Lennox International Reports Solid Fourth Quarter and Strong Full Year Results; Reaffirms 2008 Guidance
- 4Q07 adjusted earnings per share of $0.55, 4Q07 GAAP earnings per share of $0.59, up 20% and 2%, respectively
- Full year adjusted earnings per share of $2.50, GAAP earnings per share of $2.43, up 15% and 8%, respectively
- Full year free cash flow of $170 million, up 35% over 2006; 2007 cash from operations of $238 million Reaffirms 2008 guidance
(Logo: http://www.newscom.com/cgi-bin/prnh/20020304/DAM053LOGO)
For the fourth quarter, revenue was $887 million, up 1% over the prior year, with foreign exchange contributing 4% to growth. Diluted earnings per share on an adjusted basis, a non-GAAP measure, were $0.55 compared to $0.46 in the year ago quarter, growth of 20%. Diluted earnings per share on a GAAP basis grew 2% to $0.59 compared to $0.58 in the year ago quarter.
For the full year, revenue was $3.7 billion, up 1% over the prior year, with foreign exchange contributing 2% to growth. Diluted earnings per share on an adjusted basis, a non-GAAP measure, were $2.50 compared to $2.18 in the prior year, growth of 15%. Diluted earnings per share on a GAAP basis were $2.43 compared to $2.26 in the prior year, growth of 8%.
"Lennox International had a solid fourth quarter and strong results for the year," said Todd Bluedorn, chief executive officer. "Three of our four businesses -- Commercial, Service Experts, and Refrigeration -- had outstanding performance, with profit growth in the double-digits and margin expansion. In the face of a tough market, our residential business took aggressive cost reduction actions and ended the year with solid results.
"We reaffirm our 2008 outlook provided in December of adjusted earnings per share in the range of $2.85 to $3.00 and GAAP earnings per share in the range of $2.73 to $2.88. While the residential market will be soft entering 2008, we will continue our focus on the cost side of the equation and execute on our strategic priorities."
(Note: See attached schedules for full financial details, reconciliations of non-GAAP financial measures, and a description of adjusting items.)
FOURTH QUARTER 2007 FINANCIAL HIGHLIGHTS
Revenue: Revenue for the fourth quarter was $887 million, up 1% over the prior year.
Gross Profit: Adjusted gross profit in the fourth quarter was $248 million, up 11% from $224 million in the year ago quarter. Adjusted gross profit margin increased to 28% compared to 26% in the year ago quarter, primarily due to price increases and lower operating and manufacturing costs. Gross profit on a GAAP basis, which includes the gain for the warranty program adjustment, was $265 million compared to $224 million in a year ago quarter.
Net Income: For the fourth quarter, adjusted net income was $36 million, or $0.55 diluted earnings per share, compared to $33 million, or $0.46 diluted earnings per share in the fourth quarter of 2006. On a GAAP basis, fourth quarter 2007 net income was $39 million, or $0.59 diluted earnings per share. Fourth quarter 2006 GAAP net income was $41 million, with diluted earnings per share of $0.58.
Adjusted net income results for the fourth quarter of 2007 exclude a net after tax gain of $3 million, which are derived from:
- $7 million charge from restructuring activities in Refrigeration, Hearth Products, and corporate
- $1 million charge primarily from the net change in unrealized losses on open futures contracts
- $11 million gain for the Pulse furnace warranty program adjustment
Revenue: For the full year, revenue was $3.7 billion, up 1% over the prior year, with foreign exchange contributing 2% to sales growth.
Gross Profit: Adjusted gross profit for the year was $1.0 billion, up 8% from $960 million in the year ago quarter. Adjusted gross profit margin increased to 28% compared to 26% for the year ago primarily due to price increases and lower operating and manufacturing costs. Gross profit for the year on a GAAP basis, which includes the gain for the warranty program adjustment, was $1.1 billion, compared to $960 million in 2006.
Net Income: Adjusted net income for the full year was $174 million, or $2.50 diluted earnings per share, compared to $160 million, or $2.18 diluted earnings per share in 2006. On a GAAP basis, net income was $169 million, or $2.43 diluted earnings per share, compared to $166 million, or $2.26 diluted earnings per share in 2006.
