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Lennox International Reports Second Quarter Results
  • Adjusted EPS from continuing operations $0.67, and GAAP EPS from continuing operations $0.63
  • Generated $55 million in free cash flow, up 26%
  • Narrowing 2009 revenue guidance from down 15-19% to down 17-19%
  • Narrowing 2009 guidance for adjusted EPS from continuing operations from $1.65-$2.05 to $1.65-$1.80; GAAP guidance from continuing operations now $1.38-$1.53
DALLAS, July 22, 2009 /PRNewswire-FirstCall via COMTEX/ -- Lennox International Inc. (NYSE: LII) today reported financial results for the second quarter of 2009.

Revenue for the second quarter was $791 million, 21% below the prior-year quarter. Excluding the negative impact of foreign exchange, revenue would have been down 17%. Diluted earnings per share from continuing operations on an adjusted basis, a non-GAAP measure, was $0.67, compared to $1.02 in the record second quarter a year ago. Diluted earnings per share from continuing operations on a GAAP basis was $0.63, compared to $0.89 in the year-ago quarter.

"End market conditions remained difficult in the second quarter, but strong operational execution enabled Lennox to generate $55 million of free cash flow in the quarter, up 26% from last year," said Todd Bluedorn, Chief Executive Officer. "While the residential market continued to decline from a year ago, we saw the rate of decline slow in the second quarter. In the commercial and refrigeration markets, however, we saw the rate of decline increase in the quarter. Looking ahead at the full year, we are narrowing our revenue and adjusted EPS guidance to the low end of our previous range. We continue to execute on our cost reduction programs and strategic initiatives as offsets to the challenging end markets we expect through 2009."

(Note: See attached schedules for financial details, reconciliations of non-GAAP financial measures, and a description of adjusting items.)

FINANCIAL HIGHLIGHTS

Revenue: Revenue for the second quarter was $791 million, 21% below the prior-year quarter. Excluding the negative impact of foreign exchange, revenue would have been down 17%. Lower volume across all business segments impacted revenue, with offsets from improved price and mix over the year-ago quarter.

Gross Profit: Gross profit for the second quarter was $229 million, down 18% from $278 million in the year-ago quarter. Gross margin was 29.0% compared to 27.8% in the year-ago quarter, up 120 basis points. Second quarter 2009 gross margin includes a net positive warranty adjustment of $10 million compared to a positive adjustment of $4 million in the prior-year quarter. Gross margin also benefited from improvements in product price, mix, and manufacturing rationalization.

Income from Continuing Operations: Adjusted income from continuing operations in the second quarter was $38.0 million, or $0.67 diluted earnings per share, compared to adjusted income of $59.4 million, or $1.02 diluted earnings per share in the second quarter of 2008. Adjusted income from continuing operations for the second quarter of 2009 excludes a $3.4 million after-tax charge from previously announced restructuring activities and a $1.3 million after-tax gain from the net change in unrealized gains on open futures contracts and other items, net.

On a GAAP basis, income from continuing operations for the second quarter of 2009 was $35.9 million, or $0.63 diluted earnings per share, compared to income of $51.4 million, or $0.89 diluted earnings per share in the prior-year quarter.

In discontinued operations, the company took an after-tax charge of $4.2 million, or $0.07 per share, related to a legal judgment involving a Service Experts service center that had been sold in 2004.

Free Cash Flow and Total Debt: Net cash provided by operations in the second quarter was $66 million compared to $56 million in the prior-year quarter. The company invested approximately $11 million in capital assets resulting in free cash flow of $55 million for the quarter, compared to $44 million in the year-ago quarter. Total debt at the end of June 2009 was $320 million after the company paid down $85 million in the quarter. Total cash, cash equivalents and short-term investments were $99 million.

