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Lennox International Reports Third Quarter Results
  • Adjusted EPS from continuing operations $0.72, and GAAP EPS from continuing operations $0.59
  • Generated record $118 million in free cash flow, up 18%
  • Narrowing 2009 revenue guidance from down 17-19% to down approximately 19%
  • Narrowing 2009 adjusted EPS from continuing operations guidance from $1.65-$1.80 to a range of $1.65-$1.70; GAAP guidance from continuing operations now $1.31-$1.36

DALLAS, Oct 21, 2009 /PRNewswire-FirstCall via COMTEX/ -- Lennox International Inc. (NYSE: LII) today reported financial results for the third quarter of 2009.

Revenue for the third quarter was $750 million, 22% below the prior-year quarter. Excluding the negative impact of foreign exchange, revenue would have been down 20%. Diluted earnings per share from continuing operations on an adjusted basis, a non-GAAP measure, was $0.72, compared to $1.10 in the record third quarter a year ago. Diluted earnings per share from continuing operations on a GAAP basis was $0.59, compared to $0.96 in the year-ago quarter.

"The company's strong operational execution led to record free cash flow generation of $118 million in the third quarter, up 18% from a year ago, and gross margin improved 170 basis points," said Todd Bluedorn, Chief Executive Officer. "The cost reduction actions we have taken over the last year are providing significant benefit, and additional restructuring activities are underway. As expected, end market conditions continued to be difficult in the third quarter, and commercial markets were down significantly. While residential and refrigeration markets were also down from a year ago, we saw the rate of decline slow in the third quarter. Looking ahead, we remain focused on further lowering our cost structure and executing on our strategic initiatives to drive increased earnings leverage as markets recover."

(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 third quarter was $750 million, 22% below the prior-year quarter. Excluding the negative impact of foreign exchange, revenue would have been down 20%. Lower volume across all business segments impacted revenue. Price and mix were flat with the year-ago quarter.

Gross Profit: Gross profit for the third quarter was $223 million, down 17% from $269 million in the year-ago quarter. Gross margin was 29.8% compared to 28.1% in the year-ago quarter, up 170 basis points. Gross margin benefited primarily from lower component and commodity costs, as well as savings from manufacturing rationalization.

Income from Continuing Operations: Adjusted income from continuing operations in the third quarter was $41.1 million, or $0.72 diluted earnings per share, compared to $62.7 million, or $1.10 diluted earnings per share in the third quarter of 2008. Adjusted income from continuing operations for the third quarter of 2009 excludes an $8.2 million after-tax charge from restructuring activities and a $0.8 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 third quarter of 2009 was $33.7 million, or $0.59 diluted earnings per share, compared to $54.8 million, or $0.96 diluted earnings per share in the prior-year quarter.

New restructuring activity in the third quarter of 2009 includes a significant headcount reduction at the Europe HVAC manufacturing facility in Mions, France, and the transfer of Commercial rooftop production to the Longvic, France, facility. The company expects total charges of approximately $9.7 million, including $7.5 million taken in the third quarter. In addition, in Residential, the company is relocating the headquarters and other operations of its Hearth business in California to Tennessee. The company expects total restructuring charges of approximately $4.3 million, including $1.2 million taken in the third quarter. Annualized savings of approximately $6 million are expected upon completion of both projects in the first half of 2010.

In the third quarter, the company had a loss from discontinued operations of $2.7 million after-tax ($2.1 million impairment), or $0.05 diluted earnings per share, as a result of plans to exit the business of five unprofitable Service Experts centers.

Free Cash Flow and Total Debt: Net cash provided by operations in the third quarter was $131 million compared to $116 million in the prior-year quarter. The company invested approximately $13 million in capital assets resulting in free cash flow of $118 million for the quarter, compared to $100 million in the year-ago quarter. Total debt at the end of September 2009 was $201 million after the company paid down $119 million in the quarter. Total cash, cash equivalents and short-term investments were $102 million.

