Lennox International Reports Third Quarter EPS of $0.46

October 22, 2002

DALLAS, Oct. 22 -- Lennox International Inc. (NYSE: LII) today reported third quarter results for 2002, showing substantial growth in margins and profitability. GAAP income for the quarter rose sharply to $28 million, an increase of more than 80% from $15 million in the year ago period. GAAP earnings per diluted share were up 70% to $0.46 from $0.27 a year ago.

Reported operating income grew 28% to $53 million, while operating margins expanded to 6.4% from 5.0% last year. These significant improvements were realized despite a modest 1% decline in total revenues to $819 million from $825 million in third quarter 2001.

If the FAS 142 accounting rule eliminating amortization had been effective in 2001, operating income in third quarter 2001 would have been $5 million higher and EPS would have been $0.35. Also, third quarter 2002 earnings benefited from the favorable outcome of tax contingencies from prior years, reducing the provision for income taxes by $3 million and adding $0.05 per share to earnings.

"LII has achieved our third consecutive quarter of improvement from our previous year's results," said Bob Schjerven, chief executive officer. "While demand from our commercial customers for heating, cooling, and refrigeration equipment and services has been soft, favorable weather supported our residential businesses. Still, despite mixed demand, our profitability grew significantly, we generated $62 million in free cash, and the debt level on our balance sheet is at its lowest point since LII went public in 1999."

As of September 30, 2002, the company's total debt was $410 million, down $157 million from a year ago. Debt to total capital improved to 46.7%.

Strategic focus sharpens on three core businesses; reporting simplified

The company continues to focus its resources on its three core businesses: heating and cooling, Service Experts, and refrigeration. Consistent with this strategic focus and beginning this quarter, LII has streamlined and simplified its reporting structure to report results in these three business segments.

Several non-recurring events related to narrowing the company's focus to its core businesses affected third quarter 2002 earnings. A gain on the sale of 55% of LII's heat transfer business to Outokumpu Oyj in late August was almost entirely offset by charges, as detailed in the comments and table below, including:

    --  A $3.6 million pre-tax charge was incurred to write off the investment
        in a joint venture in Argentina, as the company exited the HVAC
        business in that very volatile market.  This partially offset a pre-
        tax $12.5 million gain on the Outokumpu heat transfer joint venture
        transaction, resulting in a net pre-tax gain of $8.9 million or
        $5.8 million after taxes.

    --  A charge of $2.1 million in the quarter, with no tax benefit, was
        incurred to close a commercial refrigeration equipment factory in
        Europe eliminating excess capacity, as part of the restructuring
        program announced in the fourth quarter of 2001.

    --  A restructuring charge of $4.7 million, or $3.3 million after-tax, was
        incurred as the company began to wind down a residual piece of the
        heat transfer business that does not fit with LII's strategic focus
        and was not included in the joint venture with Outokumpu.  LII will
        continue to wind down the business through 2003 and anticipates an
        additional $1 million in related restructuring charges.


     Lennox International Inc. - Segment Operating Income Reconciliation
                                (in thousands)
                                                          (Gains)
    Three Months                                           Losses     Adjusted
     Ended                                                  and       Income
    September 30,   Income from    Goodwill  Restructuring  Other       From
     2002:           Operations  Amortization   Charges    Expenses Operations

     Heating
       and Cooling    $ 41,395     $  ---      $    15    $   ---    $ 41,410
     Service Experts    13,076        ---          ---        ---      13,076
     Refrigeration       6,757        ---        2,061        ---       8,818
     Corporate
      and other         (8,745)       ---        4,666     (8,931)    (13,010)
     Eliminations          141        ---          ---        ---         141
      Income from
       Operations     $ 52,624     $  ---      $ 6,742    $(8,931)   $ 50,435


                                                           (Gains)
    Three Months                                            Losses    Adjusted
     Ended                                                   and      Income
    September 30,   Income from    Goodwill  Restructuring  Other      From
     2001:           Operations  Amortization   Charges    Expenses Operations