BUSINESS SEGMENT HIGHLIGHTS

Residential Heating & Cooling

Second quarter 2009 revenue from the Residential Heating & Cooling business segment was $379 million, a decrease of 16% from $451 million in the year-ago quarter. Excluding the negative effect of foreign exchange, revenue would have been down 14%. Segment profit was $39 million and segment profit margin was 10.4%, compared to segment profit of $50 million and segment profit margin of 11.1% a year ago. Results were impacted by lower volume, with offsets from favorable product pricing and mix, warranty adjustments, and overall cost reductions.

Commercial Heating & Cooling

Revenue in the Commercial Heating & Cooling business segment was $163 million, down 29% from $229 million in the year-ago quarter. Excluding the negative effect of foreign exchange, revenue would have been down 24%. Total segment profit was $19 million and segment profit margin was 11.9%, compared to segment profit of $27 million and segment profit margin of 11.6% in the year-ago quarter. Results were impacted by lower volume, with offsets from favorable product pricing and mix, warranty adjustments, and overall cost reductions.

Service Experts

Revenue in the Service Experts business segment was $154 million in the second quarter, down 14% from $180 million in the year-ago quarter. Excluding the negative impact of foreign exchange, revenue would have been down 12%. Segment profit was $9 million and segment profit margin was 5.7%, compared to segment profit of $14 million and segment profit margin of 8.0% in the year-ago quarter. Results were impacted by lower volume, with offsets from overall cost reduction initiatives, lower fuel costs, and a favorable business mix compared to a year ago.

Refrigeration

Revenue in the Refrigeration business segment was $122 million in the second quarter, down 28% from $169 million in the prior-year quarter. Excluding the negative impact of foreign exchange, revenue would have been down 19%. Segment profit was $10 million and segment profit margin was 7.9%, compared to segment profit of $17 million and segment profit margin of 10.3% in the second quarter a year ago. Results were impacted by lower volume, with offsets from overall cost reductions and favorable pricing versus a year ago.

FULL-YEAR OUTLOOK

The company is narrowing its revenue and adjusted EPS from continuing operations guidance for 2009 to the low end of its previous guidance ranges.

  • The revenue guidance range for 2009 is narrowed from down 15-19% to down 17-19%, including a negative 3 point impact from foreign exchange.
  • Adjusted EPS from continuing operations guidance for 2009 is narrowed to $1.65-$1.80, the low end of the previous range of $1.65-$2.05.
  • GAAP EPS from continuing operations guidance for 2009 is now a range of $1.38-$1.53 versus the previous target of $1.38-$1.78, reflecting the narrower adjusted EPS guidance range.
  • Corporate expense guidance remains approximately $60 million for 2009.
  • Capital spending guidance remains approximately $75 million for 2009.

CONFERENCE CALL INFORMATION

A conference call to discuss the company's second quarter results will be held this morning at 9:30 a.m. (Central). To listen, please call the conference call line at 612-332-0637 at least 10 minutes prior to the scheduled start time and use reservation number 103908. This conference call will also be webcast on Lennox International's web site at http://www.lennoxinternational.com.

A replay will be available from 12:00 p.m. (Central) on July 22 through July 29 by dialing 800-475-6701 (US) or 320-365-3844 (International) and using access code 103908. This call will also be archived on the company's web site.

Through its subsidiaries, 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 Steve Harrison, Vice President, Investor Relations, at 972-497-6670.

The statements in this news release that are not historical statements, including statements regarding expected financial results for 2009, are forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. These statements are subject to numerous risks and uncertainties, many of which are beyond LII's control, which could cause actual results to differ materially from the results expressed or implied by the statements. These risks and uncertainties include, but are not limited to: 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 in the demand for products and services that could cause actual results to differ materially from such statements. For information concerning these and other 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
               (Unaudited, in millions, except per share data)

                                        For the      For the Year-to-
                                        Quarters        Date Period
                                     Ended June 30,    Ended June 30,
                                     --------------   ----------------
                                     2009    2008       2009      2008
                                     ----    ----       ----      ----

