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,

2023

2022

Net sales

$         1,049.4

$         1,013.4

Cost of goods sold

742.8

745.2

Gross profit

306.6

268.2

Operating Expenses:

Selling, general and administrative expenses

167.5

155.3

Losses (gains) and other expenses, net

0.3

0.4

Restructuring charges

—

0.5

(Income) loss from equity method investments

(0.7)

0.1

Operating income

139.5

111.9

Pension settlements

0.2

0.1

Interest expense, net

14.2

6.8

Other expense (income), net

—

0.6

Net income before income taxes

125.1

104.4

Provision for income taxes

27.1

20.8

Net income

$              98.0

$              83.6

Earnings per share – Basic:

$              2.76

$              2.30

Earnings per share – Diluted:

$              2.75

$              2.29

Weighted Average Number of Shares Outstanding - Basic

35.5

36.3

Weighted Average Number of Shares Outstanding - Diluted

35.6

36.5

LENNOX INTERNATIONAL INC. AND SUBSIDIARIES 

Segment Net Sales and Profit (Loss) 

(Unaudited) 

(Amounts in millions)

For the Three Months
Ended March 31,

2023

2022⁽²⁾

Net Sales

Residential

$      681.0

$      682.2

Commercial

308.7

279.5

Corporate and other

59.7

51.7

$   1,049.4

$   1,013.4

Segment Profit (Loss) ⁽¹⁾

Residential

$      111.1

$      107.6

Commercial

50.0

23.8

Corporate and other

(19.4)

(16.8)

Total segment profit

141.7

114.6

Reconciliation to Operating income:

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

2.2

$           2.2

Restructuring charges

—

0.5

Operating income

$      139.5

$      111.9

⁽¹⁾ 

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

•     The following items in Losses (gains) and other expenses, net:

          •     Net change in unrealized gains (losses) on unsettled futures contracts,

          •     Environmental liabilities and special litigation charges,

          •     Charges incurred related to COVID-19 pandemic; and

          •     Other items, net,

•     Restructuring charges.

⁽²⁾

Previously, we operated in three reportable business segments. In November 2022, we announced the decision to explore strategic alternatives for our European portfolio and that we would continue to invest in our Heatcraft Worldwide Refrigeration business, all of which were previously in our Refrigeration segment.  On January 1, 2023, we adjusted our segment presentation to better align with how the segments are managed and evaluated after the change in portfolio.  Heatcraft Worldwide Refrigeration is now part of the Commercial segment while the European portfolio is presented with Corporate and Other until disposition. Amounts presented in this table have been recast to reflect the revised segment presentation.  See "Recast Segment Results" in Appendix A for both the previously presented segment results as well as the recast financial information to reflect the change in segment presentation.

LENNOX INTERNATIONAL INC. AND SUBSIDIARIES

Consolidated Balance Sheets

(Unaudited)

(Amounts in millions, except shares and par values)

As of March 31, 2023

As of December 31, 2022

ASSETS

(Unaudited)

Current Assets:

Cash and cash equivalents

$                                40.4

$                               52.6

Short-term investments

7.1

8.5

Accounts and notes receivable, net of allowances of $16.8 and $15.5 in
2023 and 2022, respectively

642.5

608.5

Inventories, net

904.1

753.0

Other assets

77.5

73.9

Total current assets

1,671.6

1,496.5

Property, plant and equipment, net of accumulated depreciation of $938.9
and $920.8 in 2023 and 2022, respectively

567.2

548.9

Right-of-use assets from operating leases

217.8

219.9

Goodwill

186.3

186.3

Deferred income taxes

34.0

27.5

Other assets, net

93.5

88.5

Total assets

$                           2,770.4

$                          2,567.6

LIABILITIES AND STOCKHOLDERS' DEFICIT

Current Liabilities:

