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Lennox International Reports First Quarter Results
- Revenue up 11% and total segment profit margin up 420 basis points on strong productivity improvements - Adjusted EPS from continuing operations $0.06, up from $0.22 loss a year ago - GAAP loss per share from continuing operations $0.02, compared to $0.32 loss a year ago - Repurchased $35 million of stock in the quarter and raised dividend 7% - Raising low end of 2010 revenue guidance range by 1 point to up 4-7% - Raising 2010 adjusted EPS from continuing operations guidance from $1.85-$2.25 to $1.90-$2.30

DALLAS, April 27, 2010 /PRNewswire via COMTEX/ --Lennox International Inc. (NYSE: LII) today reported financial results for the first quarter of 2010.

(Logo: http://www.newscom.com/cgi-bin/prnh/20020304/DAM053LOGO)

Revenue for the first quarter was $644 million, up 11% from the prior-year quarter. Foreign exchange had a positive impact of 5 points. Diluted earnings per share from continuing operations on an adjusted basis, a non-GAAP measure, was $0.06, compared to a $0.22 adjusted loss per share in the first quarter a year ago. Diluted loss per share from continuing operations on a GAAP basis was $0.02, compared to a $0.32 loss in the year-ago quarter.

"Our residential businesses realized strong double-digit growth in the quarter, and our refrigeration business returned to growth," said Todd Bluedorn, Chief Executive Officer. "While revenue in our commercial business was still down from a year ago, the rate of decline continued to slow in the quarter and profit was up. Overall for the company, the benefits from our productivity initiatives are clear, with gross margin up 330 basis points and total segment profit margin up 420 basis points in the quarter. With our strong balance sheet and improving end market conditions, we stepped up the level of cash returned to shareholders by raising our dividend 7% and repurchasing $35 million of stock in the quarter. Looking ahead, we are raising our 2010 guidance for adjusted EPS from continuing operations to a range of $1.90 to $2.30. Entering our strongest seasonal quarters, we are well-positioned for share gains with our recently introduced new products and to capitalize further on market opportunities."

FINANCIAL HIGHLIGHTS

Revenue: Revenue for the first quarter was $644 million, up 11% from the prior-year quarter. Foreign exchange had a positive impact of 5 points in the first quarter. Volume was higher and price/mix was down slightly from the year-ago quarter.

Gross Profit: Gross profit for the first quarter was $174 million, up 26% from $138 million in the year-ago quarter. Gross margin was 27.1% compared to 23.8% in the year-ago quarter, up 330 basis points. Gross margin benefited primarily from higher volume, lower component and commodity costs, and savings from restructuring and productivity initiatives.

Income (Loss) from Continuing Operations: Adjusted income from continuing operations in the first quarter was $3.4 million, or $0.06 diluted earnings per share, compared to adjusted loss from continuing operations of $12.0 million, or $0.22 diluted loss per share in the first quarter a year ago. Adjusted income from continuing operations for the first quarter of 2010 excludes a $4.6 million after-tax charge from restructuring activities and a $0.1 million after-tax charge for other items. In new restructuring activity in the first quarter, the company announced plans to exit its OEM refrigeration coil business in Australia.

On a GAAP basis, loss from continuing operations for the first quarter was $1.3 million, or $0.02 diluted loss per share, compared to $17.7 million loss from continuing operations, or $0.32 diluted loss per share in the prior-year quarter.

In the first quarter, the company had a loss from discontinued operations of $0.3 million after-tax, or $0.01 diluted loss per share, related to exiting the business of certain Service Experts service centers.

Free Cash Flow and Total Debt: Net cash used in operations in the first quarter was $40 million compared to net cash provided by operations of $16 million in the prior-year quarter. The company invested $11 million in capital assets in the first quarter. Free cash flow was ($51) million, compared to $6 million in the year-ago quarter. Total debt at the end of the first quarter was $291 million after the company repurchased $35 million of stock. Total cash and equivalents were $63 million at the end of the quarter.

BUSINESS SEGMENT HIGHLIGHTS

Residential Heating & Cooling

First quarter 2010 revenue from the Residential Heating & Cooling business segment was $284 million, up 15% from $246 million in the year-ago quarter. Foreign exchange had a positive 3 point impact. Segment profit was $7 million and segment profit margin was 2.5%, compared to segment loss of $5 million and segment loss margin of 1.9% a year ago. Results were impacted by higher volume, lower price/mix, savings from productivity initiatives, and lower component and commodity costs.

Commercial Heating & Cooling

Revenue in the Commercial Heating & Cooling business segment was $120 million, down 9% from $132 million in the year-ago quarter. Foreign exchange had a positive 3 point impact. Total segment profit was $3 million, and segment profit margin was 2.8%, compared to segment profit of $2 million and segment profit margin of 1.5% in the year-ago quarter. Results were impacted by lower volume, with offsets from lower commodity, component, and SG&A costs.