    NET SALES                       $790.5  $999.6    $1,375.9  $1,764.1
    COST OF GOODS SOLD               561.6   721.5     1,008.2   1,292.3
                                     -----   -----     -------   -------
    Gross profit                     228.9   278.1       367.7     471.8
    OPERATING EXPENSES:
    Selling, general and
     administrative expenses         165.8   187.2       322.8     371.1
    Losses (gains) and other
     expenses, net                     0.7    (4.6)       (0.1)     (7.9)
    Restructuring charges              4.7     7.7        15.9      10.5
    Impairment of equity method
     investment                          -     2.3           -       2.3
    Income from equity method
     investments                      (1.8)   (2.9)       (3.2)     (6.0)
                                      ----    ----        ----      ----
        Operational income from
         continuing operations        59.5    88.4        32.3     101.8
    INTEREST EXPENSE, net              1.9     3.8         3.6       6.5
    OTHER EXPENSE, net                 0.1     0.1         0.1       0.1
                                       ---     ---         ---       ---
        Income from continuing
         operations before
         income taxes                 57.5    84.5        28.6      95.2
    PROVISION FOR INCOME TAXES        21.6    33.1        10.9      37.0
                                      ----    ----        ----      ----
        Income from
         continuing operations       $35.9   $51.4       $17.7     $58.2
    DISCONTINUED OPERATIONS:
      Loss from discontinued
       operations                      6.8     0.3         6.6       1.1
      Income tax
       benefit                        (2.6)   (0.1)       (2.5)     (0.4)
                                      ----    ----        ----      ----
        Loss from discontinued
         operations                    4.2     0.2         4.1       0.7
                                       ---     ---         ---       ---
             Net income              $31.7   $51.2       $13.6     $57.5
                                     =====   =====       =====     =====

    EARNINGS PER SHARE - BASIC:
      Income from continuing
       operations                    $0.65   $0.92       $0.32     $1.00
      Loss from discontinued
       operations                    (0.08)  (0.01)      (0.07)    (0.01)
                                     -----   -----       -----     -----
             Net income              $0.57   $0.91       $0.25     $0.99
                                     =====   =====       =====     =====

    EARNINGS PER SHARE - DILUTED:
      Income from continuing
       operations                    $0.63   $0.89       $0.32     $0.97
      Loss from discontinued
       operations                    (0.07)  (0.01)      (0.08)    (0.02)
                                     -----   -----       -----     -----
             Net income              $0.56   $0.88       $0.24     $0.95
                                     =====   =====       =====     =====

    AVERAGE SHARES OUTSTANDING:
    Basic                             55.4    56.2        55.3      58.2
    Diluted                           56.6    58.0        55.9      60.2

    CASH DIVIDENDS DECLARED
     PER SHARE                       $0.14   $0.14       $0.28     $0.28



                 LENNOX INTERNATIONAL INC. AND SUBSIDIARIES

                         SEGMENT NET SALES AND PROFIT
                           (Unaudited, in millions)

                                         For the       For the Year-to-
                                         Quarters      Date Period Ended
                                      Ended June 30,        June 30,
                                      --------------  ------------------
                                      2009    2008      2009      2008
                                      ----    ----      ----      ----
    Net Sales
    Residential Heating & Cooling    $379.3  $450.7    $625.6    $779.9
    Commercial Heating & Cooling      162.7   229.5     294.2     394.7
    Service Experts                   153.7   179.6     262.9     317.1
    Refrigeration                     122.1   169.1     235.8     323.8
    Eliminations (A)                  (27.3)  (29.3)    (42.6)    (51.4)
                                      -----   -----     -----     -----
                                     $790.5  $999.6  $1,375.9  $1,764.1
                                     ======  ======  ========  ========