Adjusted net income results for 2007 exclude net after tax charges of $5 million, which are derived from:
- $16 million charges from restructuring activities in Refrigeration, Residential Heating and Cooling, and corporate,
- $3 million charge primarily from the net change in unrealized losses on open futures contracts
- $11 million gain for the Pulse furnace warranty program adjustment
- $3 million gain due to change in an estimated tax gain
Free Cash Flow and Total Debt: Cash generated from operations for the year was $238 million and the company invested $68 million in capital assets, resulting in free cash flow of $170 million versus $126 million in 2006. Total debt as of December 31, 2007 was $208 million.
During 2007, the company returned $282 million to shareholders through share repurchases of $247 million and dividend payments of $35 million. The company repurchased 7,136,987 shares during 2007 of which 5,878,987 shares were repurchased under the 2007 Share Repurchase Program announced in July, representing 40.7% of the $500 million authorization. The company is on track to complete the share repurchase plan by third quarter 2008.
BUSINESS SEGMENT FINANCIAL HIGHLIGHTS
Residential Heating and Cooling
- 4Q07 revenue of $354 million, down 11% from $397 million in the year ago quarter
- 4Q07 segment profit of $31 million, down 27% from $43 million in 4Q06
- 4Q07 segment profit margin of 9% versus 11% in 4Q06
- 2007 revenue of $1.7 billion, down 10% from $1.9 billion in 2006
- 2007 segment profit of $174 million, down 18% from $212 million in 2006
- 2007 profit margin of 10% versus 11% in 2006
Fourth quarter and full year results were impacted by lower volume and partially offset by price increases, favorable product mix, and lower expenses due to cost reduction activity.
Commercial Heating and Cooling
- 4Q07 revenue of $224 million, up 14% from $197 million in year ago quarter
- 4Q07 segment profit of $24 million, up 26% from $19 million in 4Q06
- 4Q07 segment profit margin of 11% versus 10% in 4Q06
- 2007 revenue of $875 million, up 16% from $751 million in 2006
- 2007 segment profit of $101 million, up 39% from $73 million in 2006
- 2007 profit margin of 12% versus 10% in 2006
Fourth quarter and full year segment profit improvement were primarily driven by price increases, favorable product mix and foreign exchange gains.
Service Experts
- 4Q07 revenue of $169 million, up 5% from $161 million in the year ago quarter
- 4Q07 segment profit of $7 million, down 14% from $8 million in 4Q06
- 4Q07 segment profit margin of 4% versus 5% in 4Q06
- 2007 revenue of $681 million, up 4% from $654 million in 2006
- 2007 segment profit of $25 million, up 38% from $18 million in 2006
- 2007 profit margin of 4% versus 3% in 2006
The improvement in revenue and segment profit was primarily driven by a shift in product mix to higher margin service and replacement, geographic mix, and cost-reduction efforts.
Refrigeration
- 4Q07 revenue of $158 million, up 17% from $135 million in the year ago quarter
- 4Q07 segment profit of $15 million, up 27% from $12 million in 4Q06
- 4Q07 segment profit margin of 9%, an 80 bps improvement over 4Q06 -- 2007 revenue of $608 million, up 15% from $530 million in 2006 -- 2007 segment profit of $62 million, up 18% from $52 million in 2006 -- 2007 profit margin of 10%, a 30 bps improvement over last year
The year over year improvement in financial results for the quarter and full year was due to favorable international market conditions, pricing, and cost reduction initiatives.
2008 FULL YEAR OUTLOOK
The company reaffirmed its 2008 outlook originally provided on December 12th, 2007.
- Total company revenue growth of approximately 2% to 5%
- Adjusted earnings per share in the range of $2.85 to $3.00 (excludes $0.12 per share of restructuring charges)
- GAAP earnings per share in the range of $2.73 to $2.88
- Capital expenditures of approximately $90 million
- Tax rate of 36% to 37%
CONFERENCE CALL INFORMATION
A conference call to discuss the company's fourth quarter results will be held this morning at 9:30 a.m. (Central). To listen, please call the conference call line at 612-332-0806 ten minutes prior to the scheduled start time and use reservation number 907885. This conference call will also be webcast on Lennox International's web site at http://www.lennoxinternational.com.
If you are unable to participate in this conference call, a replay will be available from 12:00 p.m. (Central) February 6, 2008 through February 13, 2008 by dialing 800-475-6701 (USA) or 320-365-3844 (International) using access code 907885. This call will also be archived on the company's web site.
