News Release

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Lennox International Reports Strong Second Quarter Revenue and Profit Growth and Raises 2010 Guidance
  • Revenue up 11% with strong growth in all business segments in the quarter

  • Adjusted EPS from continuing operations of $0.97, up 45%

  • GAAP EPS from continuing operations of $0.86, up 37%

  • Repurchased $60 million of stock in the quarter

  • Raising 2010 revenue growth guidance range by 1 point to 5-8%; at constant currency, raising revenue growth guidance range by 2 points to 4-7%

  • Raising 2010 adjusted EPS from continuing operations guidance from $1.90-$2.30 to $2.20-$2.45

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

Revenue for the second quarter was $872 million, up 11% from the prior-year quarter. Foreign exchange had a positive impact of 1 point on revenue growth. Diluted earnings per share from continuing operations on an adjusted basis was $0.97, up 45% from $0.67 in the second quarter a year ago. Diluted earnings per share from continuing operations on a GAAP basis was $0.86, up 37% from $0.63 in the year-ago quarter.

"All business segments realized strong revenue and profit growth in the second quarter on solid operational execution and improved end market conditions from a year ago," said Todd Bluedorn, Chief Executive Officer. "The success of our new products and productivity initiatives across our businesses helped drive total segment profit margin up 220 basis points to 10.1%, a record second quarter margin for the company. Looking ahead, we are encouraged by the improved end market conditions we have seen. However, we remain mindful of global economic uncertainties and commodities have become a strong year-over-year headwind for us in the second half. Overall for the full year, we are raising our revenue growth guidance to 5-8% and raising our adjusted EPS from continuing operations growth guidance to 24-38% over last year."

FINANCIAL HIGHLIGHTS

Revenue: Revenue for the second quarter was $872 million, up 11% from the prior-year quarter. Foreign exchange had a positive impact of 1 point. Volume and price/mix were both higher from the year-ago quarter.

Gross Profit: Gross profit for the second quarter was $265 million, up 16% from $227 million in the year-ago quarter. Gross margin was 30.4% compared to 29.0% in the year-ago quarter, up 140 basis points. Gross margin benefited primarily from productivity initiatives and lower component costs. The annual adjustment for warranty was favorable by $6 million in the second quarter of 2010, which compares to a favorable adjustment of $10 million in the second quarter a year ago.

Income from Continuing Operations: Adjusted income from continuing operations in the second quarter was $54.7 million, or $0.97 diluted earnings per share, compared to adjusted income from continuing operations of $38.0 million, or $0.67 diluted earnings per share, in the second quarter a year ago. Adjusted income from continuing operations for the second quarter of 2010 excludes a $2.1 million after-tax charge for restructuring activities, a $2.9 million after-tax special legal contingency charge, and $1.0 million after-tax for the net change in unrealized losses on open future contracts and other items.

On a GAAP basis, income from continuing operations for the second quarter was $48.7 million, or $0.86 diluted earnings per share, compared to $35.9 million income from continuing operations, or $0.63 diluted earnings per share in the prior-year quarter.

In the second quarter, the company had a loss from discontinued operations of $0.4 million after-tax related to previously announced plans to exit the business of certain Service Experts service centers.

Free Cash Flow and Total Debt: Net cash provided by operations in the second quarter was $14 million, compared to $66 million in the prior-year quarter. The company invested $9 million in capital assets in the second quarter. Free cash flow was $5 million, compared to $55 million in the year-ago quarter. Total debt at the end of the second quarter was $356 million following the company's completion of a 7-year $200 million senior notes offering at 4.9%. The company repurchased $60 million of stock in the second quarter and has repurchased approximately $95 million through the first half of 2010. At the end of the second quarter, total cash and cash equivalents were $62 million.

