| Condensed Consolidating Financial Statements |
Condensed Consolidating Financial Statements:
The Company’s senior unsecured notes are unconditionally guaranteed by certain of the Company’s subsidiaries (the “Guarantor Subsidiaries”) and are not secured by our other subsidiaries (the “Non-Guarantor Subsidiaries”). The Guarantor Subsidiaries are 100% owned, all guarantees are full and unconditional, and all guarantees are joint and several. As a result of the guarantee arrangements, we are required to present the following condensed consolidating financial statements.
On March 22, 2013, the Company sold its Service Experts business to a majority-owned entity of American Capital, Ltd. The primary subsidiary for the U.S. Service Experts business had previously been included as a "Guarantor Subsidiary" and the Canada Service Experts subsidiary had previously been included as a "Non-Guarantor Subsidiary." As of March 31, 2013, the U.S. and Canada Service Experts businesses are included in discontinued operations of the condensed consolidating financial statements.
The condensed consolidating financial statements reflect the investments in subsidiaries of the Company using the equity method of accounting. Intercompany account balances have been included in Accounts and notes receivable, Other assets (Current), Other assets, net, Short-term debt, Accounts payable, and Long-term debt line items of the Parent, Guarantor and Non-Guarantor balance sheets. The principal elimination entries eliminate investments in subsidiaries and intercompany balances and transactions.
Condensed consolidating financial statements of the Company, its Guarantor Subsidiaries and Non-Guarantor Subsidiaries as of March 31, 2013 and December 31, 2012 and for the three months ended March 31, 2013 and 2012 are shown on the following pages:
Lennox International Inc. and Subsidiaries Condensed Consolidating Balance Sheets As of March 31, 2013 (In millions) | | | | | | | | | | | | | | | | | | | | | | Parent | | Guarantor
Subsidiaries | | Non-Guarantor
Subsidiaries | | Eliminations | | Consolidated | ASSETS | Current Assets: | | | | | | | | | | Cash and cash equivalents | $ | — |
| | $ | 14.0 |
| | $ | 20.9 |
| | $ | — |
| | $ | 34.9 |
| Accounts and notes receivable, net | (990.1 | ) | | 873.3 |
| | 471.1 |
| | 52.7 |
| | 407.0 |
| Inventories, net | — |
| | 340.2 |
| | 129.7 |
| | (5.6 | ) | | 464.3 |
| Deferred income taxes, net | 2.2 |
| | 23.0 |
| | 6.2 |
| | (1.7 | ) | | 29.7 |
| Other assets | (14.5 | ) | | 26.3 |
| | 113.2 |
| | (56.8 | ) | | 68.2 |
| Assets of discontinued operations | — |
| | — |
| | — |
| | — |
| | — |
| Total current assets | (1,002.4 | ) | | 1,276.8 |
| | 741.1 |
| | (11.4 | ) | | 1,004.1 |
| Property, plant and equipment, net | — |
| | 235.5 |
| | 59.6 |
| | — |
| | 295.1 |
| Goodwill | — |
| | 131.8 |
| | 91.6 |
| | — |
| | 223.4 |
| Deferred income taxes | 0.9 |
| | 94.2 |
| | 20.6 |
| | (5.8 | ) | | 109.9 |
| Other assets, net(1) | 2,190.2 |
| | 534.8 |
| | 27.8 |
| | (2,671.2 | ) | | 81.6 |
| Total assets | $ | 1,188.7 |
| | $ | 2,273.1 |
| | $ | 940.7 |
| | $ | (2,688.4 | ) | | $ | 1,714.1 |