Lennox International Inc. is a global leader in the heating, 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 Karen Fugate, 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 including the impact of higher raw material prices, LII's ability to implement price increases for its products and services, and the impact of unfavorable weather and a decline in new construction activity on the demand for products and services that could cause actual results to differ materially from such statements. For information concerning these risks and uncertainties, see LII's publicly available filings with the Securities and Exchange Commission. LII 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 and Years Ended December 31, 2007 and 2006
(In millions, except per share data)
For the For the
Three Months Ended Years Ended
December 31, December 31,
2007 2006 2007 2006
(unaudited) (unaudited) (unaudited)
NET SALES $886.6 $873.7 $3,749.7 $3,715.4
COST OF GOODS SOLD 621.3 649.9 2,697.1 2,755.4
Gross profit 265.3 223.8 1,052.6 960.0
OPERATING EXPENSES:
Selling, general and
administrative expenses 196.1 188.1 778.7 778.0
(Gains), losses and
other expenses, net (1.3) 0.8 (6.4) (46.6)
Restructuring charges 11.0 0.1 25.2 13.3
Equity in earnings of
unconsolidated affiliates (1.7) (0.5) (10.6) (8.0)
Operational income 61.2 35.3 265.7 223.3
INTEREST EXPENSE, net 2.0 0.8 6.8 4.4
OTHER EXPENSE (INCOME), net 0.5 0.4 0.7 0.5
Income before income taxes 58.7 34.1 258.2 218.4
PROVISION FOR INCOME TAXES 19.9 (7.0) 89.2 52.4
Net income $38.8 $41.1 $169.0 $166.0
NET INCOME PER SHARE:
Basic $0.61 $0.61 $2.55 $2.37
Diluted $0.59 $0.58 $2.43 $2.26
AVERAGE SHARES OUTSTANDING:
Basic 63.4 67.4 66.4 69.9
Diluted 66.3 71.1 69.4 73.5
CASH DIVIDENDS DECLARED
PER SHARE $0.14 $0.13 $0.53 $0.46
LENNOX INTERNATIONAL INC. AND SUBSIDIARIES
SEGMENT REVENUES AND OPERATING PROFIT
For the Three Months and Years Ended December 31, 2007 and 2006
(Unaudited, in millions)
For the For the
Three Months Ended Years Ended
December 31, December 31,
2007 2006 2007 2006
Net Sales
Residential
Heating & Cooling $354.1 $397.1 $1,669.6 $1,861.2
Commercial Heating
& Cooling 224.4 197.1 875.0 751.2
Service Experts 169.5 161.3 681.5 654.1
Refrigeration 157.6 135.2 607.7 529.9
Eliminations (A) (19.0) (17.0) (84.1) (81.0)
$886.6 $873.7 $3,749.7 $3,715.4
Segment Profit (Loss) (B)
Residential Heating &
Cooling $31.2 $43.0 $174.4 $211.6
Commercial Heating &
Cooling 24.4 19.4 101.0 72.6
Service Experts 6.8 7.9 25.2 18.2
Refrigeration 14.9 11.7 61.5 51.9
Corporate and other (20.9) (31.7) (85.0) (98.2)
Eliminations (A) 0.8 0.5 0.6 0.8
Subtotal that includes
segment profit and
eliminations 57.2 50.8 277.7 256.9
Reconciliation to income
before income taxes:
Warranty program
adjustment (16.9) -- (16.9) --
(Gains), losses and
other expenses, net (1.3) 0.8 (6.4) (46.6)
Restructuring charges 11.0 0.1 25.2 13.3
Interest expense, net 2.0 0.8 6.8 4.4
Other expense (income),
net 0.5 0.4 0.7 0.5
Less: Realized gains on
settled futures
contracts not
designated as cash
flow hedges and
the ineffective
portion of settled
cash flow
hedges (C) 0.7 13.7 3.9 66.0
Less: Foreign currency
exchange gains
(losses)(C) 2.5 0.9 6.2 0.9
$58.7 $34.1 $258.2 $218.4
(A) Eliminations consist of intercompany sales between business segments,
such as products sold to Service Experts by the Residential Heating &
Cooling segment.
(B) The Company defines segment profit (loss) as a segment's income (loss)
from continuing operations before income taxes included in the
accompanying Consolidated Statements of Operations excluding unusual
and nonrecurring items; (gains), losses and other expenses, net;
restructuring charges; goodwill impairment; interest expense, net; and
other expense (income), net; less (plus) realized gains (losses) on
settled futures contracts not designated as cash flow hedges and the
ineffective portion of settled cash flow hedges; and less (plus)
foreign currency exchange gains (losses). For the three months and
year ended December 31, 2007, the Company excluded a $16.9 million
reduction in warranty expenses related to a one-time change in its
Residential Heating & Cooling segment's warranty program.