    Heating
     and Cooling      $ 39,021     $  843      $   ---    $   ---    $ 39,864
    Service Experts      3,840      3,569          ---        ---       7,409
     Refrigeration       7,078        313          ---        ---       7,391
     Corporate
       and other        (9,561)       425          ---        ---      (9,136)
     Eliminations          878        ---          ---        ---         878
      Income from
      Operations      $ 41,256     $5,150      $   ---    $   ---    $ 46,406

Business Segment Highlights

To facilitate comparisons of operating performance, the segment data below are adjusted for restructuring and other non-recurring charges, and the new goodwill accounting standard.

Heating and Cooling: This segment includes the company's previously reported North American residential products and commercial air conditioning segments. Quarterly revenues increased 4% to $469 million. Segment operating income for the quarter also increased 4% to $41 million, while segment operating margins were flat year-over-year at 8.8%. Shipments of the company's residential equipment increased by 8% due in large part to favorable weather during the cooling season and low inventory levels in the supply chain. Domestic commercial shipments declined by only 3% during a period of double-digit industry declines, caused by depressed construction activity.

Service Experts: The company's retail business segment saw its quarterly operating profit increase 76% to $13 million, with operating margins expanding 240 basis points from last year to 5.2%. Gross margins improved, and S,G & A expenses continued to run below last year both at the center and corporate levels. Revenues declined 6% to $252 million. On a same store basis, adjusting for dealer centers that were sold or closed, third quarter sales were down 5%.

"We continue to realize operational improvements in this business," Schjerven said. "We are also acutely aware the top line remains challenging, and our Service Experts management is currently exploring numerous marketing and business development initiatives to address this situation consistent with our goal of continued improvement in profitability."

Refrigeration: Third quarter revenues in LII's refrigeration segment were up 7% at $93 million. Segment operating income climbed 19% to $9 million, with operating margins expanding 100 basis points to 9.5%. "Our domestic operation continues a very solid record of performance, with EBIT margins in the mid-teens and increasing market share," Schjerven noted.

Business outlook: Full-year 2002

LII management continues to expect revenues from continuing businesses will be down approximately 2%. Reported company revenues are expected to decline by about 5%, including the drop in revenue from the heat transfer joint venture which will not be reported on the company's financial statements in the future. Based on earnings for the first nine months of this year, the company expects diluted EPS for full-year 2002 -- excluding restructuring, goodwill impairment and other non-recurring items -- will be in the range of $0.90 to $1.00, consistent with previously issued guidance. The company also expects to exceed the previously stated free cash flow projection of $75 million, based on performance year-to-date.

"While never satisfied, we are pleased LII's financial improvement continued in the third quarter," Schjerven said. "Our management team believes we have the programs and processes in place to deliver on our full- year projections."

LII has scheduled a conference call to discuss financial results for the third quarter 2002 on Wednesday, October 23 at 9:30 a.m. Central time. All interested parties are invited to listen as Bob Schjerven, CEO and Rick Smith, CFO comment on the company's operating results. To listen, please call the conference call line at 612-332-0228 ten minutes prior to the scheduled start time and use reservation number 655944. The number of connections for this call is limited to 200.

This conference call will be broadcast live on the Internet and can be accessed at http://www.firstcallevents.com/service/ajwz367093174gf12.html . A link to the broadcast can also be found on the company's web site at http://www.lennoxinternational.com . If you are unable to participate in this conference call, a replay will be available from 1:00 p.m. October 23 through October 30, 2002 on the Internet or by dialing 800-475-6701, access code 655944.

Selling heating, ventilation, air conditioning, and refrigeration equipment in over 70 countries, Lennox International Inc. is a global leader in climate control solutions. Lennox operates in three key business segments: Heating and cooling, Service Experts, and refrigeration. Lennox International stock is traded on the New York Stock Exchange under the symbol "LII". Additional information is available at: http://www.lennoxinternational.com or by contacting Bill Moltner, vice president, investor relations, at 972-497-6670.