BUSINESS SEGMENT HIGHLIGHTS

Residential Heating & Cooling

Third quarter 2009 revenue from the Residential Heating & Cooling business segment was $347 million, a decrease of 16% from $414 million in the year-ago quarter. Excluding the negative effect of foreign exchange, revenue would have been down 15%. Segment profit was $39 million and segment profit margin was 11.2%, compared to segment profit of $55 million and segment profit margin of 13.4% a year ago. Results were impacted by lower volume and mix, with offsets from lower component and commodity costs, and SG&A salaried headcount savings. Product pricing was flat.

Commercial Heating & Cooling

Revenue in the Commercial Heating & Cooling business segment was $154 million, down 39% from $251 million in the year-ago quarter. Excluding the negative effect of foreign exchange, revenue would have been down 36%. Total segment profit was $17 million and segment profit margin was 11.1%, compared to segment profit of $40 million and segment profit margin of 16.0% in the year-ago quarter. Results were impacted by lower volume, with offsets from favorable product mix, lower component and commodity costs, and SG&A reductions. Product pricing was flat.

Service Experts

Revenue in the Service Experts business segment was $137 million in the third quarter, down 11% from $154 million in the year-ago quarter. Excluding the negative impact of foreign exchange, revenue would have been down 9%. Segment profit was $8 million and segment profit margin was 5.7%, compared to segment profit of $5 million and segment profit margin of 2.9% in the year-ago quarter. Results were impacted by lower volume, with offsets from SG&A savings, higher technician productivity, and lower fuel costs.

Refrigeration

Revenue in the Refrigeration business segment was $134 million in the third quarter, down 18% from $163 million in the prior-year quarter. Excluding the negative impact of foreign exchange, revenue would have been down 15%. Segment profit was $17 million and segment profit margin was 12.6%, compared to segment profit of $17 million and segment profit margin of 10.3% in the third quarter a year ago. Results were impacted by lower volume, with offsets from lower component and commodity costs, lower SG&A expenses, and savings from manufacturing rationalization. Pricing was favorable compared to the third quarter a year ago.

FULL-YEAR OUTLOOK

The company is narrowing its 2009 guidance for revenue and adjusted EPS from continuing operations.

  • Narrowing 2009 revenue guidance from down 17-19% to down approximately 19%, including a negative 2 point impact from foreign exchange.
  • Narrowing 2009 adjusted EPS from continuing operations guidance from $1.65-$1.80 to a range of $1.65-$1.70.
  • Updating 2009 GAAP EPS from continuing operations guidance from $1.38-$1.53 to a range of $1.31-$1.36, reflecting the narrower adjusted EPS guidance range and additional restructuring charges.
  • Reiterating corporate expense guidance of approximately $60 million for 2009.
  • Lowering 2009 capital spending guidance from approximately $75 million to $65 million.

CONFERENCE CALL INFORMATION

A conference call to discuss the company's third quarter results will be held this morning at 9:30 a.m. Central time. To listen, please call the conference call line at 651-291-5254 at least 10 minutes prior to the scheduled start time and use reservation number 117174. 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 time on October 21 through October 28, 2009, by dialing 800-475-6701 (U.S.) or 320-365-3844 (international) and using access code 117174. 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, 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
                                          Quarters          Nine Months
                                            Ended              Ended
                                         September 30,      September 30,
                                         ------------       ------------
                                         2009    2008      2009      2008
                                         ----    ----      ----      ----