(C) Realized gains (losses) on settled futures contracts not designated
as cash flow hedges, the ineffective portion of settled cash flow
hedges and foreign currency gains (losses) are components of (Gains),
Losses and Other Expenses, net in the accompanying Consolidated
Statements of Operations.
LENNOX INTERNATIONAL INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
As of December 31, 2007 and December 31, 2006
(In millions, except share and per share data)
December 31, December 31,
2007 2006
(unaudited)
ASSETS
CURRENT ASSETS:
Cash and cash equivalents $145.5 $144.3
Short-term investments 27.7 --
Accounts and notes receivable, net 492.5 502.6
Inventories, net 325.7 305.5
Deferred income taxes 30.9 22.2
Other assets 48.4 43.8
Total current assets 1,070.7 1,018.4
PROPERTY, PLANT AND EQUIPMENT, net 317.9 288.2
GOODWILL, net 262.8 239.8
DEFERRED INCOME TAXES 94.0 104.3
OTHER ASSETS 69.2 69.1
TOTAL ASSETS $1,814.6 $1,719.8
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Short-term debt $4.8 $1.0
Current maturities of long-term debt 36.4 11.4
Accounts payable 289.8 278.6
Accrued expenses 352.1 326.3
Income taxes payable 1.1 33.8
Total current liabilities 684.2 651.1
LONG-TERM DEBT 166.7 96.8
POSTRETIREMENT BENEFITS, OTHER THAN PENSIONS 16.2 12.9
PENSIONS 34.8 49.6
OTHER LIABILITIES 104.2 105.0
Total liabilities 1,006.1 915.4
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, 81,897,439 shares and
76,974,791 shares issued for 2007 and 2006,
respectively 0.8 0.8
Additional paid-in capital 760.7 706.6
Retained earnings 447.4 312.5
Accumulated other comprehensive income (loss) 63.6 (5.1)
Treasury stock, at cost, 19,844,677 shares and
9,818,904 shares for 2007 and 2006,
respectively (464.0) (210.4)
Total stockholders' equity 808.5 804.4
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $1,814.6 $1,719.8
LENNOX INTERNATIONAL INC. AND SUBSIDIARIES
Reconciliation to U.S. GAAP (Generally Accepted Accounting Principles)
Measures
(Unaudited, in millions, except per share and ratio data)
Reconciliation of Net Income to Adjusted Net Income
For the Three Months Ended December 31, 2007
Net Change
in Unrealized
Losses on
Open Futures
Contracts Warranty
As and Other Restructuring Program As
Reported Items, Net Charges Adjustment Adjusted
NET SALES $886.6 $- $- $- $886.6
COST OF GOODS
SOLD 621.3 - - 16.9 638.2
Gross profit
(loss) 265.3 - - (16.9) 248.4
OPERATING EXPENSES:
Selling, general
and
administrative
expenses 196.1 - - - 196.1
(Gains), losses
and other
expenses, net(1) (1.3) (1.9) - - (3.2)
Restructuring
charges 11.0 - (11.0) - -
Equity in
earnings of
unconsolidated
affiliates (1.7) - - - (1.7)
Operational
income (loss) 61.2 1.9 11.0 (16.9) 57.2
INTEREST EXPENSE,
net 2.0 - - - 2.0
OTHER EXPENSE,
net 0.5 - - - 0.5
Income (loss)
before income
taxes 58.7 1.9 11.0 (16.9) 54.7
PROVISION FOR
(BENEFIT FROM)
INCOME TAXES 19.9 0.8 4.1 (6.4) 18.4
Net income
(loss) $38.8 $1.1 $6.9 $(10.5) $36.3
NET INCOME
(LOSS) PER
SHARE -
DILUTED $0.59 $0.02 $0.10 $ (0.16) $0.55
Note: Management uses adjusted net income, which is not defined by U.S.
GAAP, to measure the Company's operating performance and to analyze year-
over-year changes in operating income with and without the effects of
certain (gains), losses and other expenses, net, restructuring charges,
unusual and nonrecurring items and certain income tax items. Management
believes that excluding these effects is helpful in assessing the overall
performance of the Company.