Current maturities of long-term debt

$                              657.5

$                             710.6

Current operating lease liabilities

63.8

63.3

Accounts payable

445.0

427.3

Accrued expenses

341.7

376.9

Income taxes payable

18.4

17.6

Total current liabilities

1,526.4

1,595.7

Long-term debt

1,010.1

814.2

Long-term operating lease liabilities

159.3

161.8

Pensions

39.7

40.1

Other liabilities

160.8

158.9

Total liabilities

2,896.3

2,770.7

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

1,161.1

1,155.2

Retained earnings

3,130.9

3,070.6

Accumulated other comprehensive loss

(78.6)

(90.6)

Treasury stock, at cost, 51,672,744 shares and 51,700,260 shares for
2023 and 2022, respectively

(4,340.2)

(4,339.2)

Total stockholders' deficit

(125.9)

(203.1)

Total liabilities and stockholders' deficit

$                           2,770.4

$                          2,567.6

LENNOX INTERNATIONAL INC. AND SUBSIDIARIES 

Consolidated Statements of Cash Flows 

(Unaudited) 

(Amounts in millions)

For the Three Months
Ended March 31,

2023

2022

Cash flows from operating activities:

Net income

$           98.0

$           83.6

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

(Income) loss from equity method investments

(0.7)

0.1

Restructuring charges, net of cash paid

—

0.5

Provision for credit losses

2.0

1.4

Unrealized losses, net on derivative contracts

1.6

0.1

Stock-based compensation expense

6.1

4.7

Depreciation and amortization

19.6

18.8

Deferred income taxes

(8.2)

(5.3)

Pension expense

0.7

1.4

Pension contributions

(1.2)

(0.1)

Other items, net

(0.3)

(0.9)

Changes in assets and liabilities:

Accounts and notes receivable

(34.9)

(96.9)

Inventories

(150.4)

(168.8)

Other current assets

1.2

1.1

Accounts payable

22.3

67.5

Accrued expenses

(32.5)

(33.0)

Income taxes payable and receivable, net

0.8

20.8

   Leases, net

0.1

0.5

Other, net

(3.0)

6.6

Net cash used in operating activities

(78.8)

(97.9)

Cash flows from investing activities:

Proceeds from the disposal of property, plant and equipment

0.3

0.3

Purchases of property, plant and equipment

(35.4)

(25.8)

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

1.4

(0.2)

Net cash used in investing activities

(33.7)

(25.7)

Cash flows from financing activities:

Asset securitization borrowings

—

90.0

Asset securitization payments

(53.0)

(61.0)

Long-term debt payments

(3.2)

(3.2)

Borrowings from credit facility

610.5

722.5

Payments on credit facility

(414.5)

(381.5)

Proceeds from employee stock purchases

0.9

0.9

Repurchases of common stock

—

(200.0)

Repurchases of common stock to satisfy employee withholding tax obligations

(2.0)

(4.9)

Cash dividends paid

(37.6)

(33.7)

Net cash provided by financing activities

101.1

129.1

(Decrease) increase in cash and cash equivalents

(11.4)

5.5

Effect of exchange rates on cash and cash equivalents

(0.8)

(2.2)

Cash and cash equivalents, beginning of period

52.6

31.0

Cash and cash equivalents, end of period

$           40.4

$           34.3

Supplemental disclosures of cash flow information:

Interest paid

$           13.0

$             5.8

Income taxes paid (net of refunds)

$           34.4

$             5.2

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 and enhance the ability of investors to analyze the Company's business trends and operating performance.

In November 2022, we announced the decision to explore strategic alternatives for our European portfolio. The results from operations for these businesses have been shown in the tables below as "Non-Core business results." The prior period results have been updated to provide period-over-period comparability.