| LIABILITIES AND STOCKHOLDERS’ EQUITY | Current liabilities: | | | | | | | | | | Short-term debt | $ | 86.5 |
| | $ | — |
| | $ | (60.3 | ) | | $ | (0.2 | ) | | $ | 26.0 |
| Current maturities of long-term debt | — |
| | 0.4 |
| | 0.2 |
| | — |
| | 0.6 |
| Accounts payable | 13.4 |
| | 152.8 |
| | 82.8 |
| | 63.4 |
| | 312.4 |
| Accrued expenses | 8.4 |
| | 155.9 |
| | 58.6 |
| | (0.3 | ) | | 222.6 |
| Income taxes payable | 2.6 |
| | 4.5 |
| | 49.5 |
| | (55.8 | ) | | 0.8 |
| Liabilities of discontinued operations | — |
| | — |
| | — |
| | — |
| | — |
| Total current liabilities | 110.9 |
| | 313.6 |
| | 130.8 |
| | 7.1 |
| | 562.4 |
| Long-term debt | 474.0 |
| | 15.6 |
| | 99.4 |
| | (99.2 | ) | | 489.8 |
| Post-retirement benefits, other than pensions | — |
| | 5.8 |
| | — |
| | — |
| | 5.8 |
| Pensions | — |
| | 117.3 |
| | 18.4 |
| | — |
| | 135.7 |
| Other liabilities | 1.3 |
| | 63.9 |
| | 10.4 |
| | (7.2 | ) | | 68.4 |
| Total liabilities | 586.2 |
| | 516.2 |
| | 259.0 |
| | (99.3 | ) | | 1,262.1 |
| Commitments and contingencies | | | | | | | | | | Total stockholders' equity | 602.5 |
| | 1,756.9 |
| | 681.7 |
| | (2,589.1 | ) | | 452.0 |
| Total liabilities and stockholders' equity | $ | 1,188.7 |
| | $ | 2,273.1 |
| | $ | 940.7 |
| | $ | (2,688.4 | ) | | $ | 1,714.1 |
|
| | (1) | Other assets, net consists primarily of Investments in subsidiaries which eliminate upon consolidation. |
Lennox International Inc. and Subsidiaries Condensed Consolidating Balance Sheets As of December 31, 2012 (In millions) | | | | | | | | | | | | | | | | | | | | | | Parent | | Guarantor
Subsidiaries | | Non-
Guarantor
Subsidiaries | | Eliminations | | Consolidated | ASSETS | Current Assets: | | | | | | | | | | Cash and cash equivalents | $ | 1.0 |
| | $ | 13.4 |
| | $ | 37.4 |
| | $ | — |
| | $ | 51.8 |
| Accounts and notes receivable, net | (1,178.0 | ) | | 1,076.0 |
| | 427.2 |
| | 48.2 |
| | 373.4 |
| Inventories, net | — |
| | 257.3 |
| | 121.5 |
| | (4.0 | ) | | 374.8 |
| Deferred income taxes, net | — |
| | 22.9 |
| | 6.3 |
| | (1.7 | ) | | 27.5 |
| Other assets | (0.6 | ) | | 23.8 |
| | 97.5 |
| | (59.7 | ) | | 61.0 |
| Assets of discontinued operations | — |
| | 21.2 |
| | 77.4 |
| | — |
| | 98.6 |
| Total current assets | (1,177.6 | ) | | 1,414.6 |
| | 767.3 |
| | (17.2 | ) | | 987.1 |
| Property, plant and equipment, net | — |
| | 239.7 |
| | 58.5 |
| | — |
| | 298.2 |
| Goodwill | — |
| | 131.8 |
| | 92.0 |
| | — |
| | 223.8 |
| Deferred income taxes | — |
| | 87.8 |
| | 20.8 |
| | (5.8 | ) | | 102.8 |
| Other assets, net(1) | 2,176.3 |
| | 488.5 |
| | 30.3 |
| | (2,615.1 | ) | | 80.0 |
| Total assets | $ | 998.7 |
| | $ | 2,362.4 |
| | $ | 968.9 |
| | $ | (2,638.1 | ) | | $ | 1,691.9 |
| LIABILITIES AND STOCKHOLDERS’ EQUITY | Current liabilities: | | | | | | | | | | Short-term debt | $ | 101.9 |
| | $ | — |
| | $ | (51.0 | ) | | $ | (16.0 | ) | | $ | 34.9 |
| Current maturities of long-term debt | — |
| | 0.5 |
| | 0.2 |
| | — |
| | 0.7 |
| Accounts payable | — |
| | 133.7 |
| | 92.0 |
| | 59.0 |
| | 284.7 |
| Accrued expenses | 2.5 |
| | 196.6 |
| | 60.8 |
| | (0.3 | ) | | 259.6 |