    Segment Profit (Loss) (B)
    Residential Heating & Cooling     $39.3   $50.0     $34.5     $63.2
    Commercial Heating & Cooling       19.3    26.7      21.3      32.9
    Service Experts                     8.7    14.3       0.7       7.4
    Refrigeration                       9.6    17.5      16.1      32.2
    Corporate and other               (14.7)   (8.7)    (28.6)    (20.9)
    Eliminations (A)                      -    (0.5)     (0.4)     (2.1)
                                        ---    ----      ----      ----
      Subtotal that includes segment
       profit and eliminations         62.2    99.3      43.6     112.7
    Reconciliation to income
     from continuing operations
     before income taxes:
    Losses (gains) and other
     expenses, net of gain on sale
     of fixed assets                    0.8    (4.4)        -      (7.8)
    Restructuring charges               4.7     7.7      15.9      10.5
    Impairment of equity method
     investment                           -     2.3         -       2.3
    Interest expense, net               1.9     3.8       3.6       6.5
    Other expense, net                  0.1     0.1       0.1       0.1

    Less: Realized (losses)
     gains on settled derivative
     contracts                         (1.3)    0.6      (3.3)      1.1
    Less: Foreign currency
     exchange (losses) gains           (1.5)    4.7      (1.3)      4.8
                                       ----     ---      ----       ---
          Income from continuing
           operations before
           income taxes               $57.5   $84.5     $28.6     $95.2
                                      =====   =====     =====     =====

    (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 and loss as a segment's income or
    loss from continuing operations before income taxes included in the
    accompanying Consolidated Statements of Operations:
    Excluding:
      - Gains and/or losses and other expenses, net except for gains and/or
        losses on the sale of fixed assets.
      - Restructuring charges.
      - Goodwill and equity method investment impairments.
      - Interest expense, net.
      - Other expense, net.
    Less amounts included in Losses (Gains) and Other Expenses, net:
      - Realized gains and/or losses on settled derivative contracts.
      - Foreign currency exchange gains and/or losses.



                    LENNOX INTERNATIONAL INC. AND SUBSIDIARIES

                            CONSOLIDATED BALANCE SHEETS
                   (In millions, except share and per share data)


                                                  As of       As of
                                                 June 30,   December 31,
                                                   2009        2008
                                                ---------    --------
                                               (unaudited)
                        ASSETS
    CURRENT ASSETS:
    Cash and cash equivalents                     $65.4       $122.1
    Short-term investments                         33.5         33.4
    Accounts and notes receivable, net            431.4        369.6
    Inventories, net                              268.5        298.3
    Deferred income taxes                          27.3         24.2
    Other assets                                   47.7         87.4
                                                   ----         ----
    Total current assets                          873.8        935.0
    PROPERTY, PLANT AND EQUIPMENT, net            328.8        329.5
    GOODWILL                                      243.5        232.3
    DEFERRED INCOME TAXES                         102.4        113.5
    OTHER ASSETS, net                              51.5         49.2
                                                   ----         ----
    TOTAL ASSETS                               $1,600.0     $1,659.5
                                               ========     ========

                 LIABILITIES AND STOCKHOLDERS' EQUITY
    CURRENT LIABILITIES:
    Short-term debt                                $7.5         $6.1
    Current maturities of long-term debt           35.3          0.6
    Accounts payable                              268.2        234.5
    Accrued expenses                              308.0        331.1
    Income taxes payable                              -          3.7
                                                    ---          ---
    Total current liabilities                     619.0        576.0
    LONG-TERM DEBT                                276.9        413.7
    POSTRETIREMENT BENEFITS, OTHER THAN
     PENSIONS                                      12.1         12.5
    PENSIONS                                      111.5        107.7
    OTHER LIABILITIES                              73.7         91.0
                                                   ----         ----
    Total liabilities                           1,093.2      1,200.9
    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,
     84,705,778 shares and 84,215,904
     shares issued for 2009 and 2008,
     respectively                                   0.8          0.8
    Additional paid-in capital                    813.1        805.6
    Retained earnings                             536.9        538.8
    Accumulated other comprehensive loss          (53.5)       (98.8)
    Treasury stock, at cost, 29,213,699
     shares and 29,109,058 shares for
     2009 and 2008, respectively                 (790.5)      (787.8)
                                                 ------       ------
    Total stockholders' equity                    506.8        458.6
                                                  -----        -----
    TOTAL LIABILITIES AND
    STOCKHOLDERS' EQUITY                       $1,600.0     $1,659.5
                                               ========     ========