Reconciliation of Net income, a GAAP measure, to Adjusted Net income, a Non-GAAP measure

For the Three Months Ended March 31,

(Unaudited)

2023

2022

Pre-Tax

Tax Impact (c)

After Tax

Pre-Tax

Tax Impact (c)

After Tax

Net income, a GAAP measure

$     125.1

$              (27.1)

$      98.0

$     104.4

$              (20.8)

$      83.6

Restructuring charges

—

—

—

0.5

(0.1)

0.4

Pension settlements

0.2

—

0.2

0.1

—

0.1

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

2.2

(1.3)

0.9

2.2

(0.7)

1.5

Excess tax expense from share-based
compensation (b)

—

—

—

—

0.5

0.5

Non-core business results (d)

0.4

1.0

1.4

3.5

0.3

3.8

Adjusted net income, a non-GAAP measure

$     127.9

$              (27.4)

$     100.5

$     110.7

$              (20.8)

$      89.9

Earnings per share - diluted, a GAAP measure

$      2.75

$      2.29

Restructuring charges

—

0.01

Pension settlements

0.01

—

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

0.03

0.04

Excess tax expense from share-based
compensation (b)

—

0.02

Non-core business results (d)

0.04

0.11

Adjusted earnings per share - diluted, a non-GAAP measure

$      2.83

$      2.47

(a) Recorded in Losses (gains) and other expenses, net in the Consolidated Statements of Operations

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

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

(d) Non-core business results represent activity related to our business operations in Europe not included elsewhere in the reconciliations

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,

2023

2022

Average shares outstanding - diluted, a GAAP measure

35.6

36.5

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

—

(0.1)

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

35.6

36.4

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,

2023

2022

Net cash used in operating activities, a GAAP measure

$         (78.8)

$         (97.9)

Purchases of property, plant and equipment

(35.4)

(25.8)

Proceeds from the disposal of property, plant and equipment

0.3

0.3

Free cash flow, a Non-GAAP measure

$       (113.9)

$       (123.4)

Reconciliation of Net sales, a GAAP measure to Core net sales, a Non-GAAP measure

For the Three Months Ended March 31,

Corporate and other

Consolidated

2023

2022

2023

2022

Net sales, a GAAP measure

$                  59.7

$                  51.7

$              1,049.4

$              1,013.4

Net sales from non-core businesses (a)

(59.7)

(51.7)

(59.7)

(51.7)

Core net sales, a Non-GAAP measure

$                     —

$                     —

$                 989.7

$                 961.7

(a) Non-Core businesses represent our business operations in Europe

Reconciliation of Segment profit, a Non-GAAP measure to Adjusted Segment profit, a Non-GAAP measure

For the Three Months Ended March 31,

Corporate and other

Consolidated

2023

2022

2023

2022

Segment profit, a Non-GAAP measure

$                 (19.4)

$                 (16.8)

$                 141.7

$                 114.6

Loss from non-core businesses (a)

0.4

3.4

0.4

3.4

Adjusted Segment profit, a Non-GAAP measure

$                 (19.0)

$                 (13.4)

$                 142.1

$                 118.0

(a) Non-Core businesses represent our business operations in Europe

Appendix A

Recast Segment Results

The following tables present the previously reported and recast financial results reflecting the change in segment reporting.

Q1 2022

Q2 2022

Q3 2022

Q4 2022

2022

As
Reported

As
Adjusted

As
Reported

As
Adjusted

As
Reported

As
Adjusted

As
Reported

As
Adjusted

As
Reported

As
Adjusted

Residential segment net sales

$      682.2

$     682.2

$      977.5

$     977.5

$      835.3

$     835.3

$      703.4

$     703.4

$   3,198.3

$  3,198.3

Residential segment profit

$      107.6

$     107.6

$      216.3

$     216.3

$      153.8

$     153.8

$      119.2

$     119.2

$      596.9

$     596.9

Commercial segment net sales

$      187.7

$     279.5

$      219.6

$     327.4

$      252.9

$     352.3

$      240.5

$     327.2

$      900.7

$  1,286.4

Commercial segment profit

$          6.3

$       23.8

$        17.2

$       41.2

$        29.6

$       52.4

$        27.9

$       45.6

$        80.9

$     163.0

Refrigeration segment net sales

$      143.5

$          —

$      169.2

$          —

$      156.7

$          —

$      149.9

$          —

$      619.4

$          —

Refrigeration segment profit

$        14.1

$          —

$        23.4

$          —

$        22.4

$          —

$        18.8

$          —

$        78.8

$          —

Corporate net sales

$           —

$          —

$           —

$          —

$           —

$          —

$           —

$          —

$           —

$          —

Net sales from European
operations

$           —

$       51.7

$           —

$       61.4

$           —

$       57.3

$           —

$      63.2

$           —

$     233.7

Corporate and other net sales

$           —

$       51.7

$           —

$       61.4

$           —

$       57.3

$           —

$      63.2

$           —

$     233.7

Corporate costs

$      (13.4)