    NET SALES                          $749.5  $959.9  $2,114.0  $2,702.8
    COST OF GOODS SOLD                  526.4   690.6   1,525.7   1,967.7
                                        -----   -----   -------   -------
    Gross profit                        223.1   269.3     588.3     735.1
    OPERATING EXPENSES:
    Selling, general and
     administrative expenses            158.4   168.6     477.8     535.0
    (Gains) losses and other
     expenses, net                       (2.1)    3.2      (2.3)     (4.8)
    Restructuring charges                11.5     8.4      27.4      18.9
    Impairment of equity method
     investment                             -       -         -       2.3
    Income from equity method
     investments                         (2.4)   (2.0)     (5.6)     (8.0)
                                         ----    ----      ----      ----
          Operational income from
           continuing operations         57.7    91.1      91.0     191.7
    INTEREST EXPENSE, net                 2.2     3.9       6.1      10.7
    OTHER EXPENSE, net                    0.1     0.1       0.2       0.2
                                          ---     ---       ---       ---
          Income from continuing
           operations before income
           taxes                         55.4    87.1      84.7     180.8
    PROVISION FOR INCOME TAXES           21.7    32.3      32.8      68.9
                                         ----    ----      ----      ----
              Income from continuing
               operations               $33.7   $54.8     $51.9    $111.9
    DISCONTINUED OPERATIONS:
      Loss (income) from
       discontinued operations            2.9    (0.1)     10.2      (0.5)
      Income tax benefit                 (0.2)      -      (3.0)        -
                                         ----     ---      ----       ---
        Loss (income) from
         discontinued operations          2.7    (0.1)      7.2      (0.5)
                                          ---    ----       ---      ----
          Net income                    $31.0   $54.9     $44.7    $112.4
                                        =====   =====     =====    ======

    EARNINGS PER SHARE - BASIC:
      Income from continuing
       operations                       $0.60   $0.99     $0.94     $1.96
      Loss from discontinued
       operations                       (0.05)      -     (0.13)        -
                                        -----    ----     -----       ---
          Net income                    $0.55   $0.99     $0.81     $1.96
                                        =====   =====     =====     =====

    EARNINGS PER SHARE - DILUTED:
      Income from continuing
       operations                       $0.59   $0.96     $0.92     $1.89
      (Loss) income from
       discontinued operations          (0.05)      -     (0.13)     0.01
                                        -----     ---     -----      ----
          Net income                    $0.54   $0.96     $0.79     $1.90
                                        =====   =====     =====     =====

    AVERAGE SHARES OUTSTANDING:
    Basic                                55.8    55.3      55.5      57.2
    Diluted                              57.1    57.0      56.3      59.1

    CASH DIVIDENDS DECLARED PER SHARE   $0.14   $0.14     $0.42     $0.42



                  LENNOX INTERNATIONAL INC. AND SUBSIDIARIES

                         SEGMENT NET SALES AND PROFIT
                           (Unaudited, in millions)

                                           For the          For the
                                          Quarters        Nine Months
                                            Ended            Ended
                                        September 30,     September 30,
                                        ------------      ------------
                                        2009    2008     2009       2008
                                        ----    ----     ----       ----
    Net Sales
    Residential Heating & Cooling     $347.1  $414.0    $972.7  $1,193.9
    Commercial Heating & Cooling       154.4   251.4     448.6     646.1
    Service Experts                    137.3   154.0     389.0     449.9
    Refrigeration                      133.6   162.9     369.4     486.8
    Eliminations (A)                   (22.9)  (22.4)    (65.7)    (73.9)
                                       -----   -----     -----     -----
                                      $749.5  $959.9  $2,114.0  $2,702.8
                                      ======  ======  ========  ========

    Segment Profit (Loss) (B)
    Residential Heating & Cooling      $39.0   $55.3     $73.5    $118.5
    Commercial Heating & Cooling        17.1    40.3      38.4      73.2
    Service Experts                      7.9     4.5       9.6      10.6
    Refrigeration                       16.8    16.7      32.9      48.9
    Corporate and other                (13.4)  (16.3)    (42.0)    (37.2)
    Eliminations (A)                     0.2     1.6      (0.2)     (0.4)
                                         ---     ---      ----      ----
      Subtotal that includes segment
       profit and eliminations          67.6   102.1     112.2     213.6
    Reconciliation to income from
     continuing operations before
     income taxes:
    (Gains) losses and other
     expenses, net of gain on sale
     of fixed assets                    (1.6)    3.1      (1.7)     (4.6)
    Restructuring charges               11.5     8.4      27.4      18.9
    Impairment of equity method
     investment                            -       -         -       2.3
    Interest expense, net                2.2     3.9       6.1      10.7
    Other expense, net                   0.1     0.1       0.2       0.2