BUSINESS SEGMENT HIGHLIGHTS

Residential Heating & Cooling

Second quarter 2010 revenue in the Residential Heating & Cooling business segment was $413 million, up 9% from $379 million in the year-ago quarter. Foreign exchange had a positive 1 point impact on revenue growth. Segment profit was $52 million, up 34% from $39 million in the year-ago quarter. Segment profit margin was 12.7%, up 230 basis points from 10.4% in the second quarter a year ago. Results were impacted by higher volume, savings from productivity initiatives, and lower component costs, with offsets from lower price/mix, product launch expenses, and a lower favorable warranty adjustment than in the prior-year quarter.

Commercial Heating & Cooling

Revenue in the Commercial Heating & Cooling business segment was $176 million, up 8% from $163 million in the year-ago quarter. Foreign exchange had a negative 1 point impact on revenue growth. Total segment profit was $28 million, up 44% from $19 million in the year-ago quarter. Segment profit margin was 15.8%, up 390 basis points from 11.9% in the second quarter a year ago. Results were impacted by higher volume, higher price/mix, savings from productivity initiatives, and lower component costs.

Service Experts

Revenue in the Service Experts business segment was $168 million in the second quarter, up 14% from $147 million in the year-ago quarter. Foreign exchange had a positive 2 point impact on revenue growth. Segment profit was $13 million, up 45% from $9 million in the second quarter a year ago. Segment profit margin was 7.6%, up 160 basis points from 6.0% in the year-ago quarter. Results were impacted primarily by higher volume and favorable price/mix.

Refrigeration

Revenue in the Refrigeration business segment was $140 million in the second quarter, up 14% from $122 million in the year-ago quarter. Foreign exchange had a positive 4 point impact on revenue growth. Segment profit was $15 million, up 59% from $10 million in the second quarter a year ago. Segment profit margin was 10.9%, up 300 basis points from 7.9% in the year-ago quarter. Results were impacted by higher volume, higher price/mix, and savings from productivity initiatives.

FULL-YEAR OUTLOOK

The company is raising its 2010 guidance ranges for revenue growth and EPS from continuing operations.

  • Raising 2010 revenue guidance from up 4-7%, including 2 points of positive foreign exchange impact, to up 5-8%, including 1 point of positive foreign exchange impact. At constant currency, 2010 revenue growth guidance increases from up 2-5% to up 4-7%.
  • Raising 2010 adjusted EPS from continuing operations guidance from $1.90-$2.30 to a range of $2.20-$2.45.
  • Raising 2010 GAAP EPS from continuing operations guidance from $1.77-$2.17 to a range of $1.98-$2.23.
  • Maintaining guidance for commodity costs headwind of $20-$25 million in the second half of 2010.
  • Reiterating tax rate guidance of 35-36% for 2010.
  • Lowering capital expenditure guidance from approximately $75 million to approximately $65 million for 2010.

CONFERENCE CALL INFORMATION

A conference call to discuss the company's second quarter results will be held this morning at 8:30 a.m. Central time. To listen, please call the conference call line at 612-234-9960 at least 10 minutes prior to the scheduled start time and use reservation number 164086. 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 July 27 through August 2, 2010, by dialing 800-475-6701 (U.S.) or 320-365-3844 (international) and using access code 164086. 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 June 30,
                                          --------------
                                         2010            2009
                                         ----            ----

    NET SALES                          $872.1          $784.0
    COST OF GOODS
     SOLD                               607.4           556.5
    Gross profit                        264.7           227.5
    OPERATING
     EXPENSES:
    Selling, general
     and
     administrative
     expenses                           180.5           164.3
    Losses (gains)
     and other
     expenses, net                        5.8             0.7
    Restructuring
     charges                              3.2             4.7
    Income from
     equity method
     investments                         (4.1)           (1.8)
             Operational
              income from
              continuing
              operations                 79.3            59.6
    INTEREST EXPENSE,
     net                                  3.1             2.0
    OTHER EXPENSE,
     net                                  0.1             0.1
             Income from
              continuing
              operations
              before income
              taxes                76.1      57.5
    PROVISION FOR
     INCOME TAXES                        27.4            21.6
                  Income from
                   continuing
                   operations           $48.7           $35.9
    DISCONTINUED
     OPERATIONS:
        Loss from
         discontinued
         operations                       0.4             6.8
        Income tax
         benefit                            -            (2.6)
             Loss from
              discontinued
              operations                  0.4             4.2
                                          ---             ---
                  Net income            $48.3           $31.7
                                        =====           =====

