SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 8-K CURRENT REPORT Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 Date of Report (Date of earliest event reported): April 22, 2003 LENNOX INTERNATIONAL INC. (Exact name of registrant as specified in its charter) Delaware 001-15149 42-0991521 (State or other jurisdiction (Commission File Number) (IRS Employer of incorporation) Identification No.) 2140 Lake Park Blvd. Richardson, Texas 75080 (Address of principal executive offices) (Zip Code) Registrant's telephone number, including area code: (972) 497-5000
Item 9. Regulation FD Disclosure. The following information is intended to be furnished under Item 12, "Results of Operations and Financial Condition," but is instead being furnished pursuant to Item 9 in accordance with the interim guidance contained in Securities Exchange Commission Release No. 33-8216. On April 22, 2003, Lennox International Inc. (the "Company") issued a press release announcing its financial results for the first quarter of 2003. A copy of the Company's press release is attached hereto as Exhibit 99.1 and hereby incorporated by reference.
SIGNATURE Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized. LENNOX INTERNATIONAL INC. Date: April 22, 2003 By: /s/ Richard A. Smith ----------------------------------- Name: Richard A. Smith Title: Executive Vice President and Chief Financial Officer
INDEX TO EXHIBITS
EXHIBIT 99.1 LENNOX INTERNATIONAL REPORTS FIRST QUARTER 2003 EARNINGS; FINANCIAL IMPROVEMENT TREND CONTINUES (DALLAS, TX -- April 22, 2003) -- Lennox International Inc. (NYSE:LII) announced first quarter 2003 diluted earnings per share of $0.04, continuing a trend of improved financial performance despite continued softness in end-market demand. Sales decreased 4% to $650 million from $674 million in last year's first quarter. In constant currencies and adjusting for the loss of $46 million heat transfer revenue, most of which is now part of the company's joint venture with Outokumpu and no longer reported by LII, total sales were up 1%. International sales (sales outside the U.S. and Canada) generated 13% of total LII revenues. Consolidated operating income rose 20% to $10.6 million from $8.8 million. First quarter 2002 operating earnings included $700,000 in pre-tax restructuring charges associated with the closure of LII's Toronto manufacturing facility. The first quarter 2003 operating margin was 1.6%, compared with 1.3% last year. Net income was $2.5 million, contrasted with a net loss of $248.7 million last year. Last year's net loss was affected by a $249.2 million after-tax goodwill impairment charge. Diluted earnings per share were $0.04 compared with a loss per share of $4.38 in first quarter 2002. Pro-forma diluted earnings per share for first quarter 2002, adjusting for the goodwill impairment charge and $400,000 in after-tax restructuring charges, was $0.02. Foreign exchange benefited earnings per share by $0.01 in the first quarter of 2003. "While the first quarter is typically the weakest quarter for us, our results improved on a year-over-year basis and continued the trend of improved financial performance that began in 2002," said Bob Schjerven, chief executive officer. "As has been the case through the prolonged economic downturn, our strong brands, quality products and services, and close customer relationships have differentiated our business in a very soft marketplace. Given the difficult competitive environment, we are pleased with LII's start for 2003." LII also further strengthened its balance sheet in the first quarter, supported by a continued focus on lean enterprise initiatives. As of March 31, 2003, total debt was down $135 million from a year ago and is currently at $389 million. Total debt to capitalization declined dramatically to 45.1% from 56.3%. Free cash flow in the first quarter was a usage of $52 million, due primarily to pre-season inventory build, compared with $8 million in free cash flow generated in the first quarter of 2002. Due to the seasonal nature of many of the company's businesses it is not unusual for LII to use free cash flow in the first half of the year and generate free cash flow in the second half. Operational working capital improved 270 basis points to 19.3% of sales from 22.0%. The tables following the text in this news release provide financial detail and reconcile the information provided to U.S. Generally Accepted Accounting Principles (GAAP) measures. BUSINESS SEGMENT HIGHLIGHTS: HEATING & COOLING: Heating & Cooling business revenues rose 7% to $387 million. Adjusting for fluctuations in currency exchange rates, sales were up 5%. Segment operating income increased 37% to $21.0 million from $15.3 million last year and operating margins expanded 110 basis points to 5.4% from 4.3% last year. The Residential Heating & Cooling segment had a very strong first quarter, with sales up 7% to $294 million. Sales increases were achieved by all of the company's home comfort equipment brands, including hearth products. Segment operating income increased 41% for the quarter to $21.8 million from $15.5 million last year. Operating margins expanded 170 basis points to 7.4%, through pricing improvement on replacement sales, a favorable mix of higher-end product, and improved hearth products profitability. This improvement was partially offset by margin pressure in LII's residential new construction business.