    Less: Realized (losses) gains on
     settled derivative contracts       (0.4)      -      (3.6)      1.0
    Less: Foreign currency exchange
     gains (losses)                      0.4    (0.5)     (0.9)      4.3
                                         ---    ----      ----       ---
          Income from continuing
           operations before income
           taxes                       $55.4   $87.1     $84.7    $180.8
                                       =====   =====     =====    ======


    (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 (Gains) Losses 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
                                                 September 30,   December 31,
                                                     2009            2008
                                                   ---------       --------
                                                 (unaudited)
                                 ASSETS
    CURRENT ASSETS:
    Cash and cash equivalents                       $101.9          $122.1
    Short-term investments                               -            33.4
    Accounts and notes receivable, net               387.3           363.4
    Inventories, net                                 274.6           297.3
    Deferred income taxes                              9.5            24.2
    Other assets                                      51.9            94.8
                                                      ----            ----
    Total current assets                             825.2           935.2
    PROPERTY, PLANT AND
     EQUIPMENT, net                                  329.9           329.4
    GOODWILL                                         253.1           232.3
    DEFERRED INCOME TAXES                            104.9           113.5
    OTHER ASSETS, net                                 49.5            49.1
                                                      ----            ----
    TOTAL ASSETS                                  $1,562.6        $1,659.5
                                                  ========        ========

            LIABILITIES AND STOCKHOLDERS' EQUITY
    CURRENT LIABILITIES:
    Short-term debt                                   $5.6            $6.1
    Current maturities of long-term debt              35.6             0.6
    Accounts payable                                 279.7           234.1
    Accrued expenses                                 315.4           331.5
    Income taxes payable                                 -             3.7
                                                       ---             ---
    Total current liabilities                        636.3           576.0
    LONG-TERM DEBT                                   159.9           413.7
    POSTRETIREMENT BENEFITS, OTHER THAN PENSIONS      11.9            12.5
    PENSIONS                                         101.7           107.7
    OTHER LIABILITIES                                 75.3            91.0
                                                      ----            ----
    Total liabilities                                985.1         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, 85,193,639 shares and
     84,215,904 shares issued for 2009 and 2008,
     respectively                                      0.9             0.8
    Additional paid-in capital                       831.9           805.6
    Retained earnings                                560.1           538.8
    Accumulated other comprehensive loss             (24.5)          (98.8)
    Treasury stock, at cost, 29,223,965 shares
     and 29,109,058 shares for 2009 and 2008,
     respectively                                   (790.9)         (787.8)
                                                    ------          ------
    Total stockholders' equity                       577.5           458.6
                                                     -----           -----
    TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY    $1,562.6        $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 September 30, 2009
                                  ----------------------------------------
                                       Net Change in
                                         Unrealized
                                            Gains
                                           on Open
                                           Futures
                                          Contracts
                                  As      and Other   Restructuring      As
                               Reported   Items, Net    Charges       Adjusted
                              ---------   ----------  --------------  --------
    NET SALES                  $749.5        $-            $-         $749.5
    COST OF GOODS SOLD          526.4         -             -          526.4
                                -----       ---           ---          -----
        Gross Profit            223.1         -             -          223.1
    OPERATING EXPENSES:
      Selling, general and
       administrative
       expenses                 158.4         -             -          158.4
      (Gains) losses and
       other expenses, net(1)    (2.1)      1.4             -           (0.7)
      Restructuring charges      11.5         -         (11.5)             -
      Income from equity
       method investments        (2.4)        -             -           (2.4)
                                 ----       ---           ---           ----
        Operational income
         (loss) from
         continuing operations   57.7      (1.4)         11.5           67.8
    INTEREST EXPENSE, net         2.2         -             -            2.2
    OTHER EXPENSE, net            0.1         -             -            0.1
                                  ---       ---           ---            ---
        Income (loss) from
         continuing operations
         before income taxes     55.4      (1.4)         11.5           65.5
    PROVISION FOR (BENEFIT
     FROM) INCOME TAXES          21.7      (0.6)          3.3           24.4
                                 ----      ----           ---           ----
        Income (loss) from
         continuing operations  $33.7     $(0.8)         $8.2          $41.1
                                =====     =====          ====          =====

