Lennox International Inc. Announces Record Third Quarter Net Income; EPS of $0.64 on 26 Percent Sales Growth
DALLAS, Oct. 27 /PRNewswire/ -- Lennox International Inc. (NYSE: LII) announced today that 1999 third quarter net income increased 11 percent to a record $27.3 million from $24.6 million in third quarter 1998.
Sales also achieved record levels for the quarter, increasing 26 percent to $669.1 million, up from $529.2 million in the third quarter of 1998. Operating income for the quarter increased 22 percent to $54.6 million from $44.9 million last year.
The company reported diluted earnings per share for the quarter of $0.64. On a pro forma basis, assuming that the company's initial public offering had occurred at January 1st of each year, diluted per share earnings for the quarter increased to $0.61 this year from $0.59 last year.
"In a time of unprecedented change in our industry, we believe we are successfully executing strategies to take advantage of the opportunities being presented to us," said John Norris, Jr., Chairman and Chief Executive Officer. "In particular, the successful implementation of our dealer acquisition strategy is driving strong growth in our North American Residential business segment." The company reported that to date 80 dealers, representing run rate annual revenues of $359 million, have been acquired for a total purchase price of approximately $175 million.
Norris was also pleased by the company's overseas performance. "Our new management team in Europe has made a significant contribution by implementing several important operational improvements. Also, our recent acquisitions in the Asia Pacific region have provided the critical mass we need to be profitable in that area."
Domestic sales, in the US and Canada, increased 21 percent over the same period last year and represented 82 percent of total company revenues for the quarter. International sales, accounting for 18 percent of total revenues in the quarter, increased by 58 percent.
Segment Performance
North American Residential operating income increased 9 percent to $44.8 million on revenue growth of 28 percent. Growth due to acquisitions was fueled primarily by dealer acquisitions and hearth products. Organic growth, adjusted for the elimination of sales to dealers that were not owned last year, was 5 percent supported by favorable summer weather. Segment operating margins declined to 11.6 percent from 13.7 percent last year due primarily to the integration of lower margin acquired businesses. Higher information technology, freight, advertising and promotion expenditures reduced margins by approximately 50 basis points.
Commercial Air Conditioning operating income improved from $1.8 million to $5.1 million on revenue growth of 14 percent fueled by double-digit growth in Europe. Increased management focus has resulted in significant operating improvements, both domestically and internationally, contributing to operating margins improving to 4.0 percent this year from 1.6 percent last year.
Commercial Refrigeration operating income grew by 8 percent to $9.9 million on revenue growth of 41 percent. Acquired businesses in Asia Pacific accounted for nearly all third quarter sales growth. While operating margins improved in both domestic and international organic businesses, integration of lower margin acquired businesses resulted in operating margins declining from 13.7 percent last year to 10.5 percent this year. Margin erosion in Brazil, caused largely by the recent currency devaluation, reduced segment operating margins by approximately 30 basis points.
Heat Transfer operating income was $2.9 million on sales of $60.8 million. Acquisitions in Asia Pacific provided virtually all increase in revenues. Organic sales and income were impacted by a one week shut down in domestic production to allow the successful implementation of SAP at the Grenada, MS production facility.
Nine Month Performance
For the nine months ending September 30, 1999, reported diluted earnings per share were $1.48. Pro forma for a January 1st initial public offering, earnings per share increased to $1.34 for the first nine months of 1999, compared with $1.23 for the same period in 1998. Total Lennox International sales increased by 28 percent to $1,750.0 million from $1,364.8 million a year ago. Operating income rose 25 percent to $121.3 million from $96.8 million in the first nine months of 1998. Net income increased 15 percent to $57.5 million from $50.0 million over the same period.
Selling heating, ventilation, air conditioning, heat transfer and refrigeration equipment in over 70 countries worldwide, Lennox International Inc. is one of the world's leading companies specializing in climate control solutions. It is the parent company of Lennox Industries Inc., Armstrong Air Conditioning Inc., Heatcraft Inc., and Lennox Global Ltd. Lennox International stock is traded on the New York Stock Exchange under the symbol "LII." Additional information about Lennox International is available at: www.lennoxinternational.com.