Service Experts

Revenue in the Service Experts business segment was $127 million in the first quarter, up 22% from $104 million in the year-ago quarter. Foreign exchange had a positive 5 point impact. Segment loss was $5 million and segment loss margin was 3.6%, compared to segment loss of $7 million and segment loss margin of 6.8% in the year-ago quarter. Results were impacted by higher volume and improved productivity, with offsets from lower price/mix and higher variable selling costs.

Refrigeration

Revenue in the Refrigeration business segment was $131 million in the first quarter, up 16% from $114 million in the year-ago quarter. Foreign exchange had a positive 15 point impact. Segment profit increased 129% and segment profit margin increased 560 basis points. Segment profit was $15 million and segment profit margin was 11.3% in the first quarter, compared to segment profit of $6 million and segment profit margin of 5.7% in the year-ago quarter. Results were impacted by higher price/mix, restructuring and productivity initiatives, favorable currency, and lower component and commodity costs.

FULL-YEAR OUTLOOK

The company is narrowing its revenue guidance range for 2010 and is raising full-year guidance for adjusted EPS from continuing operations.

  • Raising the low end of 2010 revenue guidance by 1 point to a new range of up 4-7%, including 2 points of positive foreign exchange impact.
  • Raising 2010 adjusted EPS from continuing operations guidance from a range of $1.85-$2.25 to a range of $1.90-$2.30.
  • Updating 2010 GAAP EPS from continuing operations guidance from a range of $1.75-$2.15 to a range of $1.77-$2.17, reflecting the higher adjusted EPS guidance range and additional restructuring charges.
  • Increasing the assumption for higher commodity costs headwind in 2010 from $5-10 million to $15-20 million.
  • Reiterating tax rate guidance of 35-36% for 2010.
  • Reiterating capital expenditure guidance of approximately $75 million in 2010.

CONFERENCE CALL INFORMATION

A conference call to discuss the company's first quarter results will be held this morning at 8:30 a.m. Central time. To listen, please call the conference call line at 612-332-0345 at least 10 minutes prior to the scheduled start time and use reservation number 152831. This conference call will also be webcast on Lennox International's web site at http://www.lennoxinternational.com.

A replay will be available from 11:00 a.m. Central time on April 27 through May 4, 2010, by dialing 800-475-6701 (U.S.) or 320-365-3844 (international) and using access code 152831. 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 2010, 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. Risks and uncertainties that could cause actual results to differ materially from such statements 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. 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 Three Months
                                                    Ended March 31,
                                                    ---------------
                                                     2010             2009
                                                     ----             ----

    NET SALES                                      $644.1           $580.6
    COST OF GOODS SOLD                              469.8            442.7
                                                    -----            -----
    Gross profit                                    174.3            137.9
    OPERATING EXPENSES:
    Selling, general and administrative
     expenses                                       168.9            155.1
    Gains and other expenses, net                    (0.3)            (0.9)
    Restructuring charges                             7.2             11.2
    Income from equity method investments            (2.0)            (1.3)
                                                     ----             ----
             Operational income (loss) from
              continuing operations                   0.5            (26.2)
    INTEREST EXPENSE, net                             2.5              1.9
                                                      ---              ---
             Loss from continuing operations
              before income taxes                    (2.0)           (28.1)
    BENEFIT FROM INCOME TAXES                        (0.7)           (10.4)
                                                     ----            -----
                  Loss from continuing operations    (1.3)           (17.7)
    DISCONTINUED OPERATIONS:
        Operational loss from discontinued
         operations                                   0.4              0.6
        Income tax benefit                           (0.1)            (0.2)
                                                     ----             ----
             Loss from discontinued operations        0.3              0.4
                                                      ---              ---
                  Net loss                          $(1.6)          $(18.1)
                                                    =====           ======

    LOSS PER SHARE - BASIC AND DILUTED:
         Loss from continuing operations           $(0.02)          $(0.32)
         Loss from discontinued operations          (0.01)           (0.01)
                                                    -----            -----
                  Net loss                         $(0.03)          $(0.33)
                                                   ======           ======

    AVERAGE SHARES OUTSTANDING -BASIC
     AND DILUTED                                     56.0             55.2

    CASH DIVIDENDS DECLARED PER SHARE               $0.15            $0.14





                     LENNOX INTERNATIONAL INC. AND SUBSIDIARIES
                          SEGMENT NET SALES AND PROFIT
                           (Unaudited, in millions)