                    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 Income From Continuing Operations to Adjusted Income
    From Continuing Operations

                                  For the Quarter Ended June 30, 2009
                                  -----------------------------------
                                     Net Change
                                        in
                                     Unrealized
                                      Gains on
                                     Open Futures
                                      Contracts
                            As        and Other    Restructuring
                         Reported     Items, Net      Charges     As Adjusted
                        ----------  -------------- --------------  ----------

     NET SALES             $790.5         $-              $-         $790.5
      COST OF GOODS
       SOLD                 561.6          -               -          561.6
                            -----        ---             ---          -----
          Gross Profit      228.9          -               -          228.9
      OPERATING EXPENSES:
        Selling, general
         and administrative
         expenses           165.8          -               -          165.8
        Losses (gains) and
         other expenses,
         net(1)               0.7        2.1               -            2.8
        Restructuring
         charges              4.7          -            (4.7)             -
        Income from equity
         method investments  (1.8)         -               -           (1.8)
                             ----        ---             ---           ----
          Operational income
           (loss) from
            continuing
            operations       59.5       (2.1)            4.7           62.1
      INTEREST EXPENSE,
       net                    1.9          -               -            1.9
      OTHER EXPENSE, net      0.1          -               -            0.1
                              ---        ---             ---            ---
          Income (loss) from
           continuing
           operations before
           income taxes      57.5       (2.1)            4.7           60.1
       PROVISION FOR (BENEFIT
        FROM) INCOME TAXES   21.6       (0.8)            1.3           22.1
                             ----       ----             ---           ----
          Income (loss) from
           continuing
           operations       $35.9      $(1.3)           $3.4          $38.0
                            =====      =====            ====          =====

      EARNINGS (LOSS) PER
       SHARE FROM CONTINUING
       OPERATIONS - DILUTED $0.63     $(0.02)          $0.06          $0.67
                            =====     ======           =====          =====


    Note:  Management uses adjusted income from continuing operations, which
    is not defined by U.S. GAAP, to measure the Company's operating
    performance and to analyze period-over-period changes in operating income
    with and without the effects of certain losses (gains) and other expenses,
    net, impairment of equity method investment and restructuring charges.
    Management believes that excluding these effects is helpful in assessing
    the overall performance of the Company.

    (1) Losses (gains) and other expenses, net include the following:

                                     For the Quarter Ended June 30, 2009
                                     -------------------------------------
                                    Pre-tax      Tax (Benefit)     After-tax
                                  Loss (Gain)      Provision      Loss (Gain)
                                 -------------    -----------    -------------
    Realized losses on settled
     futures contracts               $1.3            $(0.5)          $0.8
    Net change in unrealized
     gains on open futures
     contracts                       (2.5)             0.8           (1.7)
    Foreign currency exchange
     loss                             1.5             (0.7)           0.8
    Discount fee on accounts sold     0.1                -            0.1
    Gain on disposal of
     fixed assets                    (0.1)               -           (0.1)
    Other items, net                  0.4                -            0.4
                                      ---              ---            ---
       Losses (gains) and other
        expenses, net                $0.7            $(0.4)          $0.3
                                     ====            =====           ====