    EARNINGS (LOSS) PER SHARE
     FROM CONTINUING
     OPERATIONS - DILUTED       $0.59    $(0.01)        $0.14          $0.72
                                =====    ======         =====          =====

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

                                      For the Quarter Ended September 30, 2009
                                      ----------------------------------------

                                               Pre-tax      Tax     After-tax
                                                Loss     (Benefit)    Loss
                                               (Gain)    Provision   (Gain)
                                               -------   ---------  ---------
    Realized losses on settled futures
     contracts                                  $0.4      $(0.2)      $0.2
    Net change in unrealized gains on open
     futures contracts                          (1.2)       0.5       (0.7)
    Foreign currency exchange gain              (0.4)       0.1       (0.3)
    Discount fee on accounts sold                0.1          -        0.1
    Gain on disposal of fixed assets            (0.5)       0.2       (0.3)
    Realized gain on marketable securities      (0.3)       0.1       (0.2)
    Other items, net                            (0.2)       0.1       (0.1)
                                                ----        ---       ----
      (Gains) losses and other expenses, net   $(2.1)      $0.8      $(1.3)
                                               =====       ====      =====



                                      For the Quarter Ended September 30, 2008
                                      ----------------------------------------

                                        Net Change in
                                         Unrealized
                                          Losses
                                          on Open
                                          Futures
                                         Contracts
                                 As      and Other     Restructuring      As
                              Reported   Items, Net      Charges      Adjusted
                            -----------  -----------  --------------  --------
    NET SALES                  $959.9        $-            $-         $959.9
    COST OF GOODS SOLD          690.6         -             -          690.6
                                -----       ---           ---          -----
        Gross Profit            269.3         -             -          269.3
    OPERATING EXPENSES:
      Selling, general and
       administrative
       expenses                 168.6         -             -          168.6
      Losses (gains) and
       other expenses, net(2)     3.2      (2.7)            -            0.5
      Restructuring charges       8.4         -          (8.4)             -
      Impairment of equity
       method investment            -         -             -              -
      Income from equity
       method investments        (2.0)        -             -           (2.0)
                                 ----       ---           ---           ----
        Operational income
         from continuing
         operations              91.1       2.7           8.4          102.2
    INTEREST EXPENSE, net         3.9         -             -            3.9
    OTHER EXPENSE, net            0.1         -             -            0.1
                                  ---       ---           ---            ---
        Income from
         continuing operations
         before income taxes     87.1       2.7           8.4           98.2
    PROVISION FOR INCOME TAXES   32.3       1.0           2.2           35.5
                                 ----       ---           ---           ----
        Income from continuing
         operations             $54.8      $1.7          $6.2          $62.7
                                =====      ====          ====          =====

    EARNINGS PER SHARE FROM
     CONTINUING OPERATIONS -
     DILUTED                    $0.96     $0.03         $0.11          $1.10
                                =====     =====         =====          =====

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




                                      For the Quarter Ended September 30, 2008
                                      ----------------------------------------
                                                           Tax
                                            Pre-tax     (Benefit)  After-tax
                                           Loss (Gain)  Provision  Loss (Gain)
                                           ----------   ---------  ----------
    Net change in unrealized losses on
     open futures contracts                   $2.8       $(1.0)       $1.8
    Foreign currency exchange loss             0.5        (0.3)        0.2
    Other items, net                          (0.1)          -        (0.1)
                                              ----         ---        ----
      Losses (gains) and other
       expenses, net                          $3.2       $(1.3)       $1.9
                                              ====       =====        ====



                          For the Year-to-Date Period Ended September 30, 2009
                          ----------------------------------------------------

