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,

2021

2020

Net sales

$

930.5

$

723.8

Cost of goods sold

674.0

558.1

Gross profit

256.5

165.7

Operating Expenses:

Selling, general and administrative expenses

145.3

131.1

Losses (gains) and other expenses, net

0.3

(1.0)

Restructuring charges

0.1

0.5

Loss from natural disasters, net of insurance recoveries

—

1.6

Income from equity method investments

(3.3)

(2.9)

Operating income

114.1

36.4

Pension settlement

0.7

—

Interest expense, net

6.0

8.7

Other expense (income), net

1.0

1.2

Income from continuing operations before income taxes

106.4

26.5

Provision for income taxes

22.2

14.0

Income from continuing operations

84.2

12.5

Discontinued Operations:

Loss from discontinued operations before income taxes

—

—

Income tax benefit

—

(0.4)

Income from discontinued operations

—

0.4

Net income

$

84.2

$

12.9

Earnings per share – Basic:

Income from continuing operations

$

2.22

$

0.33

Income from discontinued operations

—

0.01

Net income

$

2.22

$

0.34

Earnings per share – Diluted:

Income from continuing operations

$

2.20

$

0.32

Income from discontinued operations

—

0.01

Net income

$

2.20

$

0.33

Weighted Average Number of Shares Outstanding - Basic

38.0

38.4

Weighted Average Number of Shares Outstanding - Diluted

38.2

38.7

LENNOX INTERNATIONAL INC. AND SUBSIDIARIES
Segment Net Sales and Profit (Loss)
(Unaudited) 

(Amounts in millions)

For the Three Months Ended March 31,

2021

2020

Net Sales

Residential Heating & Cooling

$

606.3

$

442.1

Commercial Heating & Cooling

199.2

178.4

Refrigeration

125.0

103.3

$

930.5

$

723.8

Segment Profit (Loss) ⁽¹⁾

Residential Heating & Cooling

$

96.4

$

32.5

Commercial Heating & Cooling

27.4

18.7

Refrigeration

7.9

0.7

Corporate and other

(16.0)

(14.3)

Total segment profit

115.7

37.6

Reconciliation to Operating Income:

Loss from natural disasters, net of insurance recoveries

—

1.6

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

1.5

(0.9)

Restructuring charges

0.1

0.5

Operating income

$

114.1

$

36.4

⁽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,

◦      Special legal contingency charges,

◦      Asbestos-related litigation,

◦      Environmental liabilities,

◦      Charges incurred related to COVID-19 pandemic; and

◦      Other items, net,

•      Loss from natural disasters, net of insurance recoveries; and

•      Restructuring charges.

LENNOX INTERNATIONAL INC. AND SUBSIDIARIES

Consolidated Balance Sheets

(Amounts in millions, except shares and par values)

As of March 31,
2021

As of December 31,
2020

(Unaudited)

ASSETS

Current Assets:

Cash and cash equivalents

$

35.5

$

123.9

Short-term investments

4.5

5.1

Accounts and notes receivable, net of allowances of $9.2 and $9.6 in 2021 and 2020,
respectively

522.6

448.3

Inventories, net

502.3

439.4

Other assets

73.3

70.9

Total current assets

1,138.2

1,087.6

Property, plant and equipment, net of accumulated depreciation of $891.6 and $880.6 in
2021 and 2020, respectively

466.4

464.3

Right-of-use assets from operating leases

190.7

194.4

Goodwill

186.7

186.9

Deferred income taxes

7.6

13.2

Other assets, net

85.4

86.1

Total assets

$

2,075.0

$

2,032.5

LIABILITIES AND STOCKHOLDERS' DEFICIT

Current Liabilities:

Current maturities of long-term debt

165.0

9.9

Current operating lease liabilities

54.9

55.0

Accounts payable

372.9

340.3

Accrued expenses

254.5

296.1

Income taxes payable

1.8

—

Total current liabilities

849.1

701.3

Long-term debt

1,007.9

970.7

Long-term operating lease liabilities

138.5

142.8

Pensions

94.8

92.5

Other liabilities

145.4

142.3

Total liabilities

2,235.7

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

1,090.3

1,113.2

Retained earnings

2,440.9

2,385.8

Accumulated other comprehensive loss

(99.2)

(97.2)

Treasury stock, at cost, 49,396,668 shares and 48,820,969 shares for 2021 and 2020,
respectively

(3,593.6)

(3,419.8)

Total stockholders' deficit

(160.7)

(17.1)

Total liabilities and stockholders' deficit

$

2,075.0

$

2,032.5

LENNOX INTERNATIONAL INC. AND SUBSIDIARIES

Consolidated Statements of Cash Flows

(Unaudited)

(Amounts in millions)

For the Three Months Ended
March 31,

2021

2020

Cash flows from operating activities:

Net income

$

84.2

$

12.9

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

Income from equity method investments

(3.3)

(2.9)

Restructuring charges, net of cash paid

0.3

0.1

Provision for credit losses

2.0

1.2

Unrealized (gains) losses, net on derivative contracts

(0.2)

1.5

Stock-based compensation expense

8.5

3.7

Depreciation and amortization

17.4

19.0

Deferred income taxes

1.0

8.8

Pension expense

3.0

2.7

Pension contributions

(0.4)