This news release contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. These statements are subject to numerous risks and uncertainties that could cause actual results to differ materially from such statements. For information concerning these risks and uncertainties, see Lennox' publicly available filings with the Securities and Exchange Commission. Lennox disclaims any intention or obligation to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise.

                  LENNOX INTERNATIONAL INC. AND SUBSIDIARIES

                    CONSOLIDATED STATEMENTS OF OPERATIONS
    For the Three Months and Nine Months Ended September 30, 2002 and 2001
               (Unaudited, in thousands, except per share data)

                                      For the                 For the
                                Three Months Ended       Nine Months Ended
                                    September 30,           September 30,
                                   2002      2001(A)      2002        2001(A)
    NET SALES                    $818,844   $825,060   $2,321,403  $2,386,564
    COST OF GOODS SOLD            562,737    575,664    1,590,605   1,665,036
      Gross profit                256,107    249,396      730,798     721,528
    OPERATING EXPENSES:
      Selling, general and
       administrative expense     205,672    208,140      618,275     644,252
      Restructurings (B)            6,742        ---        8,617      34,631
      (Gains) Losses
        and other expenses         (8,931)       ---       (8,931)        ---
         Income from operations    52,624     41,256      112,837      42,645
    INTEREST EXPENSE, net           8,945     10,330       25,086      34,608
    OTHER                            (288)       (93)        (819)        285
    MINORITY INTEREST                  77          2          204         135
      Income before income taxes
       and cumulative effect
        of accounting change       43,890     31,017       88,366       7,617
    PROVISION FOR INCOME TAXES     16,312     15,838       34,591       9,697
      Income (loss) before
       cumulative effect
        of accounting change       27,578   $ 15,179       53,775     $(2,080)
    CUMULATIVE EFFECT
      OF ACCOUNTING CHANGE            ---        ---      249,224         ---
      Net income (loss)          $ 27,578   $ 15,179   $ (195,449)    $(2,080)


    INCOME (LOSS) PER SHARE
      BEFORE CUMULATIVE EFFECT
       OF ACCOUNTING CHANGE:
          Basic                  $   0.48   $   0.27   $     0.94     $ (0.04)
          Diluted                $   0.46   $   0.27   $     0.91     $ (0.04)


    CUMULATIVE EFFECT
     OF ACCOUNTING CHANGE
      PER SHARE:
          Basic                  $    ---   $    ---   $    (4.36)    $   ---
          Diluted                $    ---   $    ---   $    (4.24)    $   ---


    NET INCOME (LOSS) PER SHARE:
      Basic                      $   0.48   $   0.27   $    (3.42)    $ (0.04)
      Diluted                    $   0.46   $   0.27   $    (3.32)    $ (0.04)

    (A)  Prior year's sales, cost of sales and operating expenses are restated
         to conform with current year treatment of certain promotional
         payments in line with the adoption of EITF 01-9 in 2002.

    (B)  Nine months ended September 30, 2001 restructurings totaled $38,000,
         of which $3,369 is included in Cost of Goods Sold.


                    LENNOX INTERNATIONAL INC. AND SUBSIDIARIES

                      SEGMENT REVENUES AND OPERATING PROFIT
      For the Three Months and Nine Months Ended September 30, 2002 and 2001
                 (Unaudited, in thousands, except per share data)

                           For the Three Months      For the Nine Months
                               Ended Sept. 30,          Ended Sept. 30,
    Net Sales                 2002       2001         2002         2001
    Heating & Cooling       $468,821   $450,657   $1,293,212   $1,287,973
    Service Experts          251,573    266,683      708,053      759,400
    Refrigeration             92,811     86,847      273,152      263,775
    Corporate and other (A)   33,055     48,548      128,150      156,866
    Eliminations             (27,416)   (27,675)     (81,164)     (81,450)
                            $818,844   $825,060   $2,321,403   $2,386,564