                                   For the Quarter Ended June 30, 2008
                                   -----------------------------------
                            Net Change
                                in
                            Unrealized
                             Losses on
                               Open
                              Futures
                             Contracts                  Impairment
                             and Other                   of Equity
                        As     Items,    Restructuring    Method        As
                     Reported    Net       Charges      Investment  Adjusted
                    ----------  ------    -----------   ----------  ----------
     NET SALES         $999.6      $-          $-            $-       $999.6
     COST OF
      GOODS SOLD        721.5       -           -             -        721.5
                        -----     ---         ---           ---        -----
          Gross Profit  278.1       -           -             -        278.1
      OPERATING EXPENSES:
        Selling, general
         and
         administrative
         expenses       187.2       -           -             -        187.2
        (Gains) losses
         and other
         expenses,
         net(2)          (4.6)   (0.9)          -             -         (5.5)
        Restructuring
         charges          7.7       -        (7.7)            -            -
        Impairment
         of equity method
         investment       2.3       -           -          (2.3)           -
        Income from
         equity method
         investments     (2.9)      -           -             -         (2.9)
                         ----     ---         ---           ---         ----
          Operational
           income from
           continuing
           operations    88.4     0.9         7.7           2.3         99.3
      INTEREST EXPENSE,
       net                3.8       -           -             -          3.8
      OTHER EXPENSE,
       net                0.1       -           -             -          0.1
                          ---     ---         ---           ---          ---
          Income from
           continuing
           operations
           before income
           taxes         84.5     0.9         7.7           2.3         95.4
      PROVISION FOR
       INCOME TAXES      33.1     0.3         2.6             -         36.0
                         ----     ---         ---           ---         ----
          Income from
           continuing
           operations   $51.4    $0.6        $5.1          $2.3        $59.4
                        =====    ====        ====          ====        =====

       EARNINGS PER SHARE
        FROM CONTINUING
        OPERATIONS -
        DILUTED         $0.89   $0.01       $0.08         $0.04        $1.02
                        =====   =====       =====         =====        =====

    (2) (Gains) losses and other expenses, net include the following:

                                  For the Quarter Ended June 30, 2008
                                  -----------------------------------
                                                 Tax
                                 Pre-tax      Provision     After-tax
                                (Gain) Loss    (Benefit)    (Gain) Loss
                               -------------  -----------  -------------
     Realized gains on settled
      futures contracts            $(0.6)        $0.2          $(0.4)
     Net change in unrealized
      losses on open futures
      contracts                      0.4         (0.2)           0.2
     Foreign currency
      exchange gain                 (4.7)         0.3           (4.4)
     Gain on disposal of
      fixed assets                  (0.2)         0.1           (0.1)
     Other items, net                0.5         (0.1)           0.4
                                     ---         ----            ---
       (Gains) losses and
        other expenses, net        $(4.6)        $0.3          $(4.3)
                                   =====         ====          =====



                            For the Year-to-Date Period Ended June 30, 2009
                           -------------------------------------------------
                                           Net Change
                                               in
                                           Unrealized
                                            Gains on
                                              Open
                                             Futures
                                            Contracts
                                            and Other
                                   As         Items,   Restructuring     As
                                Reported       Net       Charges      Adjusted
                                --------    ---------  ------------   --------
     NET SALES                 $1,375.9        $-           $-       $1,375.9
       COST OF GOODS SOLD       1,008.2         -            -        1,008.2
                                -------       ---          ---        -------
           Gross Profit           367.7         -            -          367.7
      OPERATING EXPENSES:
        Selling, general and
         administrative expenses  322.8         -            -          322.8
        (Gains) losses and
         other expenses, net(3)    (0.1)      4.8            -            4.7
        Restructuring
         charges                   15.9         -        (15.9)             -
        Income from equity
         method investments        (3.2)        -            -           (3.2)
                                   ----       ---          ---           ----
           Operational income
            (loss) from continuing
            operations             32.3      (4.8)        15.9           43.4
      INTEREST
      EXPENSE, net                  3.6         -            -            3.6
       OTHER EXPENSE, net           0.1         -            -            0.1
                                    ---       ---          ---            ---
           Income (loss) from
            continuing operations
            before income taxes    28.6      (4.8)        15.9           39.7
      PROVISION FOR (BENEFIT
       FROM) INCOME TAXES          10.9      (1.7)         5.0           14.2
                                   ----      ----          ---           ----
           Income (loss) from
            continuing
            operations            $17.7     $(3.1)       $10.9          $25.5
                                  =====     =====        =====          =====

       EARNINGS (LOSS) PER
        SHARE FROM CONTINUING
        OPERATIONS - DILUTED      $0.32    $(0.05)       $0.19          $0.46
                                  =====    ======        =====          =====