| Income taxes payable | (27.3 | ) | | 35.1 |
| | 38.5 |
| | (41.8 | ) | | 4.5 |
| Liabilities of discontinued operations | — |
| | 42.3 |
| | 12.9 |
| | — |
| | 55.2 |
| Total current liabilities | 77.1 |
| | 408.2 |
| | 153.4 |
| | 0.9 |
| | 639.6 |
| Long-term debt | 335.0 |
| | 15.6 |
| | 98.7 |
| | (98.3 | ) | | 351.0 |
| Post-retirement benefits, other than pensions | — |
| | 6.1 |
| | — |
| | — |
| | 6.1 |
| Pensions | — |
| | 114.7 |
| | 19.7 |
| | — |
| | 134.4 |
| Other liabilities | 0.5 |
| | 60.1 |
| | 10.6 |
| | (7.2 | ) | | 64.0 |
| Total liabilities | 412.6 |
| | 604.7 |
| | 282.4 |
| | (104.6 | ) | | 1,195.1 |
| Commitments and contingencies |
| |
| |
| |
| |
| Total stockholders' equity | 586.1 |
| | 1,757.7 |
| | 686.5 |
| | (2,533.5 | ) | | 496.8 |
| Total liabilities and stockholders' equity | $ | 998.7 |
| | $ | 2,362.4 |
| | $ | 968.9 |
| | $ | (2,638.1 | ) | | $ | 1,691.9 |
|
| | (1) | Other assets, net consists primarily of Investments in subsidiaries which eliminate upon consolidation. |
Lennox International Inc. and Subsidiaries Condensed Consolidating Statements of Operations For the Three Months Ended March 31, 2013 (In millions) | | | | | | | | | | | | | | | | | | | | | | Parent | | Guarantor
Subsidiaries | | Non-Guarantor
Subsidiaries | | Eliminations | | Consolidated | Net Sales | $ | — |
| | $ | 520.7 |
| | $ | 189.5 |
| | $ | (41.8 | ) | | $ | 668.4 |
| Cost of goods sold | — |
| | 404.4 |
| | 143.3 |
| | (41.3 | ) | | 506.4 |
| Gross profit | — |
| | 116.3 |
| | 46.2 |
| | (0.5 | ) | | 162.0 |
| Operating expenses: | | | | | | | | | | Selling, general and administrative expenses | — |
| | 102.6 |
| | 33.0 |
| | — |
| | 135.6 |
| Losses and other expenses, net | 0.4 |
| | 0.4 |
| | 0.3 |
| | — |
| | 1.1 |
| Restructuring charges | — |
| | 0.3 |
| | 0.2 |
| | — |
| | 0.5 |
| Income from equity method investments | (7.9 | ) | | 2.5 |
| | (2.8 | ) | | 5.1 |
| | (3.1 | ) | Operational income from continuing operations | 7.5 |
| | 10.5 |
| | 15.5 |
| | (5.6 | ) | | 27.9 |
| Interest expense, net | 3.3 |
| | (0.5 | ) | | 0.6 |
| | — |
| | 3.4 |
| Other expense, net | — |
| | — |
| | 0.1 |
| | — |
| | 0.1 |
| Income from continuing operations before income taxes | 4.2 |
| | 11.0 |
| | 14.8 |
| | (5.6 | ) | | 24.4 |
| Provision for income taxes | (1.3 | ) | | 4.8 |
| | 5.3 |
| | (0.2 | ) | | 8.6 |
| Income from continuing operations | 5.5 |
| | 6.2 |
| | 9.5 |
| | (5.4 | ) | | 15.8 |
| Loss from discontinued operations | — |
| | (7.8 | ) | | — |
| | — |
| | (7.8 | ) | Net income | $ | 5.5 |
| | $ | (1.6 | ) | | $ | 9.5 |
| | $ | (5.4 | ) | | $ | 8.0 |
| Other comprehensive loss | $ | (3.4 | ) | | $ | 0.8 |
| | $ | (46.0 | ) | | $ | (0.7 | ) | | $ | (49.3 | ) |
Lennox International Inc. and Subsidiaries Condensed Consolidating Statements of Operations For the Three Months Ended March 31, 2012 (In millions) | | | | | | | | | | | | | | | | | | | | | | Parent | | Guarantor
Subsidiaries | | Non-
Guarantor
Subsidiaries | | Eliminations | | Consolidated | Net Sales | $ | — |
| | $ | 472.0 |
| | $ | 189.5 |
| | $ | (47.1 | ) | | $ | 614.4 |
| Cost of goods sold | — |
