EX-99.1 2 d24727exv99w1.htm PRESS RELEASE exv99w1
 

Exhibit 99.1

Lennox International reports $0.12 EPS from continuing operations for first quarter;
reaffirms full-year earnings guidance

     (DALLAS, TX – April 27, 2005) — Lennox International Inc. (NYSE:LII) today announced its results for the first quarter of 2005.

     Revenue from continuing operations increased 5% to $700.3 million. In constant currencies, sales were up 4%. Income from continuing operations was $7.5 million, or $0.12 per share, compared to a loss from continuing operations of $177.7 million last year. Adjusting for the $185.1 million after-tax goodwill impairment charge taken in Q1 of 2004, income from continuing operations in last year’s first quarter was $7.4 million, or $0.13 per share.

     LII incurred $1.1 million in after-tax discontinued operations charges in the first quarter related to last year’s divestiture of 48 Service Experts service centers, resulting in net income of $6.4 million, or $0.10 per share.

     Cash provided by operating activities of continuing operations was $38.0 million in the first quarter, $13.6 million was invested in capital expenditures, and the balance in the company’s asset securitization program increased by $5.0 million. As a result, the company generated strong free cash flow of $19.4 million. At March 31, 2005 LII’s total debt of $309.2 million was $56.2 million below the same time the prior-year.

     “In the first quarter of the year, typically the seasonally weakest quarter for us, LII’s financial results are tracking to our internal expectations,” said Bob Schjerven, chief executive officer. “We are realizing meaningful improvement from the price increases we have implemented, which largely offset the approximately $21 million in material cost inflation we experienced in the quarter. A shift in mix toward less profitable markets, however, negatively affected margins, particularly in our residential businesses. Our initiatives to improve Service Experts’ performance are taking hold and we continue to expect this segment to be modestly profitable this year.”

     The company reaffirmed its guidance for earnings per share of $1.50 to $1.60 in 2005 – an 8% to 15% improvement over its 2004 performance. Revenue growth for the year is expected to be in the mid-single digits.

Business segment highlights

     Heating & Cooling: First quarter revenue in the Residential Heating & Cooling segment increased 6% to $342.7 million, driven primarily by the Lennox brand and the hearth products business. Sales adjusted for foreign exchange were up 5%. Residential Heating and Cooling segment profit was $29.6 million, down from $32.6 million last year, with operating margins declining from 10.1% in last year’s first quarter to 8.6% this year. Mild temperatures in the Midwest and Northeast resulted in a sales skew to more price-competitive Southern markets. In addition, the sales mix shifted away from more profitable replacement business toward new construction business. The company incurred approximately $2 million in higher warranty and product liability costs, primarily due to revaluing warranty reserves based on higher material input costs.

     Industry demand for Commercial Heating & Cooling equipment is improving in the domestic market, and LII continues to outperform the market in this segment. Revenue in the first quarter increased 16%, or 14% adjusted for foreign exchange, to $126.2 million. Segment profit increased sharply from $1.4 million last year to $4.7 million this year, with operating margins improving by 240 basis points to 3.7%, due to higher sales volumes and improved pricing.

     Service Experts: Sales for continuing operations were down 2%, or 3% when adjusted for currency fluctuations, to $135.9 million. The segment had an operating loss of $6.3 million

 

 

in the first quarter, compared with an $7.7 million loss the prior year, reflecting a reduction in fixed expenses.

     Refrigeration: Revenue rose 2%, but was flat in constant currencies. Segment profit declined from $10.6 million last year to $8.9 million this year, with operating margins declining to 8.0% from 9.7% in the prior year due to weaker performance in the company’s international businesses.

Conference Call

     A conference call to discuss the company’s first quarter results will be held on Thursday, April 28 at 9:30 a.m. (CDT). To listen, please call the conference call line at 651-291-0344 ten minutes prior to the scheduled start time and use reservation number 778269. The number of connections for this call is limited to 200. This conference call will also be webcast on Lennox International’s web site at http://www.lennoxinternational.com.