    EARNINGS PER
     SHARE -BASIC:
         Income from
          continuing
          operations                    $0.88           $0.65
         Loss from
          discontinued
          operations                        -          (0.08)
                  Net income            $0.88           $0.57
                                        =====           =====

    EARNINGS PER
     SHARE -DILUTED:
         Income from
          continuing
          operations                    $0.86           $0.63
         Loss from
          discontinued
          operations                        -          (0.07)
                  Net income            $0.86           $0.56
                                        =====           =====

    AVERAGE SHARES
     OUTSTANDING:
    Basic                                55.1            55.4
    Diluted                              56.3            56.6

    CASH DIVIDENDS
     DECLARED PER
     SHARE                              $0.15           $0.14


                                      For the Six Months
                                        Ended June 30,
                                        --------------
                                       2010              2009
                                       ----              ----

    NET SALES                      $1,516.2          $1,364.5
    COST OF GOODS
     SOLD                           1,077.1             999.3
    Gross profit                      439.1             365.2
    OPERATING
     EXPENSES:
    Selling, general
     and
     administrative
     expenses                         349.6             319.3
    Losses (gains)
     and other
     expenses, net                      5.5              (0.2)
    Restructuring
     charges                           10.3              15.9
    Income from
     equity method
     investments                       (6.1)             (3.2)
             Operational
              income from
              continuing
              operations               79.8              33.4
    INTEREST EXPENSE,
     net                                5.6               3.9
    OTHER EXPENSE,
     net                                0.1               0.1
             Income from
              continuing
              operations
              before income
              taxes                 74.1        29.4
    PROVISION FOR
     INCOME TAXES                      26.7              11.2
                  Income from
                   continuing
                   operations         $47.4             $18.2
    DISCONTINUED
     OPERATIONS:
        Loss from
         discontinued
         operations                     0.8               7.4
        Income tax
         benefit                       (0.1)             (2.8)
             Loss from
              discontinued
              operations                0.7               4.6
                                        ---               ---
                  Net income          $46.7             $13.6
                                      =====             =====

    EARNINGS PER
     SHARE -BASIC:
         Income from
          continuing
          operations                  $0.85             $0.33
         Loss from
          discontinued
          operations                  (0.01)            (0.08)
                  Net income          $0.84             $0.25
                                      =====             =====

    EARNINGS PER
     SHARE -DILUTED:
         Income from
          continuing
          operations                  $0.83             $0.33
         Loss from
          discontinued
          operations                  (0.01)            (0.09)
                  Net income          $0.82             $0.24
                                      =====             =====

    AVERAGE SHARES
     OUTSTANDING:
    Basic                              55.6              55.3
    Diluted                            56.8              55.9

    CASH DIVIDENDS
     DECLARED PER
     SHARE                            $0.30             $0.28


                           LENNOX INTERNATIONAL INC. AND SUBSIDIARIES

                                  SEGMENT NET SALES AND PROFIT
                                    (Unaudited, in millions)


                                                For the Three
                                                    Months
                                               Ended June 30,
                                               --------------
                                                2010             2009
                                                ----             ----
    Net Sales
    Residential Heating &
     Cooling                                  $413.4           $379.3
    Commercial Heating &
     Cooling                                   175.8            162.7
    Service Experts                            167.6            147.2
    Refrigeration                              139.8            122.1
    Eliminations (A)                           (24.5)           (27.3)
                                              $872.1           $784.0
                                              ======           ======