Commercial Heating & Cooling segment revenues rose 7% to $93 million, but were flat when adjusted for currency fluctuations. The segment operating loss was $0.7 million, compared with a loss of $0.2 million last year. Operating margins were (0.8%), down 60 basis points from 2002. Higher insurance and wage expenses and a skew toward lower margin parts sales in the company's domestic operation, combined with pricing-related margin pressure in Europe, were responsible for the decline. Several initiatives, including the recent signing of 16 new national accounts and the planned closing of a 120,000-square-foot factory in Northampton, England, position the commercial segment for improved performance going forward. SERVICE EXPERTS: The Service Experts segment had an operating loss of $4.7 million, or 2.4% of sales, compared with a loss of $2.8 million, or 1.4% of sales, last year. Higher insurance expenses and lower commercial business margins more than offset improved residential performance. Revenues declined 4%, or 5% when adjusted for currency translation, to $197 million. Year-over-year sales in the service and replacement businesses and in the residential new construction business - which represent almost 85% of total segment revenues -- increased slightly, although soft demand compounded what is typically the weakest quarter for this business. The decline in segment revenue is entirely in the commercial new construction sector due in part to severe weather in key sales areas. "We remain confident we have identified and are implementing the right strategies to improve the performance of this segment," Schjerven said. REFRIGERATION: Segment revenues were up 3% to $90 million but were down 4% when adjusted for currency exchange. Segment operating income was essentially flat at $8.3 million, with strict cost control helping to offset lower sales. Operating margins contracted to 9.2%, primarily due to pricing-related margin pressure in Europe. While demand for commercial refrigeration equipment has declined, the refrigeration segment is maintaining its market share. BUSINESS OUTLOOK The company reaffirmed its guidance for 2003, anticipating revenues to be relatively flat and earnings per share, based on the continued focus on cost reduction and the full-year effect of actions taken in 2002, to be in the range of $1.10 to $1.20. While the company sees no clear signs of sustained underlying strength in the economy and with a lack of visibility on the timing of economic recovery, year-over-year improvements are expected to be more concentrated in the latter half of the year. For the year, the company expects to generate free cash flow approximately equal to net income. "We are pleased our performance continues to improve," said Bob Schjerven. "Our management team remains intensely focused on operating improvements, which will accelerate with economic recovery." A conference call to discuss the company's Q1 2003 results will be held on Wednesday, April 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 612-326-1019 ten minutes prior to the scheduled start time and use reservation number 681357. The number of connections for this call is limited to 200. This conference call will be broadcast live on the Internet by PRNewswire and can be accessed at http://www.firstcallevents.com/service/ajwz378648386gf12.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. April 23 through April 30, 2003 by dialing 800-475-6701, access code 681357. This call will also be archived on the company's web site.
A Fortune 500 company operating in over 100 countries, Lennox International Inc. is a global leader in the heating, ventilation, air conditioning, and refrigeration markets. 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 Ended March 31, 2003 and 2002 (Unaudited, in thousands, except per share data)
LENNOX INTERNATIONAL INC. AND SUBSIDIARIES SEGMENT REVENUES AND OPERATING PROFIT For the Three Months Ended March 31, 2003 and 2002 (Unaudited, in Thousands)
LENNOX INTERNATIONAL INC. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS As of March 31, 2003 and December 31, 2002 (Unaudited, in thousands, except share data)
LENNOX INTERNATIONAL INC. AND SUBSIDIARIES Reconciliation to U.S. GAAP (Generally Accepted Accounting Principles) Measures (Unaudited, in thousands, except per share and ratio data) PRO FORMA NET INCOME AND PRO FORMA DILUTED EPS (EARNINGS PER SHARE)