                                       Net Change in
                                        Unrealized
                                          Gains
                                         on Open
                                         Futures
                                        Contracts
                               As       and Other     Restructuring     As
                            Reported    Items, Net       Charges     Adjusted
                           ----------   -----------   -------------  ---------
    NET SALES                $2,114.0        $-            $-       $2,114.0
    COST OF GOODS SOLD        1,525.7         -             -        1,525.7
                              -------       ---           ---        -------
        Gross Profit            588.3         -             -          588.3
    OPERATING EXPENSES:
      Selling, general
       and administrative
       expenses                 477.8         -             -          477.8
      (Gains) losses and
       other expenses,
       net(3)                    (2.3)      6.2             -            3.9
      Restructuring charges      27.4         -         (27.4)             -
      Income from equity
       method investments        (5.6)        -             -           (5.6)
                                 ----       ---           ---           ----
        Operational income
         (loss) from
          continuing
          operations             91.0      (6.2)         27.4          112.2
    INTEREST EXPENSE, net         6.1         -             -            6.1
    OTHER EXPENSE, net            0.2         -             -            0.2
                                  ---       ---           ---            ---
        Income (loss) from
         continuing operations
         before income taxes     84.7      (6.2)         27.4          105.9
    PROVISION FOR (BENEFIT
     FROM) INCOME TAXES          32.8      (2.3)          8.3           38.8
                                 ----      ----           ---           ----
        Income (loss) from
         continuing operations  $51.9     $(3.9)        $19.1          $67.1
                                =====     =====         =====          =====

    EARNINGS (LOSS) PER
     SHARE FROM CONTINUING
      OPERATIONS - DILUTED      $0.92    $(0.07)        $0.34          $1.19
                                =====    ======         =====          =====

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




                                          For the Year-to-Date Period Ended
                                                   September 30, 2009
                                          ---------------------------------
                                          Pre-tax    Tax (Benefit)  After-tax
                                        Loss (Gain)    Provision   Loss (Gain)
                                        ----------   ------------  ----------
    Realized losses  on settled
     futures contracts                     $3.6         $(1.3)        $2.3
    Net change in unrealized gains
     on open futures contracts             (6.4)          2.3         (4.1)
    Foreign currency exchange loss          0.9          (0.5)         0.4
    Discount fee on accounts sold           0.3          (0.1)         0.2
    Gain on disposal of fixed assets       (0.6)          0.2         (0.4)
    Realized gain on marketable
     securities                            (0.3)          0.1         (0.2)
    Other items, net                        0.2             -          0.2
                                            ---           ---          ---
      (Gains) losses and other
       expenses, net                      $(2.3)         $0.7        $(1.6)
                                          =====          ====        =====



                          For the Year-to-Date Period Ended September 30, 2008
                          ----------------------------------------------------

                                   Net Change in
                                     Unrealized
                                      Losses
                                      on Open
                                      Futures
                                     Contracts             Impairment
                                        and                   of
                                       Other                 Equity
                                As     Items, Restructuring  Method      As
                             Reported   Net     Charges    Investment Adjusted
                             --------   ---   ------------ ---------- --------
    NET SALES                $2,702.8    $-       $-          $-     $2,702.8
    COST OF GOODS SOLD        1,967.7     -        -           -      1,967.7
                              -------   ---      ---         ---      -------
        Gross Profit            735.1     -        -           -        735.1
    OPERATING EXPENSES:
      Selling, general
       and administrative
       expenses                 535.0     -        -           -        535.0
      (Gains) losses and
       other expenses, net(4)    (4.8) (0.7)       -           -         (5.5)
      Restructuring charges      18.9     -    (18.9)          -            -
      Impairment of equity
       method investment          2.3     -        -        (2.3)           -
      Income from equity
       method investments        (8.0)    -        -           -         (8.0)
                                 ----   ---      ---         ---         ----
        Operational income
         from continuing
         operations             191.7   0.7     18.9         2.3        213.6
    INTEREST EXPENSE, net        10.7     -        -           -         10.7
    OTHER EXPENSE, net            0.2     -        -           -          0.2
                                  ---   ---      ---         ---          ---
        Income from
         continuing operations
         before income taxes    180.8   0.7     18.9         2.3        202.7
    PROVISION FOR INCOME TAXES   68.9   0.2      5.9           -         75.0
                                 ----   ---      ---         ---         ----
        Income from
         continuing operations $111.9  $0.5    $13.0        $2.3       $127.7
                               ======  ====    =====        ====        ======