    Segment Profit (Loss)
     (B)
    Residential Heating &
     Cooling                                   $52.5            $39.3
    Commercial Heating &
     Cooling                                    27.8             19.3
    Service Experts                             12.8              8.8
    Refrigeration                               15.3              9.6
    Corporate and other                        (19.6)           (14.7)
    Eliminations (A)                            (0.3)               -
       Subtotal that includes
        segment profit and
        eliminations                            88.5             62.3
    Reconciliation to
     income from
     continuing operations
     before income taxes:
    Items in losses
     (gains) and other
     expenses, net that
     are excluded from
     segment profit (C)                    6.0       (2.0)
    Restructuring charges                        3.2              4.7
    Interest expense, net                        3.1              2.0
    Other expense, net                           0.1              0.1
             Income from continuing
              operations before
              income taxes                     $76.1            $57.5
                                               =====            =====


                                               For the Six Months
                                                 Ended June 30,
                                                 --------------
                                                  2010               2009
                                                  ----               ----
    Net Sales
    Residential Heating &
     Cooling                                    $697.6             $625.6
    Commercial Heating &
     Cooling                                     295.4              294.2
    Service Experts                              294.7              251.6
    Refrigeration                                271.2              235.8
    Eliminations (A)                             (42.7)             (42.7)
                                              $1,516.2           $1,364.5
                                              ========           ========

    Segment Profit (Loss)
     (B)
    Residential Heating &
     Cooling                                     $59.6              $34.5
    Commercial Heating &
     Cooling                                      31.3               21.3
    Service Experts                                8.2                1.7
    Refrigeration                                 30.2               16.1
    Corporate and other                          (32.8)             (28.6)
    Eliminations (A)                              (0.2)              (0.3)
       Subtotal that includes
        segment profit and
        eliminations                              96.3               44.7
    Reconciliation to
     income from
     continuing operations
     before income taxes:
    Items in losses
     (gains) and other
     expenses, net that
     are excluded from
     segment profit (C)                      6.2         (4.6)
    Restructuring charges                         10.3               15.9
    Interest expense, net                          5.6                3.9
    Other expense, net                             0.1                0.1
             Income from continuing
              operations before
              income taxes                       $74.1              $29.4
                                                 =====              =====


    (A) Eliminations consist of intercompany sales between business
    segments, such as products sold to Service Experts by the
    Residential Heating & Cooling segment.

    (B) The Company defines segment profit and loss as a segment's income
    or loss from continuing operations before income taxes included in
    the accompanying Consolidated Statements of Operations:
          Excluding:
      o    Special product quality adjustment.
      o    Items within Gains and/or losses and other expenses, net that
      are noted in (C) .
      o    Restructuring charges.
      o    Goodwill and equity method investment impairments.
      o    Interest expense, net.
      o    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 and/
    or losses on open future contracts, discount fee on accounts sold,
    realized gains and/or losses on marketable securities, special
    legal contingency charge, and other items.

             LENNOX INTERNATIONAL INC. AND SUBSIDIARIES

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

                                     As of               As of
                                                        December
                                   June 30,                         31,
                                        2010              2009
                                         ---               ---
                                  (unaudited)
                            ASSETS
    CURRENT ASSETS:
    Cash and cash equivalents          $61.9            $124.3
    Restricted cash                     23.8                 -
    Accounts and notes
     receivable, net of
     allowances of $16.0 and
     $15.6 in 2010 and 2009,
     respectively                      458.0       357.0
    Inventories, net                   338.4             250.2
    Deferred income taxes               39.1              34.9
    Other assets                        48.3              67.5
                                        ----              ----
    Total current assets               969.5             833.9
    PROPERTY, PLANT AND
     EQUIPMENT, net                    318.2             329.6
    GOODWILL                           253.8             257.4
    DEFERRED INCOME TAXES               66.4              74.6
    OTHER ASSETS, net                   59.3              48.4
                                        ----              ----
    TOTAL ASSETS                    $1,667.2          $1,543.9
                                    ========          ========