(1) (Gains), losses and other expenses, net include the following:
For the Three Months Ended
December 31, 2007
Pre-tax Tax (Benefit) After-tax
(Gain) Loss Provision (Gain) Loss
Realized gains on settled
futures contracts $(0.7) $0.2 $(0.5)
Net change in unrealized losses
on open futures contracts 2.2 (0.8) 1.4
Foreign currency exchange gain (2.5) 0.7 (1.8)
Other items, net (0.3) -- (0.3)
(Gains), losses and other
expenses, net $(1.3) $0.1 $(1.2)
For the Three Months Ended December 31, 2006
Net Change in
Unrealized
Losses on
Open Futures
Contracts and
As Other Items, Restructuring Income Tax As
Reported Net Charges Items(3) Adjusted
NET SALES $873.7 $- $- $- $873.7
COST OF GOODS
SOLD 649.9 - - - 649.9
Gross profit 223.8 - - - 223.8
OPERATING
EXPENSES:
Selling, general
and
administrative
expenses 188.1 - - - 188.1
(Gains), losses
and other
expenses, net(2) 0.8 (15.4) - - (14.6)
Restructuring
charges 0.1 - (0.1) - -
Equity in
earnings of
unconsolidated
affiliates (0.5) - - - (0.5)
Operational
income 35.3 15.4 0.1 - 50.8
INTEREST
EXPENSE, net 0.8 - - - 0.8
OTHER EXPENSE,
net 0.4 - - - 0.4
Income before
income taxes 34.1 15.4 0.1 - 49.6
PROVISION FOR
(BENEFIT FROM)
INCOME TAXES (7.0) 5.8 0.1 18.1 17.0
Net income
(loss) $41.1 $9.6 $- $(18.1) $32.6
NET INCOME
(LOSS) PER
SHARE -
DILUTED $0.58 $0.14 $- $(0.26) $0.46
(2)(Gains), losses and other expenses, net include the following:
For the Three Months Ended
December 31, 2006
Pre-tax Tax (Benefit) After-tax
(Gain) Loss Provision (Gain) Loss
Realized gains on settled
futures contracts $(13.7) $5.2 $(8.5)
Net change in unrealized losses
on open futures contracts 15.6 (5.8) 9.8
Foreign currency exchange gain (0.9) 0.3 (0.6)
Other items, net (0.2) -- (0.2)
(Gains), losses and other
expenses, net $0.8 $(0.3) $0.5
(3) Income tax items include the following:
For the
Three Months Ended
December 31, 2006
Revaluation of deferred tax asset valuation allowances $(3.8)
Release of income tax reserves related to prior years,
net (excluding interest) (14.3)
Income tax items $(18.1)
For the Year Ended December 31, 2007
Net Change in
Unrealized
Losses on Warranty
Open Futures Program
Contracts and Adjustment
As Other Items, Restructuring and Income As
Reported Net Charges Tax Items(5) Adjusted
NET SALES $3,749.7 $- $- $- $3,749.7
COST OF
GOODS SOLD 2,697.1 - - 16.9 2,714.0
Gross profit
(loss) 1,052.6 - - (16.9) 1,035.7
OPERATING
EXPENSES:
Selling,
general and
administrative
expenses 778.7 - - - 778.7
(Gains),
losses
and other
expenses,
net(4) (6.4) (3.7) - - (10.1)
Restructuring
charges 25.2 - (25.2) - -
Equity in
earnings of
unconsolidated
affiliates (10.6) - - - (10.6)
Operational
income
(loss) 265.7 3.7 25.2 (16.9) 277.7
INTEREST EXPENSE,
net 6.8 - - - 6.8
OTHER EXPENSE,
net 0.7 - - - 0.7
Income (loss)
before income
taxes 258.2 3.7 25.2 (16.9) 270.2
PROVISION FOR
(BENEFIT FROM)
INCOME TAXES 89.2 1.2 9.4 (3.2) 96.6
Net income
(loss) $169.0 $2.5 $15.8 $(13.7) $173.6
NET INCOME
(LOSS) PER
SHARE -
DILUTED $2.43 $0.04 $0.23 $(0.20) $2.50
(4)(Gains), losses and other expenses, net include the following:
For the Year Ended December 31, 2007
Pre-tax Tax (Benefit) After-tax
(Gain) Loss Provision (Gain) Loss
Realized gains on settled
futures contracts $(3.9) $1.3 $(2.6)
Net change in unrealized losses
on open futures contracts 3.3 (1.2) 2.1
Foreign currency exchange gain (6.2) 2.1 (4.1)
Other items, net 0.4 -- 0.4
(Gains), losses and other
expenses, net $(6.4) $2.2 $(4.2)