    EARNINGS PER SHARE FROM
     CONTINUING OPERATIONS
       - DILUTED                $1.89 $0.01    $0.22       $0.04        $2.16
                                ===== =====    =====       =====        =====

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




                                        For  the Year-to-Date Period Ended
                                                  September 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             0.4           (0.1)          0.3
    Foreign currency exchange gain        (4.3)             -          (4.3)
    Gain on disposal of fixed assets      (0.2)           0.1          (0.1)
    Other items, net                       0.3           (0.1)          0.2
                                           ---           ----           ---
      (Gains) losses and other
       expenses, net                     $(4.8)          $0.3         $(4.5)
                                         =====           ====         =====



    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 - $1.70
    Restructuring charges                                   (0.41)
    Net change in unrealized gains on open futures
     contracts and other items, net                          0.07
                                                             ----
      GAAP income per share from continuing
       operations - diluted                             $1.31 - $1.36
                                                       ===============




    Free Cash Flow

                                                     For the       For the
                         For the      For the      Year-to-Date  Year-to-Date
                         Quarter      Quarter         Period        Period
                          Ended        Ended          Ended          Ended
                       September 30, September 30, September 30, September 30,
                           2009         2008           2009           2008
                       -----------   ------------  ------------  ------------
    Net cash provided
     by operating
     activities          $130.6         $116.2         $213.3        $139.8
    Purchase of
     property, plant
     and equipment        (12.3)         (15.8)         (33.9)        (38.3)
                          -----          -----          -----         -----
      Free cash flow     $118.3         $100.4         $179.4        $101.5
                         ======         ======         ======        ======



    Operational Working Capital

                                      September 30,              September 30,
                                          2009                        2008
                        September 30,   Trailing    September 30,   Trailing
                            2009       12 Mo. Avg.     2008        12 Mo. Avg.
                       -------------   ----------   ------------   ----------

    Accounts and Notes
     Receivable, Net       $387.3                     $542.7
      Asset
       Securitization        30.0                          -
      Allowance for
       Doubtful Accounts     20.4                       18.5
                             ----                       ----
    Accounts and Notes
     Receivable, Gross      437.7        $422.0        561.2         $546.6

    Inventories             274.6                      351.3
      Excess of Current
       Cost Over Last-in,
       First-out             72.5                       73.8
                             ----                       ----
    Inventories
     as Adjusted            347.1         375.8        425.1          435.9

    Accounts Payable       (279.7)       (258.3)      (347.0)        (334.0)
                           ------        ------       ------         ------
    Operating Working
     Capital (a)            505.1         539.5        639.3          648.5
                            =====         =====        =====          =====
    Net Sales, Trailing
     Twelve Months (b)    2,852.3       2,852.3      3,572.7        3,572.7
                          -------       -------      -------        -------
    Operational Working
     Capital Ratio (a/b)     17.7%         18.9%        17.9%          18.2%
                             ====          ====         ====           ====


    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
                                                       September 30,
                                                           2009
                                                       ------------
    Earnings before interest and taxes ("EBIT") (a)       $161.9
    Depreciation and amortization expense ("DA") (b)        51.4
                                                            ----
    EBITDA (EBIT excluding DA) (a + b)                    $213.3
                                                          ======
    Total debt at September 30, 2009 (c)                  $201.1
                                                          ======
    Total debt to EBITDA ratio ((c / (a + b))                0.9
                                                             ===

    Reconciliation of EBIT to income from continuing
     operations before income taxes:
    EBIT per above (non-GAAP)                             $161.9
    Losses and other expenses, net of gain on sale
     of fixed assets                                         5.8
    Impairment of equity method investment                   6.8
    Restructuring charges                                   38.9
    Other expenses, net                                      0.1
    Interest expense, net                                    9.6
                                                             ---
      Subtotal                                             100.7
    Less:  Realized losses on settled futures contracts     (5.5)
    Less:  Foreign currency exchange losses                 (2.0)
                                                            ----
      Income from continuing operations before income
       taxes (GAAP)                                       $108.2
                                                          ======

SOURCE Lennox International Inc.

http://www.lennoxinternational.com