     If you are unable to participate in this conference call, a replay will be available from 3:00 p.m. April 28 through May 05, 2005 by dialing 800-475-6701, access code 778269. This call will also be archived on the company’s web site.

     This news release contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. These statements are subject to numerous risks and uncertainties — including the impact of higher raw material prices, our ability to implement price increases for our products and services, and the impact of unfavorable weather on the demand for our products and services — that could cause actual results to differ materially from such statements. For information concerning these risks and uncertainties, see Lennox International’s publicly available filings with the Securities and Exchange Commission. Lennox International disclaims any intention or obligation to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise.

 

 

LENNOX INTERNATIONAL INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF OPERATIONS
For the Three Months Ended March 31, 2005 and 2004
(Unaudited, in millions, except per share data)

                 
    For the  
    Three Months Ended  
    March 31,  
    2005     2004  
NET SALES
   $ 700.3     $ 664.0  
COST OF GOODS SOLD
     478.5       438.4  
 
            
Gross Profit
     221.8       225.6  
OPERATING EXPENSES:
                
Selling, general and administrative expense
     204.3       206.3  
Goodwill impairment
     —       208.3  
 
            
Operational income (loss) from continuing operations
     17.5       (189.0 )
INTEREST EXPENSE, net
     5.5       7.5  
OTHER EXPENSE
     0.1       0.3  
 
            
Income (loss) from continuing operations before income taxes
     11.9       (196.8 )
PROVISION FOR (BENEFITS FROM) INCOME TAXES
     4.4       (19.1 )
 
            
Income (loss) from continuing operations
     7.5       (177.7 )
 
            
DISCONTINUED OPERATIONS
                
Loss from operations of discontinued operations
     1.6       20.1  
Income tax benefit
     (0.4 )     (3.7 )
Loss on disposal of discontinued operations
     0.1       —  
Income tax benefit
     (0.2 )     —  
 
            
Loss from discontinued operations
     1.1       16.4  
 
            
Net income (loss)
   $ 6.4     $ (194.1 )
 
            
INCOME (LOSS) PER SHARE FROM CONTINUING OPERATIONS:
                
Basic
   $ 0.12     $ (2.98 )
Diluted
   $ 0.12     $ (2.98 )
LOSS PER SHARE FROM DISCONTINUED OPERATIONS:
                
Basic
   $ (0.02 )   $ (0.28 )
Diluted
   $ (0.02 )   $ (0.28 )
NET INCOME (LOSS) PER SHARE:
                
Basic
   $ 0.10     $ (3.26 )
Diluted
   $ 0.10     $ (3.26 )

 

 

LENNOX INTERNATIONAL INC. AND SUBSIDIARIES

SEGMENT REVENUES AND OPERATING PROFIT
For the Three Months Ended March 31, 2005 and 2004
(Unaudited, in millions)

                 
    For the  
    Three Months Ended  
    March 31,  
    2005     2004  
Net Sales
                
Residential
   $ 342.7     $ 324.3  
Commercial
     126.2       108.9  
 
            
Heating and Cooling
     468.9       433.2  
Service Experts
     135.9       138.9  
Refrigeration
     111.9       109.2  
Eliminations
     (16.4 )     (17.3 )
 
            
 
   $ 700.3     $ 664.0  
 
            
Segment Profit (Loss) (A)
                
Residential
   $ 29.6     $ 32.6  
Commercial
     4.7       1.4  
 
            
Heating and Cooling
     34.3       34.0  
Service Experts
     (6.3 )     (7.7 )
Refrigeration
     8.9       10.6  
Corporate and other
     (19.3 )     (16.4 )
Eliminations
     (0.1 )     (1.2 )
 
            
Segment Profit
     17.5       19.3  
Reconciliation to income (loss) from continuing operations before income taxes
                
Goodwill impairment
     —       208.3  
Interest expense, net
     5.5       7.5  
Other expense
     0.1       0.3  
 
            
 
   $ 11.9     $ (196.8 )
 
            

(A)   Segment profit is based upon income (loss) from continuing operations included in the accompanying consolidated statements of operations excluding Goodwill Impairment.

