Lennox International Inc LII

LENNOX INTERNATIONAL INC. AND SUBSIDIARIES

Consolidated Statements of Operations

(Unaudited)

(Amounts in millions, except per share data)

For the Three Months Ended

 June 30,

For the Six Months Ended
June 30,

2024

2023

2024

2023

Net sales

$        1,451.1

$        1,411.4

$        2,498.2

$        2,460.7

Cost of goods sold

962.9

953.6

1,670.0

1,696.2

Gross profit

488.2

457.8

828.2

764.5

Operating Expenses:

Selling, general and administrative expenses

168.5

181.3

339.2

348.8

Losses and other expenses, net

3.7

0.8

7.4

1.1

Gain on sale from previous dispositions

(1.6)

—

(1.6)

—

Income from equity method investments

(2.5)

(3.1)

(3.7)

(3.8)

Operating income

320.1

278.8

486.9

418.4

Pension settlements

0.3

0.1

0.3

0.3

Interest expense, net

12.5

15.0

24.3

29.2

Other expense, net

0.3

—

1.1

—

Income before income taxes

307.0

263.7

461.2

388.9

Provision for income taxes

61.1

46.5

91.0

73.7

Net income

$            245.9

$            217.2

$            370.2

$            315.2

Earnings per share – Basic:

$              6.91

$              6.12

$            10.40

$              8.88

Earnings per share – Diluted:

$              6.87

$              6.10

$            10.34

$              8.85

Weighted Average Number of Shares Outstanding - Basic

35.6

35.5

35.6

35.5

Weighted Average Number of Shares Outstanding - Diluted

35.8

35.6

35.8

35.6

LENNOX INTERNATIONAL INC. AND SUBSIDIARIES
Segment Net Sales and Profit (Loss)
(Unaudited)

For the Three Months
Ended June 30,

For the Six Months
Ended June 30,

2024

2023

2024

2023

Net Sales

Home Comfort Solutions

$       982.3

$       936.2

$    1,656.9

$    1,617.2

Building Climate Solutions

468.8

407.5

841.3

716.1

Corporate and other ⁽¹⁾

—

67.7

—

127.4

$    1,451.1

$    1,411.4

$    2,498.2

$    2,460.7

Segment Profit (Loss) ⁽²⁾

Home Comfort Solutions

$       228.5

$       202.6

$       340.6

$       313.7

Building Climate Solutions

114.0

103.0

192.2

153.0

Corporate and other

(24.0)

(22.5)

(47.5)

(41.9)

Total segment profit

318.5

283.1

485.3

424.8

Reconciliation to Operating income:

Gain on sale from previous dispositions

(1.6)

—

(1.6)

—

Items in Losses and other expenses, net which are excluded from
segment profit (loss) ⁽²⁾

—

4.3

6.4

Operating income

$       320.1

$       278.8

$       486.9

$       418.4

⁽¹⁾

The Corporate and Other segment included our European portfolio. In the fourth quarter of 2023 we completed the divestiture of our European operations.

⁽²⁾

We define segment profit (loss) as a segment's operating income (loss) included in the accompanying Consolidated Statements of Operations, excluding:

•       The following items in Losses and other expenses, net:

◦       Net change in unrealized losses (gains) on unsettled futures contracts,

◦       Environmental liabilities and special litigation charges, and;

◦       Other items, net

•       Gain on sale from previous disposition of European entities

LENNOX INTERNATIONAL INC. AND SUBSIDIARIES

Consolidated Balance Sheets

(Amounts in millions, except shares and par values)

As of June 30, 2024

As of December 31, 2023

ASSETS

Current Assets:

Cash and cash equivalents

$                                   47.6

$                                  60.7

Short-term investments

10.2

8.4

Accounts and notes receivable, net of allowances of $16.1 and $14.4 in
2024 and 2023, respectively

858.6

594.6

Inventories, net

776.3

699.1

Other assets

72.6

70.7

Total current assets

1,765.3

1,433.5

Property, plant and equipment, net of accumulated depreciation of $936.5
and $910.8 in 2024 and 2023, respectively

740.8

720.4

Right-of-use assets from operating leases

271.6

213.6

Goodwill

219.9

222.1

Deferred income taxes

63.0

51.8

Other assets, net

161.3

156.9

Total assets

$                              3,221.9

$                             2,798.3

LIABILITIES AND STOCKHOLDERS' EQUITY

Current Liabilities:

Accounts payable

$                                 450.8

$                                374.7

Accrued expenses

393.0

416.1

Income taxes payable

33.1

4.2

Commercial paper

147.0

150.0

Current maturities of long-term debt

14.0

12.1

Current operating lease liabilities

66.6

57.5

Total current liabilities

1,104.5

1,014.6

Long-term debt

1,126.8

1,143.1

Long-term operating lease liabilities

215.2

164.6

Pensions

18.1

22.5

Other liabilities

179.9

168.2

Total liabilities

2,644.5

2,513.0

Commitments and contingencies

Stockholders' equity:

Preferred stock, $0.01 par value, 25,000,000 shares authorized, no shares
issued or outstanding

—

—

Common stock, $0.01 par value, 200,000,000 shares authorized,
87,170,197 shares issued

0.9

0.9

Additional paid-in capital

1,197.9

1,184.6

Retained earnings

3,796.0

3,506.2

Accumulated other comprehensive loss

(60.8)

(56.9)

Treasury stock, at cost, 51,538,343 shares and 51,588,103 shares for
2024 and 2023, respectively

(4,356.6)

(4,349.5)