             LIABILITIES AND STOCKHOLDERS' EQUITY
    CURRENT LIABILITIES:
    Short-term debt                     $6.1              $2.2
    Current maturities of long-
     term debt                           0.5              35.5
    Accounts payable                   314.7             238.2
    Accrued expenses                   315.4             317.9
    Income taxes payable                 7.1                 -
    Total current liabilities          643.8             593.8
    LONG-TERM DEBT                     349.6             193.8
    POSTRETIREMENT BENEFITS,
     OTHER THAN PENSIONS                13.2              13.4
    PENSIONS                            69.0              66.7
    OTHER LIABILITIES                   69.0              71.8
                                        ----              ----
    Total liabilities                1,144.6             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, 86,026,162
     shares and 85,567,485 shares
     issued for 2010 and 2009,
     respectively                        0.9         0.9
    Additional paid-in capital         850.9             839.1
    Retained earnings                  588.8             558.6
    Accumulated other
     comprehensive loss                (25.1)             (0.8)
    Treasury stock, at cost,
     31,589,468 shares and
     29,292,512 shares for 2010
     and 2009, respectively           (892.9)           (793.4)
    Total stockholders' equity         522.6             604.4
                                       -----             -----
    TOTAL LIABILITIES AND
     STOCKHOLDERS' EQUITY           $1,667.2          $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 Income From
      Continuing Operations to
      Adjusted Income From
      Continuing Operations


                                     For The Three          For The Six
                                         Months                Months
                                    Ended June 30,        Ended June 30,
                                    --------------        --------------
                                     2010        2009        2010        2009
                                     ----        ----        ----        ----
    Income from continuing
     operations, a GAAP
     measure                        $48.7       $35.9       $47.4       $18.2
       Restructuring charges,
        after tax                     2.1         3.4         6.7        10.9
       Special legal
        contingency charge,
        after-tax (a)                 2.9           -         2.9           -
       Net change in
        unrealized losses
        (gains) on open
        future contracts,
        after tax (a)                 0.8     (1.3)     0.8     (3.1)
       Other items, net,
        after tax (a)                 0.2           -         0.3           -
    Adjusted income from
     continuing
     operations, a non-
     GAAP measure                   $54.7       $38.0       $58.1       $26.0
                                    =====       =====       =====       =====

    Income per share from
     continuing operations
     -diluted, a GAAP
     measure                        $0.86       $0.63       $0.83       $0.33
       Restructuring charges         0.04        0.06        0.12        0.19
       Special legal
        contingency charge
        (a)                          0.05           -        0.05           -
       Net change in
        unrealized losses
        (gains) on open
        future contracts and
        other items, net (a)         0.02   (0.02)     0.02   (0.05)
    Adjusted earnings per
     share from continuing
     operations -
     diluted, a non-GAAP
     measure                        $0.97    $0.67    $1.02    $0.47
                                    =====       =====       =====       =====

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

                                     For The Three          For The Six
                                         Months                Months
                                    Ended June 30,        Ended June 30,
                                    --------------        --------------
    Components of Losses
     (gains) and other
     expenses, net (pre-
     tax):                           2010        2009        2010        2009
    --------------------             ----        ----        ----        ----
      Realized (gains)
       losses on settled
       future contracts (a)          (0.4)        1.3        (0.8)        3.3
      Special legal
       contingency charge
       (c)                            4.5           -         4.5           -
      Foreign currency
       exchange loss (a)              0.1         1.5           -         1.3
      (Gain) loss on
       disposal of fixed
       assets (a)                       -        (0.1)        0.1        (0.1)
      Discount fee on
       accounts sold (b)                -         0.1           -         0.3
      Realized gain on
       marketable securities
       (b)                              -           -           -        (0.1)
      Net change in
       unrealized losses
       (gains) on open
       futures contracts (c)          1.3        (2.5)        1.3        (5.2)
      Loss on sale of entity
       (c)                            0.1           -         0.1           -
      Other items, net (c)            0.2         0.4         0.3         0.3
                                      ---         ---         ---         ---
         Losses (gains) and
          other expenses, net
          (pre-tax)                  $5.8        $0.7        $5.5       $(0.2)
                                     ====        ====        ====       =====

