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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
_________________________________________________
FORM 10-Q
 _________________________________________________
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 2020
OR
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from _____to ______


Commission file number 001-15149
 _________________________________________________
LENNOX INTERNATIONAL INC.
Incorporated pursuant to the laws of the State of Delaware
_________________________________________________ 
Internal Revenue Service Employer Identification No. 42-0991521
2140 LAKE PARK BLVD., RICHARDSON, Texas, 75080
(972-497-5000)
_________________________________________________ 
Securities registered pursuant to Section 12(b) of the Act:
Title of each classTrading Symbol(s)Name of each exchange on which registered
Common stock, $0.01 par value per shareLIINew York Stock Exchange
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    Yes      No  
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).    Yes      No  
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company" in Rule 12b-2 of the Exchange Act.
Large Accelerated FilerAccelerated Filer
Non-Accelerated FilerSmaller Reporting Company
Emerging growth company
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).    Yes   No  
As of July 10, 2020, the number of shares outstanding of the registrant’s common stock, par value $0.01 per share, was 38,253,953.





LENNOX INTERNATIONAL INC.
FORM 10-Q
For the three and six months ended June 30, 2020

INDEX
Page
Part I
Consolidated Balance Sheets - June 30, 2020 (Unaudited) and December 31, 2019
Consolidated Statements of Operations (Unaudited) - Three Months and Six Months Months Ended June 30, 2020 and 2019
Consolidated Statements of Comprehensive Income (Unaudited) - Three Months and Six Months Months Ended June 30, 2020 and 2019
Consolidated Statements of Stockholders' Deficit (Unaudited) - Three Months and Six Months Months Ended June 30, 2020 and 2019
Consolidated Statements of Cash Flows (Unaudited) - Six Months Ended June 30, 2020 and 2019
Part II

i


Part I - Financial Information
Item 1. Financial Statements

LENNOX INTERNATIONAL INC. AND SUBSIDIARIES
Consolidated Balance Sheets
(Amounts in millions, except shares and par values)As of June 30, 2020As of December 31, 2019
(Unaudited)
ASSETS
Current Assets:
Cash and cash equivalents$44.8  $37.3  
Short-term investments3.8  2.9  
Accounts and notes receivable, net of allowances of $7.2 and $6.1 in 2020 and 2019, respectively
624.2  477.8  
Inventories, net499.7  544.1  
Other assets54.4  58.8  
Total current assets1,226.9  1,120.9  
Property, plant and equipment, net of accumulated depreciation of $848.5 and $824.3 in 2020 and 2019, respectively
441.2  445.4  
Right-of-use assets from operating leases177.1  181.6  
Goodwill186.5  186.5  
Deferred income taxes15.5  21.5  
Other assets, net77.1  79.0  
Total assets$2,124.3  $2,034.9  
LIABILITIES AND STOCKHOLDERS’ DEFICIT
Current Liabilities:
Current maturities of long-term debt$343.6  $321.9  
Current operating lease liabilities
52.0  52.7  
Accounts payable295.0  372.4  
Accrued expenses251.0  255.7  
Income taxes payable4.6    
Total current liabilities946.2  1,002.7  
Long-term debt1,047.2  849.3  
Long-term operating lease liabilities127.9  131.0  
Pensions91.8  87.4  
Other liabilities140.1  134.7  
Total liabilities2,353.2  2,205.1  
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 capital1,102.4  1,093.5  
Retained earnings2,201.5  2,148.7  
Accumulated other comprehensive loss(121.7) (103.8) 
Treasury stock, at cost, 48,919,279 shares and 48,575,901 shares for 2020 and 2019, respectively
(3,412.0) (3,309.5) 
Total stockholders' deficit(228.9) (170.2) 
Total liabilities and stockholders' deficit$2,124.3  $2,034.9  
The accompanying notes are an integral part of these consolidated financial statements.
1