(5)Warranty program adjustment and income tax items include the following:
For the Year Ended December 31, 2007
Pre-tax Tax (Benefit) After-tax
Gain Provision Gain
Warranty program adjustment $(16.9) $6.4 $(10.5)
Change in estimated tax gain
from prior year -- (3.2) (3.2)
(Gains), losses and other
expenses, net $(16.9) $3.2 $(13.7)
For the Year Ended December 31, 2006
Net Change in
Unrealized
Losses on
Open Futures
Contracts and
As Other Items, Restructuring Income Tax As
Reported Net Charges Items(7) Adjusted
NET SALES $3,715.4 $- $- $- $3,715.4
COST OF
GOODS SOLD 2,755.4 - - - 2,755.4
Gross profit 960.0 - - - 960.0
OPERATING
EXPENSES:
Selling,
general and
administrative
expenses 778.0 - - - 778.0
(Gains), losses
and other
expenses,
net (6) (46.6) (20.3) - - (66.9)
Restructuring
charges 13.3 - (13.3) - -
Equity in
earnings of
unconsolidated
affiliates (8.0) - - - (8.0)
Operational
income 223.3 20.3 13.3 - 256.9
INTEREST
EXPENSE, net 4.4 - - - 4.4
OTHER EXPENSE,
net 0.5 - - - 0.5
Income before
income taxes 218.4 20.3 13.3 - 252.0
PROVISION FOR
INCOME TAXES 52.4 7.5 4.8 27.0 91.7
Net income
(loss) $166.0 $12.8 $8.5 $(27.0) $160.3
NET INCOME
(LOSS) PER
SHARE -
DILUTED $2.26 $0.17 $0.12 $(0.37) $2.18
(6)(Gains), losses and other expenses, net include the following:
For the Year Ended December 31, 2006
Pre-tax Tax (Benefit) After-tax
(Gain) Loss Provision (Gain) Loss
Realized gains on settled
futures contracts $(66.0) $24.8 $(41.2)
Net change in unrealized losses
on open futures contracts 20.8 (7.7) 13.1
Foreign currency exchange gain (0.9) 0.3 (0.6)
Other items, net (0.5) 0.2 (0.3)
(Gains), losses and other
expenses, net $(46.6) $17.6 $(29.0)
(7)Income tax items include the following:
For the Year Ended
December 31, 2006
Revaluation of deferred tax asset valuation allowances $(3.8)
Reversal of valuation allowance on deferred tax assets,
offset by other related charges (8.9)
Release of income tax reserves related to prior years,
net (excluding interest) (14.3)
Income tax items $(27.0)
Free Cash Flow
For the For the
Year Ended Year Ended
December 31, December 31,
2007 2006
Net cash provided by operating activities $238.1 $199.7
Purchase of property, plant and equipment (68.4) (73.8)
Free cash flow $169.7 $125.9
For the For the
Three Months Three Months
Ended Ended
December 31, December 31,
2007 2006
Net cash provided by operating activities $127.6 $115.0
Purchase of property, plant and equipment (23.9) (24.0)
Free cash flow $103.7 $91.0
Operational Working Capital
December 31, December 31,
2007 2006
December 31, Trailing December 31, Trailing
2007 12 Mo. Avg. 2006 12 Mo. Avg.
Accounts and Notes
Receivable, Net $492.5 $502.6
Allowance for Doubtful
Accounts 17.1 16.7
Accounts and Notes
Receivable, Gross 509.6 $580.5 519.3 $565.9
Inventories 325.7 305.5
Excess of Current Cost
Over Last-in,
First-out 70.4 56.9
Inventories as Adjusted 396.1 445.5 362.4 397.4
Accounts Payable (289.8) (340.8) (278.6) (336.6)
Operating Working
Capital (a) 615.9 685.2 603.1 626.7
Net Sales, Trailing
Twelve Months (b) 3,749.7 3,749.7 3,715.4 3,715.4
Operational Working
Capital Ratio (a/b) 16.4% 18.3% 16.2% 16.9%
Note: Management uses free cash flow and operational working capital,
which are not defined by U.S. GAAP, to measure the Company's operating
performance. Free cash flow and operational working capital are also two
of several measures used to determine incentive compensation for certain
employees.
SOURCE Lennox International Inc.
http://www.lennoxinternational.com