| | 375.9 |
| | 144.5 |
| | (46.9 | ) | | 473.5 |
| Gross profit | — |
| | 96.1 |
| | 45.0 |
| | (0.2 | ) | | 140.9 |
| Operating expenses: | | | | | | | | | | Selling, general and administrative expenses | — |
| | 88.4 |
| | 34.8 |
| | — |
| | 123.2 |
| Losses and other expenses, net | (1.6 | ) | | (0.7 | ) | | 0.9 |
| | — |
| | (1.4 | ) | Restructuring charges | — |
| | 2.6 |
| | — |
| | — |
| | 2.6 |
| Income from equity method investments | 6.8 |
| | 2.1 |
| | (1.9 | ) | | (9.4 | ) | | (2.4 | ) | Operational income from continuing operations | (5.2 | ) | | 3.7 |
| | 11.2 |
| | 9.2 |
| | 18.9 |
| Interest expense, net | 4.4 |
| | (0.5 | ) | | 0.8 |
| | — |
| | 4.7 |
| Other expense, net | — |
| | — |
| | — |
| | — |
| | — |
| Income from continuing operations before income taxes | (9.6 | ) | | 4.2 |
| | 10.4 |
| | 9.2 |
| | 14.2 |
| Provision for income taxes | (1.0 | ) | | 2.6 |
| | 2.8 |
| | 0.5 |
| | 4.9 |
| Income from continuing operations | (8.6 | ) | | 1.6 |
| | 7.6 |
| | 8.7 |
| | 9.3 |
| Loss from discontinued operations | — |
| | (10.8 | ) | | (4.6 | ) | | — |
| | (15.4 | ) | Net loss | $ | (8.6 | ) | | $ | (9.2 | ) | | $ | 3.0 |
| | $ | 8.7 |
| | $ | (6.1 | ) | Other comprehensive income | $ | 6.9 |
| | $ | 2.7 |
| | $ | 12.1 |
| | $ | 0.7 |
| | $ | 22.4 |
|
Lennox International Inc. and Subsidiaries Condensed Consolidating Statements of Cash Flows For the Three Months Ended March 31, 2013 (In millions) | | | | | | | | | | | | | | | | | | | | | | Parent | | Guarantor Subsidiaries | | Non-Guarantor Subsidiaries | | Eliminations | | Consolidated | Cash flows from operating activities: | $ | 54.3 |
| | $ | (168.3 | ) | | $ | (23.3 | ) | | $ | — |
| | $ | (137.3 | ) | Cash flows from investing activities: | | | | | | | | | | Proceeds from the disposal of property, plant and equipment | — |
| | — |
| | — |
| | — |
| | — |
| Purchases of property, plant and equipment | — |
| | (9.3 | ) | | (2.8 | ) | | — |
| | (12.1 | ) | Net proceeds from sale of business | 2.0 |
| | — |
| | 3.3 |
| | — |
| | 5.3 |
| Net cash used in discontinued operations | — |
| | (0.1 | ) | | — |
| | — |
| | (0.1 | ) | Net cash used in investing activities | 2.0 |
| | (9.4 | ) | | 0.5 |
| | — |
| | (6.9 | ) | Cash flows from financing activities: | | | | | | | | | | Short-term borrowings, net | — |
| | — |
| | 1.2 |
| | — |
| | 1.2 |
| Asset securitization borrowings | — |
| | — |
| | 130.0 |
| | — |
| | 130.0 |
| Asset securitization payments | — |
| | — |
| | (140.0 | ) | | — |
| | (140.0 | ) | Long-term debt payments | — |
| | (0.2 | ) | | — |
| | — |
| | (0.2 | ) | Borrowings from revolving credit facility | 435.5 |
| | — |
| | — |
| | — |
| | 435.5 |
| Payments on revolving credit facility | (296.5 | ) | | — |
| | — |
| | — |
| | (296.5 | ) | Proceeds from stock option exercises | 0.5 |
| | — |
| | — |
| | — |
| | 0.5 |
| Repurchases of common stock | (4.2 | ) | | — |
| | — |
| | — |
| | (4.2 | ) | Excess tax benefits related to share-based payments | 2.3 |
| | — |
| | — |
| | — |
| | 2.3 |
| Intercompany debt | (7.1 | ) | | (0.7 | ) | | 7.8 |
| | — |
| | — |
| Intercompany financing activity | (187.8 | ) | | 179.2 |