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,
 2020201920202019
Net sales$941.3  $1,099.1  $1,665.1  $1,889.4  
Cost of goods sold665.6  767.0  1,223.7  1,355.8  
Gross profit275.7  332.1  441.4  533.6  
Operating Expenses:
Selling, general and administrative expenses129.5  152.4  260.8  298.2  
Losses (gains) and other expenses, net3.6  2.1  2.3  3.2  
Restructuring charges10.0  (0.1) 10.5  0.4  
Loss on sale of business  0.4    8.8  
Insurance proceeds for lost profits  (26.0)   (65.5) 
Loss (gain) from natural disaster, net of insurance recoveries1.0  (5.9) 2.7  (12.8) 
Income from equity method investments(4.4) (4.6) (7.2) (7.2) 
Operating income136.0  213.8  172.3  308.5  
Pension settlement  60.6    60.6  
Interest expense, net6.9  13.1  15.6  23.9  
Other expense (income), net1.1  0.3  2.2  1.2  
Income from continuing operations before income taxes128.0  139.8  154.5  222.8  
Provision for income taxes27.4  28.8  41.4  42.4  
Income from continuing operations100.6  111.0  113.1  180.4  
Discontinued Operations:
Loss from discontinued operations before income taxes(0.8) (0.3) (0.8) (0.4) 
Income tax benefit(0.2)   (0.6)   
Loss from discontinued operations(0.6) (0.3) (0.2) (0.4) 
Net income$100.0  $110.7  $112.9  $180.0  
Earnings per share – Basic:
Income from continuing operations$2.63  $2.84  $2.95  $4.58  
Loss from discontinued operations(0.01) (0.01)   (0.01) 
Net income$2.62  $2.83  $2.95  $4.57  
Earnings per share – Diluted:
Income from continuing operations$2.62  $2.81  $2.93  $4.53  
Loss from discontinued operations(0.02) (0.01)   (0.01) 
Net income$2.60  $2.80  $2.93  $4.52  
Weighted Average Number of Shares Outstanding - Basic38.2  39.1  38.3  39.4  
Weighted Average Number of Shares Outstanding - Diluted38.4  39.5  38.6  39.8  

The accompanying notes are an integral part of these consolidated financial statements.
2



LENNOX INTERNATIONAL INC. AND SUBSIDIARIES
Consolidated Statements of Comprehensive Income
(Unaudited)

(Amounts in millions)For the Three Months Ended June 30,For the Six Months Ended June 30,
 2020201920202019
Net income$100.0  $110.7  $112.9  $180.0  
Other comprehensive income (loss):
Foreign currency translation adjustments2.4  3.4  (17.8) 3.9  
Reclassification of foreign currency translation gains into earnings      2.1  
Net change in pension and post-retirement liabilities(1.5) 4.6  (2.4) 2.4  
Reclassification of pension and post-retirement benefit losses into earnings1.4  1.0  3.0  3.0  
Pension settlement  60.6    60.6  
Net change in fair value of cash flow hedges6.3  (5.3) (8.3) 0.8  
Reclassification of cash flow hedge losses into earnings5.8  2.0  7.0  4.3  
Other comprehensive income (loss) before taxes14.4  66.3  (18.5) 77.1  
Tax (expense) benefit(3.0) (15.7) 0.6  (17.9) 
Other comprehensive income (loss), net of tax11.4  50.6  (17.9) 59.2  
Comprehensive income $111.4  $161.3  $95.0  $239.2  
The accompanying notes are an integral part of these consolidated financial statements.
3


LENNOX INTERNATIONAL INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' DEFICIT
For the three and six months ended June 30, 2020 and 2019 (Unaudited)
(In millions, except per share data)

Common Stock IssuedAdditional Paid-In CapitalRetained EarningsAccumulated Other Comprehensive LossTreasury Stock at CostTotal Stockholders' Deficit
(For the three months ended June 30, 2020)
Shares Amount
Balance as of March 31, 2020
$0.9  $1,095.2  $2,130.9  $(133.1) 48.9  $(3,412.2) $(318.3) 
Net income—  —  100.0  —  —  —  100.0  
Dividends, $0.77 per share
—  —  (29.4) —  —  —  (29.4) 
Foreign currency translation adjustments—  —  —  2.4  —  —  2.4  
Pension and post-retirement liability changes, net of tax benefit of $0.1
—  —  —  (0.1) —  —  (0.1) 
Stock-based compensation expense—  6.7  —  —  —  —  6.7  
Change in cash flow hedges, net of tax expense of $3.1
—  —  —  9.1  —  —  9.1  
Treasury shares reissued for common stock—  0.5  —  —    0.3  0.8  
Treasury stock purchases—  —  —  —    (0.1) (0.1) 
Balance as of June 30, 2020
$0.9  $1,102.4  $2,201.5  $(121.7) 48.9  $(3,412.0) $(228.9) 