(0.6)

Other items, net

(0.1)

0.2

Changes in assets and liabilities:

Accounts and notes receivable

(77.5)

(18.7)

Inventories

(62.5)

(71.0)

Other current assets

(9.5)

(0.7)

Accounts payable

41.2

(8.7)

Accrued expenses

(41.8)

(33.0)

Income taxes payable / receivable, net

14.0

(17.3)

   Leases, net

(0.7)

0.1

Other, net

6.9

3.9

Net cash used in operating activities

(17.5)

(98.8)

Cash flows from investing activities:

Proceeds from the disposal of property, plant and equipment

0.4

0.1

Purchases of property, plant and equipment

(24.7)

(24.7)

Proceeds from (purchases of) short-term investments

0.5

(1.1)

Net cash used in investing activities

(23.8)

(25.7)

Cash flows from financing activities:

Asset securitization borrowings

155.0

—

Asset securitization payments

—

(70.0)

Long-term debt payments

(2.9)

(2.6)

Borrowings from credit facility

202.0

682.5

Payments on credit facility

(165.0)

(342.5)

Proceeds from employee stock purchases

0.9

0.8

Repurchases of common stock

(200.0)

(100.0)

Repurchases of common stock to satisfy employee withholding tax obligations

(6.0)

(5.5)

Cash dividends paid

(29.5)

(29.7)

Net cash (used in) provided by financing activities

(45.5)

133.0

(Decrease) increase in cash and cash equivalents

(86.8)

8.5

Effect of exchange rates on cash and cash equivalents

(1.6)

(6.7)

Cash and cash equivalents, beginning of period

123.9

37.3

Cash and cash equivalents, end of period

$

35.5

$

39.1

Supplemental disclosures of cash flow information:

Interest paid

$

5.5

$

6.8

Income taxes paid (net of refunds)

$

8.2

$

21.3

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 March 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

$

106.4

$

(22.2)

$

84.2

$

26.5

$

(14.0)

$

12.5

Restructuring charges

0.1

(0.1)

—

0.5

(0.1)

0.4

Pension settlement

0.7

(0.1)

0.6

—

—

—

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

1.5

(0.2)

1.3

(0.9)

0.1

(0.8)

Excess tax benefits from share-based
compensation (b)

—

(1.2)

(1.2)

—

0.1

0.1

Other tax items, net (b)

—

2.0

2.0

—

8.2

8.2

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

—

—

—

1.6

(0.3)

1.3

Adjusted income from continuing operations,
a non-GAAP measure

$

108.7

$

(21.8)

$

86.9

$

27.7

$

(6.0)

$

21.7

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

$

2.20

$

0.32

Restructuring charges

—

0.01

Pension settlement

0.02

—

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

0.03

(0.02)

Excess tax benefits from share-based compensation (b)

(0.03)

—

Other tax items, net (b)

0.05

0.21

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

—

0.04

Change in share counts from share-based
compensation (c)

—

—

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

$

2.27

$

0.56

(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) The impact of excess tax benefits from the change in share-based compensation also impacts the Company's diluted share counts.  The reconciliation of average outstanding diluted shares on a GAAP and non-GAAP basis is included in this amount..

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

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

For the Three Months Ended
March 31,

2021

2020

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

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

$

(0.3)

$

0.1

Foreign currency exchange gains ^(a)

(0.3)

(0.5)

(Gain) loss on disposal of fixed assets ^(a)

(0.3)

0.1

Other operating (income) loss ^(a)

(0.3)

0.2

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

(0.2)

0.6

Special legal contingency charges ^(b)

0.2

—

Asbestos-related litigation ^(b)

1.1

(1.7)

Environmental liabilities ^(b)

0.6

0.2

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

0.6

—

Other items, net ^(b)

(0.8)

—

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

$

0.3

$

(1.0)

(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 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, 2021

ESTIMATED

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

$11.33-$11.93

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

(0.07)

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

$11.40-$12.00

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,

2021

2020

Average shares outstanding - diluted, a GAAP measure

38.2

38.7

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

—

—

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

38.2

38.7

Reconciliation of 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,

2021

2020

Net cash used in operating activities

$

(17.5)

$

(98.8)

Purchases of property, plant and equipment

(24.7)

(24.7)

Proceeds from the disposal of property, plant and equipment

0.4

0.1

Free cash flow, a Non-GAAP measure

$

(41.8)

$

(123.4)

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

Trailing Twelve 
Months to
March 31, 2021

Adjusted EBIT (a)

$

584.8

Depreciation and amortization expense (b)

69.1

EBITDA (a + b)

$

653.9

Total debt at March 31, 2021 (c)

$

1,172.9

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

1.8

Reconciliation of Adjusted EBIT, a Non-GAAP measure, to Income From Continuing Operations Before Income Taxes, a GAAP measure (dollars in millions)

Trailing Twelve 
Months to
March 31, 2021

Income from continuing operations before income taxes, a GAAP measure

$

525.1

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

15.7

Special product quality adjustments

1.0

Restructuring charges

10.4

Interest expense, net

25.6

Pension settlements

1.3

Loss from natural disasters, net of insurance recoveries

1.5

Other expense (income), net

4.2

Adjusted EBIT per above, a Non-GAAP measure

$

584.8