                                                   For the Three Months
                                                     Ended March 31,
                                                     ---------------
                                                    2010               2009
                                                    ----               ----
    Net Sales
    Residential Heating & Cooling                 $284.2             $246.3
    Commercial Heating & Cooling                   119.7              131.5
    Service Experts                                127.1              104.4
    Refrigeration                                  131.4              113.7
    Eliminations (A)                              (18.3)              (15.3)
                                                  $644.1             $580.6
                                                  ======             ======

    Segment Profit (Loss) (B)
    Residential Heating & Cooling                   $7.1              $(4.8)
    Commercial Heating & Cooling                     3.4                2.0
    Service Experts                                 (4.6)              (7.1)
    Refrigeration                                   14.9                6.5
    Corporate and other                           (13.2)              (13.9)
    Eliminations (A)                                 0.2               (0.4)
       Subtotal that includes
        segment profit (loss) and
        eliminations                                 7.8              (17.7)
    Reconciliation to loss from
     continuing operations before
     income taxes:
    Items in gains and other
     expenses, net that are
     excluded from segment profit
     (C)                                             0.1               (2.7)
    Restructuring charges                            7.2               11.2
    Interest expense, net                            2.5                1.9
             Loss from continuing
              operations before income
              taxes                                $(2.0)            $(28.1)
                                                   =====             ======

    (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:
          -  Special product quality adjustment.
          -  Items within Gains and/or losses and other
             expenses, net that are noted in (C) .
          -  Restructuring charges.
          -  Goodwill and equity method investment impairments.
          -  Interest expense, net.
          -  Other expense, net.

    (C) Items in Gains and/or losses and other
     expenses, net that are excluded from segment
     profit are net change in unrealized gains on open
     future contracts, discount fee on accounts sold,
     realized gain on marketable securities, and other
     items.


                LENNOX INTERNATIONAL INC. AND SUBSIDIARIES
                     CONSOLIDATED BALANCE SHEETS
              (In millions, except share and per share data)

                                                       As of        As of
                                                      March 31,  December 31,
                                                        2010          2009
                                                     (unaudited)
                                      ASSETS
    CURRENT ASSETS:
    Cash and cash equivalents                           $63.0        $124.3
    Restricted cash                                      25.1             -
    Accounts and notes receivable, net of
     allowances of $15.7 and $15.6 in 2010
     and 2009, respectively                             349.5         357.0
    Inventories, net                                    326.4         250.2
    Deferred income taxes                                34.3          34.9
    Other assets                                         84.8          67.5
    Total current assets                                883.1         833.9
    PROPERTY, PLANT AND EQUIPMENT, net                  326.7         329.6
    GOODWILL                                            260.9         257.4
    DEFERRED INCOME TAXES                                69.5          74.6
    OTHER ASSETS, net                                    50.6          48.4
    TOTAL ASSETS                                     $1,590.8      $1,543.9

                              LIABILITIES AND STOCKHOLDERS' EQUITY
    CURRENT LIABILITIES:
    Short-term debt                                     $4.2          $2.2
    Current maturities of long-term debt                 0.5          35.5
    Accounts payable                                   286.1         238.2
    Accrued expenses                                   285.9         317.9
    Total current liabilities                          576.7         593.8
    LONG-TERM DEBT                                     286.6         193.8
    POSTRETIREMENT BENEFITS, OTHER THAN
     PENSIONS                                           13.3          13.4
    PENSIONS                                            68.4          66.7
    OTHER LIABILITIES                                   75.3          71.8
    Total liabilities                                1,020.3         939.5
    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, 85,978,262 shares and
     85,567,485 shares issued for 2010 and
     2009, respectively                                  0.9           0.9
    Additional paid-in capital                         846.6         839.1
    Retained earnings                                  548.7         558.6
    Accumulated other comprehensive income
     (loss)                                              7.1          (0.8)
    Treasury stock, at cost, 30,216,824
     shares and 29,292,512 shares for 2010
     and 2009, respectively                           (832.8)       (793.4)
    Total stockholders' equity                         570.5         604.4
    TOTAL LIABILITIES AND STOCKHOLDERS'
     EQUITY                                         $1,590.8      $1,543.9


    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 Loss From Continuing Operations to Adjusted Income (Loss) From Continuing Operations

                                                  For The Three Months
                                                    Ended March 31,
                                                    ---------------
                                                  2010             2009
                                                  ----             ----
    Loss from continuing operations, a GAAP
     measure                                     $(1.3)          $(17.7)
       Restructuring charges, after tax            4.6              7.5
       Net change in unrealized gains on open
        future contracts, after tax (a)              -             (1.8)
       Other items, after tax (a)                  0.1                -
    Adjusted income (loss) from continuing
     operations, a non-GAAP measure               $3.4           $(12.0)
                                                  ====           ======