$     (13.4)

$      (27.1)

$     (27.1)

$      (16.5)

$     (16.5)

$      (33.7)

$     (33.7)

$      (90.8)

$     (90.8)

Segment profit from European
operations

$           —

$       (3.4)

$           —

$       (0.6)

$           —

$       (0.4)

$           —

$        1.1

$           —

$       (3.3)

Corporate and other segment
profit

$      (13.4)

$     (16.8)

$      (27.1)

$     (27.7)

$      (16.5)

$     (16.9)

$      (33.7)

$     (32.6)

$      (90.8)

$     (94.1)

LII net sales

$   1,013.4

$  1,013.4

$   1,366.3

$  1,366.3

$   1,244.9

$  1,244.9

$   1,093.8

$  1,093.8

$   4,718.4

$  4,718.4

LII total segment profit

$      114.6

$     114.6

$      229.8

$     229.8

$      189.3

$     189.3

$      132.2

$     132.2

$      665.8

$     665.8

Q1 2021

Q2 2021

Q3 2021

Q4 2021

2021

As
Reported

As
Adjusted

As
Reported

As
Adjusted

As
Reported

As
Adjusted

As
Reported

As
Adjusted

As
Reported

As
Adjusted

Residential segment net sales

$      606.3

$     606.3

$      838.0

$     838.0

$      711.0

$    711.0

$      620.3

$     620.3

$   2,775.6

$  2,775.6

Residential segment profit

$        96.4

$       96.4

$      189.7

$     189.7

$      144.0

$    144.0

$      110.3

$     110.3

$      540.3

$     540.3

Commercial segment net sales

$      199.2

$     274.8

$      252.8

$     335.0

$      211.5

$    292.7

$      201.4

$     286.3

$      864.8

$  1,188.8

Commercial segment profit

$        27.4

$       39.6

$        45.3

$       58.9

$        22.6

$      36.3

$        15.6

$       29.8

$      110.9

$     164.6

Refrigeration segment net sales

$      125.0

$          —

$      148.2

$          —

$      137.4

$         —

$      143.1

$          —

$      553.7

$          —

Refrigeration segment profit

$          7.9

$          —

$        13.5

$          —

$        14.5

$         —

$        13.2

$          —

$        49.1

$          —

Corporate net sales

$           —

$          —

$           —

$          —

$           —

$         —

$           —

$          —

$           —

$          —

Net sales from European
operations

$           —

$      49.4

$           —

$       66.0

$           —

$      56.2

$           —

$       58.2

$           —

$     229.7

Corporate and other net sales

$           —

$      49.4

$           —

$       66.0

$           —

$      56.2

$           —

$       58.2

$           —

$     229.7

Corporate costs

$      (16.0)

$     (16.0)

$      (26.9)

$      (26.9)

$      (16.3)

$     (16.3)

$      (37.2)

$      (37.2)

$      (96.4)

$     (96.4)

Segment profit from European
operations

$           —

$       (4.3)

$           —

$        (0.1)

$           —

$        0.8

$           —

$        (1.0)

$           —

$       (4.6)

Corporate and other segment
profit

$      (16.0)

$     (20.3)

$      (26.9)

$      (27.0)

$      (16.3)

$     (15.5)

$      (37.2)

$      (38.2)

$      (96.4)

$   (101.0)

LII net sales

$      930.5

$     930.5

$   1,239.0

$  1,239.0

$   1,059.9

$  1,059.9

$      964.8

$     964.8

$   4,194.1

$  4,194.1

LII total segment profit

$      115.7

$     115.7

$      221.6

$     221.6

$      164.8

$     164.8

$      101.9

$     101.9

$      603.9

$     603.9