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 INCOME
For the Three Months and Nine Months Ended September 30, 1999 and 1998
(Unaudited, in thousands, except per share data)
For the For the
Three Months Ended Nine Months Ended
September 30, September 30,
1999 1998 1999 1998
NET SALES $669,053 $529,169 $1,749,953 $1,364,799
COST OF GOODS SOLD 456,611 359,663 1,199,611 930,464
Gross Profit 212,442 169,506 550,342 434,335
OPERATING EXPENSES:
Selling, general and
administrative 154,735 125,676 422,529 331,294
Other operating expenses,
net 3,078 (1,044) 6,486 6,247
Income from operations 54,629 44,874 121,327 96,794
INTEREST EXPENSE, net 9,093 4,437 24,193 10,903
OTHER 378 754 (403) 1,286
MINORITY INTEREST 832 205 212 (583)
Income before income taxes 44,326 39,478 97,325 85,188
PROVISION FOR INCOME TAXES 17,042 14,884 39,840 35,220
Net income $27,284 $24,594 $57,485 $49,968
REPORTED EARNINGS PER SHARE (A):
Basic $0.65 $0.70 $ 1.52 $1.44
Diluted $0.64 $0.68 $ 1.48 $1.40
PRO FORMA EARNINGS PER SHARE (B):
Diluted $0.61 $0.59 $ 1.34 $1.23
(A) 8,088,490 additional shares issued in Lennox IPO August 3, 1999
(B) Pro forma EPS assumes IPO occurred January 1, each fiscal year.
(Interest expense, income tax, and number of shares have been
adjusted.)
For the For the
Three Months Ended Nine Months Ended
September 30, September 30,
Net Sales 1999 1998 1999 1998
North American residential $386,108 $300,667 $1,009,411 $764,124
Commercial air conditioning 127,922 112,364 337,985 286,209
Commercial refrigeration 94,176 67,049 238,351 176,058
Heat transfer 60,847 49,089 164,206 138,408
$669,053 $529,169 $1,749,953 $1,364,799
For the For the
Three Months Ended Nine Months Ended
September 30, September 30,
Income (Loss) from Operations 1999 1998 1999 1998
North American residential $44,790 $41,188 $109,441 $100,683
Commercial air conditioning 5,138 1,787 6,285 (3,303)
Commercial refrigeration 9,925 9,164 19,095 17,092
Heat transfer 2,851 4,377 10,308 11,274
Corporate and other (8,075) (11,642) (23,802) (28,952)
$54,629 $44,874 $121,327 $96,794
LENNOX INTERNATIONAL INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
As of September 30, 1999 and December 31, 1998
(In thousands, except share data)
ASSETS
September 30, December 31,
1999 1998
(unaudited)
CURRENT ASSETS:
Cash and cash equivalents $41,122 $28,389
Accounts and notes receivable, net 484,420 318,858
Inventories 327,067 274,679
Deferred income taxes 38,406 37,426
Other assets 40,081 36,183
Total current assets 931,096 695,535
INVESTMENTS IN JOINT VENTURES 12,479 17,261
PROPERTY, PLANT AND EQUIPMENT, net 302,285 255,125
GOODWILL, net 323,103 155,290
OTHER ASSETS 40,471 29,741
TOTAL ASSETS $1,609,434 $1,152,952
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Short-term debt $157,270 $56,070
Current maturities of long-term debt 25,424 18,778
Accounts payable 200,088 149,824
Accrued expenses 206,882 207,040
Income taxes payable 9,271 534
Total current liabilities 598,935 432,246
LONG-TERM DEBT 309,467 242,593
DEFERRED INCOME TAXES 12,726 11,628
POSTRETIREMENT BENEFITS, OTHER THAN PENSIONS 15,735 16,511
OTHER LIABILITIES 70,336 60,845
Total liabilities 1,007,199 763,823
MINORITY INTEREST 15,213 12,689
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, 44,958,240 shares and
35,546,940 shares issued and outstanding
for 1999 and 1998, respectively 450 355
Additional paid-in capital 199,302 32,889
Retained earnings 398,412 350,851
Currency translation adjustments (11,142) (7,655)
Total stockholders' equity 587,022 376,440
TOTAL LIABILITIES AND STOCKHOLDERS'
EQUITY $1,609,434 $1,152,952
SOURCE Lennox International Inc.
Web site: http: //www.lennoxinternational.com
CONTACT: Bill Moltner, Director, Investor Relations of Lennox International Inc., 972-497-6670