Common Stock IssuedAdditional Paid-In CapitalRetained EarningsAccumulated Other Comprehensive LossTreasury Stock at CostTotal Stockholders' Deficit
(For the three months ended June 30, 2019)
Shares Amount
Balance as of March 31, 2019
$0.9  $1,079.4  $1,898.7  $(180.2) 47.6  $(3,003.6) $(204.8) 
Net income—  —  110.7  —  —  —  110.7  
Dividends, $0.77 per share
—  —  (30.0) —  —  —  (30.0) 
Foreign currency translation adjustments—  —  —  3.4  —  —  3.4  
Pension and post-retirement liability changes, net of tax expense of $16.4
—  —  —  49.8  —  —  49.8  
Stock-based compensation expense—  6.1  —  —  —  —  6.1  
Change in cash flow hedges, net of tax benefit of $0.8
—  —  —  (2.6) —  —  (2.6) 
Treasury shares reissued for common stock—  0.3  —  —    0.6  0.9  
Treasury stock purchases—    —  —  0.5  (151.0) (151.0) 
Balance as of June 30, 2019
$0.9  $1,085.8  $1,979.4  $(129.6) 48.1  $(3,154.0) $(217.5) 

The accompanying notes are an integral part of these consolidated financial statements.







4



LENNOX INTERNATIONAL INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' DEFICIT
For the three and six months ended June 30, 2020 and 2019 (Unaudited)
(In millions, except per share data)
Common Stock IssuedAdditional Paid-In CapitalRetained EarningsAccumulated Other Comprehensive LossTreasury Stock at CostTotal Stockholders' Deficit
(For the six months ended June 30, 2020)
SharesAmount
Balance as of December 31, 2019
$0.9  $1,093.5  $2,148.7  $(103.8) 48.6  $(3,309.5) $(170.2) 
Cumulative effect adjustment upon adoption of new accounting standard (ASU 2016-13)—  —  (1.3) —  —  —  (1.3) 
Net income—  —  112.9  —  —  —  112.9  
Dividends, $1.54 per share
—  —  (58.8) —  —  —  (58.8) 
Foreign currency translation adjustments—  —  —  (17.8) —  —  (17.8) 
Pension and post-retirement liability changes, net of tax expense of $0.1
—  —  —  0.5  —  —  0.5  
Stock-based compensation expense—  10.4  —  —  —  —  10.4  
Change in cash flow hedges, net of tax benefit of $0.8
—  —  —  (0.6) —  —  (0.6) 
Treasury shares reissued for common stock—  (1.5) —  —  (0.1) 3.1  1.6  
Treasury stock purchases—  —  —  —  0.4  (105.6) (105.6) 
Balance as of June 30, 2020
$0.9  $1,102.4  $2,201.5  $(121.7) 48.9  $(3,412.0) $(228.9) 


Common Stock IssuedAdditional Paid-In CapitalRetained EarningsAccumulated Other Comprehensive LossTreasury Stock at CostTotal Stockholders' Deficit
(For the six months ended June 30, 2019)
SharesAmount
Balance as of December 31, 2018
$0.9  $1,078.8  $1,855.0  $(188.8) 47.3  $(2,895.5) $(149.6) 
Cumulative effect adjustment upon adoption of new accounting standard (ASC 842)—  —  (0.3) —  —  —  (0.3) 
Net income—  —  180.0  —  —  —  180.0  
Dividends, $1.41 per share
—  —  (55.3) —  —  —  (55.3) 
Foreign currency translation adjustments—  —  —  6.0  —  —  6.0  
Pension and post-retirement liability changes, net of tax expense of $16.4
—  —  —  49.6  —  —  49.6  
Stock-based compensation expense—  11.4  —  —  —  —  11.4  
Change in cash flow hedges, net of tax expense of $1.5
—  —  —  3.6  —  —  3.6  
Treasury shares reissued for common stock—  (4.4) —  —  (0.2) 6.0  1.6  
Treasury stock purchases—  —  —  —  1.0  (264.5) (264.5) 
Balance as of June 30, 2019
$0.9  $1,085.8  $1,979.4  $(129.6) 48.1  $(3,154.0) $(217.5) 
The accompanying notes are an integral part of these consolidated financial statements.
5


xLENNOX INTERNATIONAL INC. AND SUBSIDIARIES
Consolidated Statements of Cash Flows
(Unaudited)
(Amounts in millions)For the Six Months Ended June 30,
20202019
Cash flows from operating activities:
Net income$112.9  $180.0  
Adjustments to reconcile net income to net cash provided by (used in) operating activities:
Loss on sale of business  8.8  
Insurance recoveries received for property damage incurred from natural disaster
  (12.8) 
Income from equity method investments(7.2) (7.2) 
Dividends from affiliates2.5  2.0  
Restructuring charges, net of cash paid