| | 8.6 |
| | — |
| | — |
| Cash dividends paid | — |
| | — |
| | — |
| | — |
| | — |
| Net cash provided by financing activities | (57.3 | ) | | 178.3 |
| | 7.6 |
| | — |
| | 128.6 |
| Decrease in cash and cash equivalents | (1.0 | ) | | 0.6 |
| | (15.2 | ) | | — |
| | (15.6 | ) | Effect of exchange rates on cash and cash equivalents | — |
| | — |
| | (1.3 | ) | | — |
| | (1.3 | ) | Cash and cash equivalents, beginning of period | 1.0 |
| | 13.4 |
| | 37.4 |
| | — |
| | 51.8 |
| Cash and cash equivalents, end of period | $ | — |
| | $ | 14.0 |
| | $ | 20.9 |
| | $ | — |
| | $ | 34.9 |
|
Lennox International Inc. and Subsidiaries Condensed Consolidating Statements of Cash Flows For the Three Months Ended March 31, 2012 (In millions) | | | | | | | | | | | | | | | | | | | | | | Parent | | Guarantor Subsidiaries | | Non-Guarantor Subsidiaries | | Eliminations | | Consolidated | Cash flows from operating activities: | $ | 30.9 |
| | $ | (71.5 | ) | | $ | 6.3 |
| | $ | — |
| | $ | (34.3 | ) | Cash flows from investing activities: | | | | | | | | | | Proceeds from the disposal of property, plant and equipment | — |
| | 0.1 |
| | — |
| | — |
| | 0.1 |
| Purchases of property, plant and equipment | — |
| | (5.5 | ) | | (1.1 | ) | | — |
| | (6.6 | ) | Net proceeds from sale of business | — |
| | — |
| | — |
| | — |
| | — |
| Net cash used in discontinued operations | — |
| | (0.3 | ) | | — |
| | — |
| | (0.3 | ) | Net cash used in investing activities | — |
| | (5.7 | ) | | (1.1 | ) | | — |
| | (6.8 | ) | Cash flows from financing activities: | | | | | | | | | | Short-term borrowings, net | — |
| | — |
| | 6.6 |
| | — |
| | 6.6 |
| Asset securitization borrowings | — |
| | — |
| | 170.0 |
| | — |
| | 170.0 |
| Asset securitization payments | — |
| | — |
| | (170.0 | ) | | — |
| | (170.0 | ) | Long-term debt payments | — |
| | (0.2 | ) | | — |
| | — |
| | (0.2 | ) | Borrowings from revolving credit facility | 267.5 |
| | — |
| | — |
| | — |
| | 267.5 |
| Payments on revolving credit facility | (215.5 | ) | | — |
| | — |
| | — |
| | (215.5 | ) | Proceeds from stock option exercises | 0.1 |
| | — |
| | — |
| | — |
| | 0.1 |
| Payments of deferred financing costs | — |
| | — |
| | — |
| | — |
| | — |
| Repurchases of common stock | (1.9 | ) | | — |
| | — |
| | — |
| | (1.9 | ) | Excess tax benefits related to share-based payments | 0.8 |
| | — |
| | — |
| | — |
| | 0.8 |
| Intercompany debt | 8.5 |
| | (2.2 | ) | | (6.3 | ) | | — |
| | — |
| Intercompany financing activity | (81.3 | ) | | 86.8 |
| | (5.5 | ) | | — |
| | — |
| Cash dividends paid | (9.2 | ) | | — |
| | — |
| | — |
| | (9.2 | ) | Net cash provided by financing activities | (31.0 | ) | | 84.4 |
| | (5.2 | ) | | — |
| | 48.2 |
| Increase in cash and cash equivalents | (0.1 | ) | | 7.2 |
| | — |
| | — |
| | 7.1 |
| Effect of exchange rates on cash and cash equivalents | — |
| | — |
| | 2.6 |
| | — |
| | 2.6 |
| Cash and cash equivalents, beginning of period | 1.0 |
| | 9.7 |
| | 34.3 |
| | — |
| | 45.0 |
| Cash and cash equivalents, end of period | $ | 0.9 |
| | $ | 16.9 |
| | $ | 36.9 |
| | $ | — |
| | $ | 54.7 |
|
|