Release Details

LENNOX INTERNATIONAL INC. AND SUBSIDIARIES

Consolidated Statements of Operations

(Amounts in millions, except per share data)

For the Three Months Ended December 31,

(Unaudited)

For the Years Ended December 31,

2021

2020

2021

2020

Net sales

$             964.8

$            914.0

$       4,194.1

$       3,634.1

Cost of goods sold

711.2

638.7

3,005.7

2,594.0

Gross profit

253.6

275.3

1,188.4

1,040.1

Operating Expenses:

Selling, general and administrative expenses

151.5

143.3

598.9

555.9

Losses (gains) and other expenses, net

4.5

1.7

9.2

7.4

Restructuring charges

0.2

0.2

1.8

10.8

(Gain) loss from natural disasters, net of insurance recoveries

—

(4.5)

—

3.1

Income from equity method investments

(0.2)

(4.4)

(11.8)

(15.6)

Operating income

97.6

139.0

590.3

478.5

Pension settlements

0.1

0.3

1.2

0.6

Interest expense, net

6.2

6.3

25.0

28.3

Other expense (income), net

1.1

1.0

4.0

4.4

Income from continuing operations before income taxes

90.2

131.4

560.1

445.2

Provision for income taxes

6.7

19.2

96.1

88.1

Income from continuing operations

83.5

112.2

464.0

357.1

Discontinued Operations:

Income (loss) from discontinued operations before income taxes

0.2

(0.6)

—

(1.5)

Income tax expense (benefit)

0.1

(0.1)

—

(0.7)

Income (loss) from discontinued operations

0.1

(0.5)

—

(0.8)

Net income

$               83.6

$            111.7

$          464.0

$          356.3

Earnings per share – Basic:

Income from continuing operations

$               2.28

$              2.93

$          12.47

$            9.32

Loss from discontinued operations

—

(0.01)

—

(0.02)

Net income

$               2.28

$              2.92

$          12.47

$            9.30

Earnings per share – Diluted:

Income from continuing operations

$               2.27

$              2.91

$          12.39

$            9.26

Loss from discontinued operations

—

(0.02)

—

(0.02)

Net income

$               2.27

$              2.89

$          12.39

$            9.24

Weighted Average Number of Shares Outstanding - Basic

36.6

38.3

37.2

38.3

Weighted Average Number of Shares Outstanding - Diluted

36.8

38.6

37.5

38.6

LENNOX INTERNATIONAL INC. AND SUBSIDIARIES

Segment Net Sales and Profit (Loss)

(Amounts in millions)

For the Three Months Ended December 31,

(Unaudited)

For the Years Ended December 31,

2021

2020

2021

2020

Net Sales

Residential Heating & Cooling

$         620.3

$        552.7

$   2,775.6

$    2,361.5

Commercial Heating & Cooling

201.4

226.2

864.8

800.9

Refrigeration

143.1

135.1

553.7

471.7

$         964.8

$        914.0

$   4,194.1

$    3,634.1

Segment Profit (Loss) ⁽¹⁾

Residential Heating & Cooling

$         110.3

$        115.6

$      540.3

$       428.5

Commercial Heating & Cooling

15.6

43.8

110.9

136.9

Refrigeration

13.2

10.2

49.1

32.8

Corporate and other

(37.2)

(30.3)

(96.4)

(91.5)

Total segment profit

101.9

139.3

603.9

506.7

Reconciliation to Operating Income:

Special product quality adjustments

(1.4)

2.0

(2.5)

1.0

(Gain) loss from natural disasters, net of insurance recoveries

—

(4.5)

—

3.1

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

5.5

2.6

14.3

13.3

Restructuring charges

0.2

0.2

1.8

10.8

Operating income

$           97.6

$        139.0

$      590.3

$       478.5

⁽¹⁾  

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

LENNOX INTERNATIONAL INC. AND SUBSIDIARIES

Consolidated Balance Sheets

(Amounts in millions, except shares and par values)

As of December 31, 2021

As of December 31, 2020

ASSETS

Current Assets:

Cash and cash equivalents

$                     31.0

$                   123.9

Short-term investments

5.5

5.1

Accounts and notes receivable, net of allowances of $10.7 and $9.6 in 2021 and 2020, respectively

508.3

448.3

Inventories, net

510.9

439.4

Other assets

119.7

70.9

Total current assets

1,175.4

1,087.6

Property, plant and equipment, net of accumulated depreciation of $888.8 and $880.6 in 2021 and 2020, respectively

515.1

464.3

Right-of-use assets from operating leases

196.1

194.4

Goodwill

186.6

186.9

Deferred income taxes

11.3

13.2

Other assets, net

87.4

86.1

Total assets

$                2,171.9

$                2,032.5

LIABILITIES AND STOCKHOLDERS' DEFICIT

Current Liabilities:

Current maturities of long-term debt

$                     11.3

$                       9.9

Current operating lease liabilities

54.8

55.0

Accounts payable

402.1

340.3

Accrued expenses

358.9

296.1

Total current liabilities

827.1

701.3

Long-term debt

1,226.5

970.7

Long-term operating lease liabilities

145.0

142.8

Pensions

83.3

92.5

Other liabilities

159.0

142.3

Total liabilities

2,440.9

2,049.6

Commitments and contingencies

Stockholders' deficit:

Preferred stock, $0.01 par value, 25,000,000 shares authorized, no shares issued or outstanding

—

—

Common stock, $0.01 par value, 200,000,000 shares authorized, 87,170,197 shares issued

0.9

0.9

Additional paid-in capital

1,133.7

1,113.2

Retained earnings

2,719.3

2,385.8

Accumulated other comprehensive loss

(88.1)

(97.2)

Treasury stock, at cost, 50,536,125 shares and 48,820,969 shares for 2021 and 2020, respectively

(4,034.8)

(3,419.8)

Total stockholders' deficit

(269.0)

(17.1)

Total liabilities and stockholders' deficit

$                2,171.9

$                2,032.5

LENNOX INTERNATIONAL INC. AND SUBSIDIARIES
Consolidated Statements of Cash Flows

(Amounts in millions)

For the Years Ended December 31,

2021

2020

Cash flows from operating activities:

Net income

$              464.0

$              356.3

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

Income from equity method investments

(11.8)

(15.6)

Dividends from affiliates

9.1

12.3

Restructuring charges, net of cash paid

1.1

3.4

Provision for credit losses

4.9

8.1

Unrealized (gains) losses on derivative contracts

(0.6)

0.3

Stock-based compensation expense

24.3

24.3

Depreciation and amortization

72.4

72.6

Deferred income taxes

(5.4)

7.2

Pension expense

11.3

10.5

Pension contributions

(1.5)

(3.3)

Other items, net

0.3

0.2

Changes in assets and liabilities:

Accounts and notes receivable

(68.8)

26.5

Inventories

(71.0)

110.3

Other current assets

(19.2)

5.3

Accounts payable

55.2

(31.7)

Accrued expenses

64.2

35.4

Income taxes payable and receivable, net

(26.5)

(5.7)

   Leases, net

0.2

2.1

Other, net

13.3

(6.1)

Net cash provided by operating activities

515.5

612.4

Cash flows from investing activities:

Proceeds from the disposal of property, plant and equipment

0.9

1.0

Purchases of property, plant and equipment

(106.8)

(78.5)

Proceeds from (purchases of) short-term investments, net

(0.5)

(2.2)

Net cash (used in) provided by investing activities

(106.4)

(79.7)

Cash flows from financing activities:

Short-term debt payments

—

(4.6)

Short-term debt borrowings

—

4.6

Asset securitization borrowings

627.0

91.0

Asset securitization payments

(377.0)

(376.0)

Long-term debt borrowings

—

600.0

Long-term debt payments

(12.3)

(10.8)

Borrowings from credit facility

1,162.5

1,576.0

Payments on credit facility

(1,156.0)

(2,081.5)

Payments of deferred financing costs

2.4

(7.5)

Proceeds from employee stock purchases

3.3

3.0

Repurchases of common stock

(600.0)

(100.0)

Repurchases of common stock to satisfy employee withholding tax obligations

(22.1)

(17.9)

Cash dividends paid

(126.5)

(118.1)

Net cash used in financing activities

(498.7)

(441.8)

(Decrease) increase in cash and cash equivalents

(89.6)

90.9

Effect of exchange rates on cash and cash equivalents

(3.3)

(4.3)

Cash and cash equivalents, beginning of period

123.9

37.3

Cash and cash equivalents, end of period

$                31.0

$              123.9

Supplemental disclosures of cash flow information:

Interest paid

$                23.8

$                25.3

Income taxes paid (net of refunds)

$              128.5

$                90.3

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 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.

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

For the Three Months Ended December 31,

(Unaudited)

2021

2020

Pre-Tax

    Tax Impact (d)

After Tax

Pre-Tax

    Tax Impact (d)

After Tax

Income from continuing operations, a GAAP measure

$         90.2

$          (6.7)

$         83.5

$        131.4

$        (19.2)

$        112.2

Restructuring charges

0.2

—

0.2

0.2

—

0.2

Pension settlements

0.1

(0.1)

—

0.3

(0.1)

0.2

Special product quality adjustments (b)

(1.4)

0.4

(1.0)

2.0

(0.5)

1.5

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

5.5

(2.2)

3.3

2.6

(0.8)

1.8

Excess tax expense (benefits) from share-based compensation (c)

—

0.7

0.7

—

(1.5)

(1.5)

Other tax items, net (c)

—

—

—

—

0.4

0.4

Gain from natural disasters, net of insurance recoveries (e)

—

—

—

(4.5)

1.1

(3.4)

Adjusted income from continuing operations, a non-GAAP measure

$         94.6

$          (7.9)

$         86.7

$        132.0

$        (20.6)

$        111.4

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

$         2.27

$         2.91

Restructuring charges

—

0.01

Pension settlements

—

0.01

Special product quality adjustments (b)

(0.03)

0.04

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

0.09

0.05

Excess tax expense (benefits) from share-based compensation (c)

0.02

(0.04)

Other tax items, net (c)

—

0.01

Gain from natural disasters, net of insurance recoveries (e)

—

(0.10)

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

$         2.35

$         2.89

(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

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

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

(e) Recorded in (Gain) loss from natural disasters, net of insurance recoveries in the Consolidated Statement of Operations.