    (3) (Gains) losses and other expenses, net include the following:

                               For the Year-to-Date Period Ended
                                         June 30, 2009
                                        ---------------
                             Pre-tax      Tax (Benefit)     After-tax
                           Loss (Gain)      Provision      Loss (Gain)
                          -------------    -----------    -------------
     Realized losses on
      settled futures
      contracts                $3.3            $(1.2)          $2.1
     Net change in
      unrealized gains on
      open futures contracts   (5.2)             1.8           (3.4)
     Foreign currency
      exchange loss             1.3             (0.6)           0.7
     Discount fee on
      accounts sold             0.2             (0.1)           0.1
     Gain on disposal of
      fixed assets             (0.1)               -           (0.1)
     Other items, net           0.4             (0.1)           0.3
                                ---             ----            ---
       (Gains) losses and
        other expenses, net   $(0.1)           $(0.2)         $(0.3)
                              =====            =====          =====



                           For the Year-to-Date Period Ended June 30, 2008
                           -----------------------------------------------
                             Net Change
                                 in
                             Unrealized
                              Gains on
                                Open
                               Futures
                              Contracts                 Impairment
                              and Other                 of Equity
                        As      Items,  Restructuring    Method         As
                      Reported    Net     Charges      Investment    Adjusted
                      --------  -------   ---------    -----------   ---------
     NET SALES        $1,764.1      $-       $-            $-        $1,764.1
     COST OF GOODS
      SOLD             1,292.3       -        -             -         1,292.3
                       -------     ---      ---           ---         -------
          Gross Profit   471.8       -        -             -           471.8
     OPERATING EXPENSES:
       Selling, general
        and
        administrative
        expenses         371.1       -        -             -           371.1
       (Gains) losses
        and other
        expenses,
        net(4)            (7.9)    1.9        -             -            (6.0)
       Restructuring
        charges           10.5       -    (10.5)            -               -
       Impairment of
        equity
        method
        investment         2.3       -        -          (2.3)              -
       Income from
        equity
        method
        investments       (6.0)      -        -             -            (6.0)
                          ----     ---      ---           ---            ----
          Operational
           income
           (loss) from
           continuing
           operations    101.8    (1.9)    10.5           2.3           112.7
     INTEREST EXPENSE,
      net                  6.5       -        -             -             6.5
     OTHER EXPENSE, net    0.1       -        -             -             0.1
                           ---     ---      ---           ---             ---
          Income (loss)
           from
           continuing
           operations
           before
           income taxes   95.2    (1.9)    10.5           2.3           106.1
      PROVISION FOR
       (BENEFIT FROM)
       INCOME TAXES       37.0    (0.7)     3.7             -            40.0
                          ----    ----      ---           ---            ----
          Income (loss)
           from
           continuing
           operations    $58.2   $(1.2)    $6.8          $2.3           $66.1
                         =====   =====     ====          ====           =====

      EARNINGS (LOSS)
       PER SHARE FROM
       CONTINUING
       OPERATIONS
       - DILUTED         $0.97  $(0.02)   $0.11         $0.04           $1.10
                         =====  ======    =====         =====           =====

    (4) (Gains) losses and other expenses, net include the following:



                             For the Year-to-Date Period Ended
                                        June 30, 2008
                            ----------------------------------
                                            Tax
                              Pre-tax     Provision     After-tax
                           (Gain) Loss    (Benefit)    (Gain) Loss
                           -------------  -----------  -------------
     Realized gains on
      settled futures
      contracts               $(1.0)        $0.4          $(0.6)
     Net change in
      unrealized gains
      on open futures
      contracts                (2.3)         0.8           (1.5)
     Foreign currency
      exchange gain            (4.8)         0.3           (4.5)
     Gain on disposal
      of fixed assets          (0.2)         0.1           (0.1)
     Other items, net           0.4         (0.1)           0.3
                                ---         ----            ---
       (Gains) losses and
        other expenses, net   $(7.9)        $1.5          $(6.4)
                              =====         ====          =====