    (a) Included in segment profit and adjusted income from
     continuing operations
    (b) Included in adjusted income from continuing
     operations but excluded from segment profit
    (c) Excluded from segment profit and adjusted income 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                        $2.20 - $2.45
     Restructuring charges                             (0.15)
     Special legal contingency charge                  (0.05)
     Net change in unrealized losses on open
      futures contracts and other items, net           (0.02)
                                                       -----
       GAAP income per share from continuing
        operations -diluted                    $1.98 - $2.23
                                               =============



     Free Cash Flow




                                     For the Three Months
                                        Ended June 30,
                                        --------------
                                    2010                2009
                                    ----                ----
     Net cash provided by
      (used in) operating
      activities                   $14.3               $66.4
     Purchase of
      property, plant and
      equipment                     (9.0)              (11.7)
                                ----               -----
       Free cash flow           $5.3               $54.7
                                ====               =====


     Operational Working
      Capital

                                             June 30,
                                                  2010
                           June 30,          Trailing
                                2010        12 Mo. Avg.
                                ----        -----------
     Accounts and Notes
      Receivable, Net         $458.0
       Asset Securitization           -
       Allowance for
        Doubtful Accounts        16.0
                                ----
     Accounts and Notes
      Receivable, Gross        474.0              $404.6

     Inventories               338.4
       Excess of Current
        Cost Over Last-in,
          First-out             71.6
                                ----
     Inventories as
      Adjusted                 410.0               369.4

     Accounts Payable         (314.7)             (273.5)
                              ------              ------

     Operating Working
      Capital (a)              569.3               500.5
                               =====               =====

     Net Sales, Trailing
      Twelve Months (b)      2,999.2             2,999.2
                             -------             -------

     Operational Working
      Capital Ratio (a /
      b)                        19.0%               16.7%
                                ====                ====


                                      For the Six Months
                                        Ended June 30,
                                        --------------
                                    2010                2009
                                    ----                ----
     Net cash provided by
      (used in) operating
      activities                  $(26.0)              $82.7
     Purchase of
      property, plant and
      equipment                    (19.7)              (21.6)
                               -----               -----
       Free cash flow         $(45.7)              $61.1
                              ======               =====


     Operational Working
      Capital

                                             June 30,
                                                  2009
                           June 30,          Trailing
                                2009        12 Mo. Avg.
                                ----        -----------
     Accounts and Notes
      Receivable, Net         $426.5
       Asset Securitization        30.0
       Allowance for
        Doubtful Accounts        20.4
                                ----
     Accounts and Notes
      Receivable, Gross        476.9              $455.8

     Inventories               267.6
       Excess of Current
        Cost Over Last-in,
          First-out             75.4
                                ----
     Inventories as
      Adjusted                 343.0               398.5

     Accounts Payable         (267.3)             (282.6)
                              ------              ------

     Operating Working
      Capital (a)              552.6               571.7
                               =====               =====

     Net Sales, Trailing
      Twelve Months (b)      3,062.7             3,062.7
                             -------             -------

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



     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,
                                                                      2010
                                                                       ---
     Earnings before interest and taxes ("EBIT") (a)                $216.1
     Depreciation and amortization expense ("DA") (b)                 53.4
     EBITDA (EBIT excluding DA) (a + b)                             $269.5
                                                                    ======
     Total debt at June 30, 2010 (c)                                $356.2
                                                                    ======
       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)                                      $216.1
     Special product quality adjustment                               18.3
     Items in gains and other expenses, net that are
      excluded from segment profit                                    (0.1)
     Impairment of assets                                              6.4
     Restructuring charges                                            35.9
     Other expenses, net                                               0.1
     Interest expense, net                                             9.9
                                                                       ---
       Income from continuing operations before income
        taxes (GAAP)                                                $145.6
                                                                    ======


SOURCE: Lennox International Inc.