For the Years Ended December 31,

(Unaudited)

2021

2020

Pre-Tax

   Tax Impact (d)

After Tax

Pre-Tax

   Tax Impact (d)

After Tax

Income from continuing operations, a GAAP measure

$       560.1

$        (96.1)

$       464.0

$        445.2

$        (88.1)

$        357.1

Restructuring charges

1.8

(0.4)

1.4

10.8

(2.4)

8.4

Pension settlements

1.2

(0.3)

0.9

0.6

(0.2)

0.4

Special product quality adjustments (b)

(2.5)

0.7

(1.8)

1.0

(0.2)

0.8

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

14.3

(3.8)

10.5

13.3

(3.5)

9.8

Excess tax benefits from share-based compensation (c)

—

(5.7)

(5.7)

(4.2)

(4.2)

Other tax items, net (c)

—

2.1

2.1

—

8.5

8.5

Loss from natural disasters, net of insurance recoveries (e)

—

—

—

3.1

(0.8)

2.3

Adjusted income from continuing operations, a non-GAAP measure

$       574.9

$      (103.5)

$       471.4

$        474.0

$        (90.9)

$        383.1

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

$       12.39

$         9.26

Restructuring charges

0.04

0.22

Pension settlements

0.02

0.01

Special product quality adjustments (b)

(0.05)

0.02

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

0.29

0.25

Excess tax benefits from share-based compensation (c)

(0.15)

(0.11)

Other tax items, net (c)

0.06

0.23

Loss from natural disasters, net of insurance recoveries (e)

—

0.06

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

$       12.60

$         9.94

(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

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

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

(e) Recorded in (Gain) loss from natural disasters, net of insurance recoveries in the Consolidated Statement of Operations.

For the Three Months Ended December 31,

For the Years Ended December 31,

2021

2020

2021

2020

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

Realized (gains) losses on settled futures contracts ^(a)

$            (0.3)

$            (0.1)

$            (1.2)

$             0.1

Foreign currency exchange gains ^(a)

(0.6)

(0.5)

(2.2)

(3.6)

Loss (gain) on disposal of fixed assets ^(a)

0.4

0.2

(0.2)

(0.2)

Other operating income ^(a)

(0.5)

(0.5)

(1.5)

(2.2)

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

—

(0.4)

—

(0.3)

Special legal contingency charges ^(b)

0.4

0.2

1.3

1.1

Asbestos-related litigation ^(b)

0.9

3.7

5.4

5.6

Environmental liabilities ^(b)

1.2

(2.9)

2.9

(1.4)

Charges incurred related to COVID-19 pandemic ^(b)

0.3

1.8

2.2

8.3

Other items, net ^(b)

2.7

0.2

2.5

—

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

$             4.5

$             1.7

$             9.2

$             7.4

(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 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, 2022

ESTIMATED

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

$13.50-$14.50

Other non-core EBIT charges and other non-core tax items

—

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

$13.50-$14.50

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 December 31,

For the Years Ended December 31,

2021

2020

2021

2020

Average shares outstanding - diluted, a GAAP measure

36.8

38.6

37.5

38.6

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

—

—

(0.1)

(0.1)

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

36.8

38.6

37.4

38.5

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 December 31,

For the Years Ended December 31,

2021

2020

2021

2020

Net cash provided by operating activities

$          119.2

$          166.1

$          515.5

$          612.4

Purchases of property, plant and equipment

(38.3)

(22.6)

(106.8)

(78.5)

Proceeds from the disposal of property, plant and equipment

0.2

0.3

0.9

1.0

Free cash flow, a Non-GAAP measure

$           81.1

$          143.8

$          409.6

$          534.9

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

Trailing Twelve  Months to December 31, 2021

Adjusted EBIT (a)

$                  603.9

Depreciation and amortization expense (b)

69.9

EBITDA (a + b)

$                  673.8

Total debt at December 31, 2021 (c)

$               1,237.8

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

1.8

Reconciliation of Income From Continuing Operations Before Income Taxes, a GAAP measure to Adjusted EBIT, a Non-GAAP measure

Trailing Twelve  Months to December 31, 2021

Income from continuing operations before income taxes, a GAAP measure

560.1

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

14.3

Special product quality adjustments

(2.5)

Restructuring charges

1.8

Interest expense, net

25.0

Pension settlements

1.2

Other expense (income), net

4.0

Adjusted EBIT per above, a Non-GAAP measure

603.9