    Loss per share from continuing operations -
     diluted, a GAAP measure                    $(0.02)          $(0.32)
       Restructuring charges                      0.08             0.14
       Net change in unrealized gains on open
        future contracts (a)                         -            (0.04)
    Adjusted earnings (loss) per share from
     continuing operations - diluted, a non-
     GAAP measure                                $0.06           $(0.22)
                                                 =====           ======

    (a)  Recorded in Gains and other expenses,
     net in the Consolidated Statements of
     Operations


                                                             For The Three
                                                                 Months
                                                            Ended March 31,
                                                            ---------------
    Components of Gains and other expenses, net
     (pre-tax):                                           2010          2009
    -------------------------------------------           ----          ----
      Realized (gains) losses on settled future
       contracts (a)                                     $(0.4)         $1.9
      Foreign currency exchange gain (a)                  (0.1)         (0.2)
      Loss on disposal of fixed assets (a)                 0.1             -
      Discount fee on accounts sold (b)                      -           0.2
      Realized gain on marketable securities (b)             -          (0.1)
      Net change in unrealized gains on open futures
       contracts (c)                                         -          (2.7)
      Gain on sale of business (c)                        (0.1)            -
      Other items, net (c)                                 0.2             -
         Gains and other expenses, net (pre-tax)         $(0.3)        $(0.9)
                                                         =====         =====

    (a) Included in segment profit (loss) and adjusted income
     (loss) from continuing operations
    (b) Included in adjusted income (loss) from continuing
     operations but excluded from segment profit (loss)
    (c) Excluded from segment profit (loss) and adjusted income
     (loss) from continuing operations



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

                                                                  For the
                                                                Year Ended
                                                               December 31,
                                                                        2010
                                                                 ESTIMATED
                                                                 ---------
     Adjusted income per share from continuing operations -
      diluted                                                  $1.90 - $2.30
     Restructuring charges                                             (0.12)
     Net change in unrealized losses on open futures
      contracts and other items, net                                   (0.01)
                                                                       -----
       GAAP income per share from continuing operations -
        diluted                                                $1.77 - $2.17
                                                               =============


    Free Cash Flow

                                                  For the Three Months
                                                     Ended March 31,
                                                     ---------------
                                                 2010                2009
                                                 ----                ----
     Net cash (used in) provided by operating
      activities                               $(40.3)              $16.3
     Purchase of property, plant and equipment  (10.7)               (9.9)
                                                -----                ----
       Free cash flow                          $(51.0)               $6.4
                                               ======                ====






     Operational Working Capital

                                                 March 31,           March 31,
                                                   2010                 2009
                                                 Trailing             Trailing
                                       March 31, 12 Mo.     March 31,  12 Mo.
                                           2010     Avg.        2009   Avg.
                                            ---    ------       ----  ------
     Accounts and notes receivable,
      net                                  $349.5               $330.0
              Asset securitization              -                 30.0
              Allowance for doubtful
               accounts                      15.7                 18.6
                                             ----
     Accounts and notes receivable,
      gross                                 365.2     $404.6    378.6  $489.5

     Inventories                            326.4               320.3
              Excess of current cost
               over Last-in,
               First-out                     71.7                75.1
                                             ----
     Inventories as adjusted                398.1      358.1    395.4   418.3

     Accounts payable                      (286.1)    (259.5)  (257.7) (307.2)
                                           ------     ------   ------  ------

     Operating working capital (a)         $477.2     $503.2    $516.3 $600.6
                                           ======     ======    ====== ======

     Net sales, trailing twelve months
      (b)                                $2,911.0   $2,911.0  $3,267.1 3,267.1
                                         ========   ========  ======== =======

     Operational working capital ratio
      (a /b)                                 16.4%      17.3%     15.8%  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
                                                              March 31,
                                                                     2010
                                                                      ---
     Earnings before interest and taxes
      ("EBIT") (a)                                                 $190.0
     Depreciation and amortization expense
      ("DA") (b)                                                     53.1
     EBITDA (EBIT excluding DA) (a + b)                            $243.1
                                                                   ======
     Total debt at March 31, 2010 (c)                              $291.3
                                                                   ======
       Total debt to EBITDA ratio ((c /(a +
        b))                                                           1.2
                                                                      ===

     Reconciliation of EBIT to income from
      continuing operations before income taxes:
     EBIT per above (non-GAAP)                                     $190.0
     Special product quality adjustment                              18.3
     Items in gains and other expenses, net that
      are excluded from segment profit                               (8.1)
     Impairment of assets                                             6.4
     Restructuring charges                                           37.5
     Other expenses, net                                              0.1
     Interest expense, net                                            8.8
                                                                      ---
       Income from continuing operations before
        income taxes (GAAP)                                        $127.0
                                                                   ======




SOURCE Lennox International Inc.