 

 

LENNOX INTERNATIONAL INC. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS
As of March 31, 2005 and December 31, 2004
(in millions, except share data)

ASSETS

                 
    March 31,     December 31,  
    2005     2004  
    (unaudited)          
CURRENT ASSETS:
                
Cash and cash equivalents
   $ 84.2     $ 60.9  
Accounts and notes receivable, net
     450.2       472.5  
Inventories
     275.8       247.2  
Deferred income taxes
     13.1       13.1  
Other assets
     42.4       45.9  
Assets held for sale
     1.2       5.1  
 
            
Total current assets
     866.9       844.7  
PROPERTY, PLANT AND EQUIPMENT, net
     236.3       234.0  
GOODWILL, net
     222.5       225.4  
DEFERRED INCOME TAXES
     82.1       82.8  
OTHER ASSETS
     137.3       131.7  
 
            
TOTAL ASSETS
   $ 1,545.1     $ 1,518.6  
 
            
LIABILITIES AND STOCKHOLDERS’ EQUITY
CURRENT LIABILITIES:
                
Short-term debt
   $ 3.8     $ 6.0  
Current maturities of long-term debt
     36.3       36.4  
Accounts payable
     281.6       237.0  
Accrued expenses
     259.9       286.3  
Income taxes payable
     16.7       14.6  
Liabilities held for sale
     2.4       3.7  
 
            
Total current liabilities
     600.7       584.0  
LONG-TERM DEBT
     269.1       268.1  
POSTRETIREMENT BENEFITS, OTHER THAN PENSIONS
     14.7       14.2  
PENSIONS
     105.1       105.5  
OTHER LIABILITIES
     78.6       73.9  
 
            
Total liabilities
     1,068.2       1,045.7  
 
            
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, 67,005,959 shares and 66,367,987 shares issued for 2005 and 2004 respectively
     0.7       0.7  
Additional paid-in capital
     465.1       454.1  
Retained earnings
     66.9       66.8  
Accumulated other comprehensive loss
     (7.4 )     0.7  
Deferred compensation
     (16.0 )     (18.2 )
Treasury stock, at cost, 3,106,822 shares and 3,044,286 for 2005 and 2004, respectively
     (32.4 )     (31.2 )
 
            
Total stockholders’ equity
     476.9       472.9  
 
            
TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY
   $ 1,544.7     $ 1,518.6  
 
            

 

 

LENNOX INTERNATIONAL INC. AND SUBSIDIARIES

Reconciliation to U.S. GAAP (Generally Accepted Accounting Principles) Measures
(Unaudited, in millions, except ratio data)

Free Cash Flow From Continuing Operations

         
    For the Three Months  
    Ended March 31,  
    2005  
Net cash provided by operating activities
   $ 36.3  
Net cash used in operating activities of discontinuing operations
     1.7  
Purchases of property, plant and equipment
     (13.6 )
Change in asset securitization
     (5.0 )
 
      
Free cash flow from continuing operations
   $ 19.4  
 
      

Operational Working Capital – Continuing Operations

                 
    March 31,     March 31, 2005  
    2005     Trailing 12 Mo. Avg.  
Accounts and Notes Receivable, Net
   $ 450.2          
Allowance for Doubtful Accounts
     17.5          
Asset Securitization
     5.0          
 
              
Accounts and Notes Receivable, Gross
     472.7     $ 500.9  
Inventories
     275.8          
Excess of current Cost Over Last-in, First-out
     57.4          
 
              
Inventories as Adjusted
     333.2       326.7  
Accounts Payable
     (281.6 )     (258.2 )
 
            
Operational Working Capital (a)
     524.3       569.4  
Net Sales, Trailing Twelve Months (b)
     3,019.0       3,019.0  
 
            
Operational Working Cap. Ratio (a/b)
     17.4 %     18.9 %
 
            

     Note: Management uses free cash flow and operational working capital, which are not defined by US 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.