     Reconciliation of Estimated Adjusted to GAAP Income per Share from
      Continuing Operations - Diluted

                                                             For the
                                                           Year Ended
                                                          December 31,
                                                              2009
                                                            ESTIMATED
                                                           -----------
     Adjusted income per share from continuing
      operations - diluted                               $1.65 - $1.80
     Restructuring charges                                   (0.33)
     Net change in unrealized gains on open futures
      contracts and other items, net                          0.06
                                                              ----
         GAAP income per share from continuing
          operations - diluted                           $1.38 - $1.53
                                                         =============

     Free Cash Flow

                        For the     For the       For the        For the
                        Quarter     Quarter     Year-to-Date   Year-to-Date
                         Ended       Ended     Period Ended    Period Ended
                        June 30,    June 30,      June 30,      June 30,
                          2009        2008          2009          2008
                          ----        ----          ----          ----
     Net cash provided
      by operating
      activities         $66.4       $56.2         $82.7          $23.6
     Purchase of
      property, plant
      and equipment      (11.7)      (12.7)        (21.6)         (22.5)
                         -----       -----         -----          -----
        Free cash flow   $54.7       $43.5         $61.1           $1.1
                         =====       =====         =====           ====


     Operational Working Capital

                                        June 30,                   June 30,
                                         2009                       2008
                              June 30,  Trailing      June 30,     Trailing
                                2009   12 Mo. Avg.      2008      12 Mo. Avg.
                                ----  -------------     ----     -------------
     Accounts and Notes
      Receivable, Net         $431.4                   $604.2
        Asset Securitization    30.0                        -
        Allowance for Doubtful
         Accounts               20.9                     20.0
                                ----                     ----
     Accounts and Notes
      Receivable, Gross        482.3      $463.1        624.2        $570.9

     Inventories               268.5                    367.4
       Excess of Current
        Cost Over Last-in,
         First-out              75.4                     73.0
                                ----                     ----
     Inventories as
      Adjusted                 343.9       399.6        440.4         439.7

     Accounts Payable         (268.2)     (283.4)      (376.9)       (334.2)
                              ------      ------       ------        ------

     Operating Working
      Capital (a)              558.0       579.3        687.7         676.4
                               =====       =====        =====         =====

     Net Sales, Trailing
      Twelve Months (b)      3,093.2     3,093.2      3,673.2       3,673.2
                             -------     -------      -------       -------

     Operational Working
      Capital Ratio (a /b)     18.0%        18.7%        18.7%         18.4%
                               ====         ====         ====          ====


    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



    Debt to Earnings Before Interest, Taxes, Depreciation and
     Amortization Expense ("EBITDA") Ratio

                                                           Trailing
                                                            Twelve
                                                           Months to
                                                           June 30,
                                                             2009
                                                             ----
     Earnings before interest and taxes ("EBIT") (a)        $195.8
     Depreciation and amortization expense ("DA") (b)         53.2
                                                              ----
     EBITDA (EBIT excluding DA) (a + b)                     $249.0
                                                            ======
     Total debt at June 30, 2009 (c)                        $319.7
                                                            ======
       Total debt to EBITDA ratio ((c / (a + b)                1.3
                                                               ===

     Reconciliation of EBIT to income from continuing
      operations before income taxes:
     EBIT per above (non-GAAP)                              $195.8
     Losses and other expenses, net of gain on sale of
      fixed assets                                            10.8
     Impairment of equity method investment                    6.8
     Restructuring charges                                    35.8
     Other expenses, net                                       0.1
     Interest expense, net                                    10.8
                                                              ----
         Subtotal                                            131.5
     Less:  Realized losses on settled futures contracts      (5.3)
     Less:  Foreign currency exchange losses                  (2.9)
                                                              ----
         Income from continuing operations before
          income taxes (GAAP)                               $139.7
                                                            ======

SOURCE Lennox International Inc.

http://www.lennoxinternational.com