based payments

17.3

4.0

Cash dividends paid

(26.9)

(23.6)

Net cash provided by financing activities

100.6

125.1

Increase (decrease) in cash and cash equivalents

15.3

10.5

Effect of exchange rates on cash and cash equivalents

(5.3)

1.1

Cash and cash equivalents, beginning of period

37.5

38.0

Cash and cash equivalents, end of period

$

47.5

$

49.6

Supplemental disclosures of cash flow information:

Interest paid

$

12.3

$

7.8

Income taxes paid (net of refunds)

$

34.4

$

52.3

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,

2015

2014

2015

2014

Income from continuing operations, a GAAP measure

$

81.6

$

74.6

$

95.6

$

94.5

Restructuring charges, after tax

1.3

0.5

1.5

0.6

Special product quality adjustments, after tax ^(b)

(0.8)

(0.2)

(0.9)

(0.2)

Special legal contingency charges, after tax ^(a)

0.5

(0.1)

2.6

0.1

Asbestos-related litigation, after tax ^(a)

0.3

0.2

0.3

0.4

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

0.1

(0.5)

—

(0.1)

Environmental liabilities, after tax ^(a)

(0.2)

—

0.4

—

Contractor Tax Payments ^(a)

1.1

—

1.1

—

Other items, net, after tax ^(a)

—

0.4

—

0.5

Adjusted income from continuing operations, a non-GAAP measure

$

83.9

$

74.9

$

100.6

$

95.8

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

$

1.79

$

1.50

$

2.10

$

1.90

Restructuring charges, after tax

0.03

0.01

0.03

0.01

Special product quality adjustments, after tax ^(b)

(0.02)

—

(0.02)

—

Special legal contingency charges, after tax ^(a)

0.01

—

0.06

—

Asbestos-related litigation, after tax ^(a)

0.01

—

0.01

0.01

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

—

(0.01)

—

—

Environmental liabilities, after tax ^(a)

—

—

0.01

—

Contractor Tax Payments ^(a)

0.02

—

0.02

—

Other items, net, after tax ^(a)

—

0.01

—

0.01

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

$

1.84

$

1.51

$

2.21

$

1.93

^{(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,

2015

2014

2015

2014

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

Realized losses on settled future contracts ^(a)

$

0.3

$

0.3

$

0.7

$

0.6

Foreign currency exchange losses (gains) ^(a)

0.4

(0.8)

1.5

0.1

Loss on disposal of fixed assets ^(a)

—

(0.1)

—

(0.1)

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

0.1

(0.8)

—

(0.2)

Special legal contingency charges ^(b)

0.7

(0.2)

4.1

0.2

Asbestos-related litigation ^(b)

0.4

0.4

0.6

0.6

Environmental liabilities ^(b)

(0.2)

—

0.4

—

Contractor Tax Payments ^(b)

1.6

—

1.6

—

Other items, net ^(b)

—

0.2

—

0.2

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

$

3.3

$

(1.0)

$

8.9

$

1.4

   ^{(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 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

$5.25 - $5.50

Restructuring charges and other items

(0.11)

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

$5.14 - $5.39

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 June 30,

For the Six Months Ended June 30,

2015

2014

2015

2014

Net cash provided by operating activities, a GAAP measure

$

69.9

$

51.6

$

(52.3)

$

(73.4)

 Purchases of property, plant and equipment

(15.0)

(23.9)

(33.0)

(41.2)

 Free cash flow, a Non-GAAP measure

$

54.9

$

27.7

$

(85.3)

$

(114.6)

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

Trailing
Twelve 
Months to 
June 30, 2015

 Adjusted EBIT (a)

$

352.4

 Depreciation and amortization expense (b)

61.4

 EBITDA (a + b)

$

413.8

 Total debt at June 30, 2015 (c)

$

1,055.6

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

2.6

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 
June 30, 2015

 Adjusted EBIT per above, a Non-GAAP measure

$

352.4

 Special product quality adjustments

(2.5)

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

10.6

 Restructuring charges

3.7

 Interest expense, net

22.3

 Special inventory write down

1.0

 Other expenses, net

(0.1)

 Income from continuing operations before income taxes, a GAAP measure

$

317.4