    Income (Loss) from
     Operations - before
    Restructurings,
                         For the Three Months          For the Nine Months
                            Ended Sept. 30,              Ended Sept. 30,
     (Gains) Losses      2002     2001     2001      2002     2001      2001
     & Other Expenses                    Adj.(B)                     Adj. (B)
    Heating
     & Cooling        $41,410  $39,021  $39,864    $98,585  $90,574  $93,324
    Service Experts    13,076    3,840    7,409     26,169   (5,291)   3,981
    Refrigeration       8,818    7,078    7,391     26,032   20,559   21,529
    Corporate
     and other (A)    (13,010)  (9,561)  (9,136)   (37,566) (27,952) (26,817)
    Eliminations          141      878      878       (697)    (614)    (614)
                      $50,435  $41,256  $46,406   $112,523  $77,276  $91,403

    (A)  In the third quarter of 2002, the Company formed a joint venture with
         Outokumpu Oyj ("Outokumpu") of Finland by selling to Outokumpu a
         55 percent interest in the Company's heat transfer business segment
         for approximately $55 million.  The net sales and results of
         operations for the current periods and all prior periods of the
         Company's former heat transfer business segment are now included in
         Corporate and other.

    (B)  To facilitate comparisons, the reported segment Income (Loss) from
         Operations amounts for the three and nine months ended
         September 30, 2001 have been adjusted to reflect the discontinuation
         of goodwill and trademark amortization under SFAS 142.


                    LENNOX INTERNATIONAL INC. AND SUBSIDIARIES

                           CONSOLIDATED BALANCE SHEETS
                  As of September 30, 2002 and December 31, 2001
                        (In thousands, except share data)

                                      ASSETS
                                              September 30,      December 31,
                                                   2002              2001
                                               (Unaudited)
    CURRENT ASSETS:
       Cash and cash equivalents              $   55,925        $   34,393
       Accounts and notes receivable, net        364,252           291,485
       Inventories                               250,340           281,170
       Deferred income taxes                      45,281            42,662
       Other assets                               62,725            63,655
         Total current assets                    778,523           713,365
    PROPERTY, PLANT AND EQUIPMENT, net           238,017           291,531
    GOODWILL, net                                418,003           704,713
    OTHER ASSETS                                 146,954            84,379
         TOTAL ASSETS                         $1,581,497        $1,793,988


                       LIABILITIES AND STOCKHOLDERS' EQUITY

    CURRENT LIABILITIES:
       Short-term debt                        $   24,778        $   23,701
       Current maturities of long-term debt       15,278            28,895
       Accounts payable                          261,614           242,534
       Accrued expenses                          278,620           249,546
       Income taxes payable                       35,387             9,870
          Total current liabilities              615,677           554,546
    LONG-TERM DEBT                               369,992           465,163
    DEFERRED INCOME TAXES                            876               673
    POSTRETIREMENT BENEFITS, OTHER THAN PENSIONS  13,642            14,014
    OTHER LIABILITIES                            111,467           103,301
          Total liabilities                    1,111,654         1,137,697
    MINORITY INTEREST                              1,412             1,651
    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,
         62,589,638 shares and 60,690,198
         shares issued for 2002 and 2001,
         respectively                                626               607
       Additional paid-in capital                396,755           372,877
       Retained earnings                         171,780           383,566
       Accumulated other comprehensive loss      (59,516)          (68,278)
         Deferred compensation                   (10,498)           (3,710)
       Treasury stock, at cost, 3,009,656
         and 2,980,846 shares for 2002 and 2001,
          respectively                           (30,716)          (30,422)
          Total stockholders' equity             468,431           654,640
          TOTAL LIABILITIES
           AND STOCKHOLDERS' EQUITY           $1,581,497        $1,793,988

                     

Source: Lennox International Inc.