Total stockholders' equity

577.4

285.3

Total liabilities and stockholders' equity

$                              3,221.9

$                             2,798.3

LENNOX INTERNATIONAL INC. AND SUBSIDIARIES

Consolidated Statements of Cash Flows

(Unaudited)

(Amounts in millions)

For the Six Months Ended June 30,

2024

2023

Cash flows from operating activities:

Net income

$                      370.2

$                      315.2

Adjustments to reconcile net income to net cash provided by operating

Gain on sale from previous dispositions

(1.6)

—

Income from equity method investments

(3.7)

(3.8)

Provision for credit losses

3.4

3.8

Unrealized losses, net on derivative contracts

0.5

3.9

Stock-based compensation expense

13.3

13.8

Depreciation and amortization

49.2

40.5

Deferred income taxes

(13.4)

(18.9)

Pension expense

2.0

1.4

Pension contributions

(5.1)

(2.0)

Other items, net

(0.1)

(1.2)

Changes in assets and liabilities, net of effects of acquisitions and divestitures:

Accounts and notes receivable

(270.8)

(236.5)

Inventories

(78.9)

(100.4)

Other current assets

(2.5)

8.7

Accounts payable

76.2

45.4

Accrued expenses

(22.1)

45.6

Income taxes payable and receivable, net

40.1

4.1

   Leases, net

1.8

3.3

Other, net

2.7

(6.2)

Net cash provided by operating activities

161.2

116.7

Cash flows from investing activities:

Proceeds from the disposal of property, plant and equipment

1.1

1.5

Purchases of property, plant and equipment

(62.2)

(85.3)

Net proceeds from previous disposition

4.1

—

Acquisitions, net of cash

1.8

—

(Purchases of) proceeds from short-term investments

(2.0)

1.5

Net cash used in investing activities

(57.2)

(82.3)

Cash flows from financing activities:

Commercial paper borrowings

374.0

—

Commercial paper payments

(377.0)

—

Asset securitization borrowings

—

140.0

Asset securitization payments

—

(90.0)

Long-term debt payments

(9.9)

(7.3)

Borrowings from credit facility

156.7

1,182.0

Payments on credit facility

(176.7)

(1,182.0)

Proceeds from employee stock purchases

2.0

1.9

Repurchases of common stock to satisfy employee withholding tax obligations

(9.1)

(3.2)

Cash dividends paid

(78.3)

(75.2)

Net cash used in financing activities

(118.3)

(33.8)

(Decrease) increase in cash and cash equivalents

(14.3)

0.6

Effect of exchange rates on cash and cash equivalents

1.2

(1.8)

Cash and cash equivalents, beginning of period

60.7

52.6

Cash and cash equivalents, end of period

$                        47.6

$                        51.4

Supplemental disclosures of cash flow information:

Interest paid

$                        25.6

$                        27.1

Income taxes paid (net of refunds)

$                        60.2

$                        88.4

LENNOX INTERNATIONAL INC. AND SUBSIDIARIES

Reconciliation to U.S. GAAP (Generally Accepted Accounting Principles) Measures

(Unaudited, in millions, except per share and ratio data)

Use of Non-GAAP Financial Measures

To supplement the Company's consolidated financial statements and segment net sales and profit (loss) presented in accordance with U.S.
GAAP, additional non-GAAP financial measures are provided and reconciled in the following tables.  In addition to these non-GAAP
measures, the Company also provides rates of revenue change at constant currency on a consolidated and segment basis if different than the
reported  measures. The Company believes that these non-GAAP financial measures, when considered together with the GAAP financial
measures, provide information that is useful to investors in understanding period-over-period operating results and enhance the ability of
investors to analyze the Company's business trends and operating performance.

Reconciliation of Net income, a GAAP measure, to Adjusted net income, a Non-GAAP measure

For the Three Months Ended June 30,

For the Six Months Ended June 30,

2024

2023

2024

2023

Amount

after tax

Per
Diluted
Share

Amount
after tax

Per
Diluted
Share

Amount
after tax

Per
Diluted
Share

Amount
after tax

Per
Diluted
Share

Net income, a GAAP measure

$   245.9

$  6.87

$   217.2

$    6.10

$  370.2

$ 10.34

$ 315.2

$ 8.85

Gain on sale from previous dispositions

(1.6)

(0.04)

—

—

(1.6)

(0.04)

—

—

Pension settlements

—

—

0.1

—

—

—

0.3

0.01

Items in Losses and other expenses, net which are
excluded from segment profit (loss) (a)

—

—

2.9

0.09

—

—

3.5

0.10

Excess tax benefit from share-based compensation (b)

—

—

(0.1)

—

—

—

(0.1)

—

Other tax items, net (b)

0.1

—

—

—

0.4

0.01

Non-core business results (c)

—

—

(1.4)

(0.04)

—

—

—

—

Adjusted net income, a non-GAAP measure

$   244.3

$   6.83

$    218.8

$     6.15

$  368.6

$ 10.30

$  319.3

$  8.97

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

(b) Recorded in Provision for income taxes in the Consolidated Statements of Operations

(c) Non-core business results represent activity related to our business operations in Europe not included elsewhere in the reconciliations.

Reconciliation of Net Cash Provided by Operating Activities, a GAAP measure, to Free Cash Flow, a Non-GAAP measure

For the Three Months
Ended June 30,

For the Six Months
Ended June 30,

2024

2023

2024

2023

Net cash provided by operating activities

$        184.0

$        195.5

$        161.2

$        116.7

Purchases of property, plant and equipment

(32.7)

(49.9)

(62.2)

(85.3)

Proceeds from the disposal of property, plant and equipment

0.6

1.2

1.1

1.5

Free cash flow, a Non-GAAP measure

$        151.9

$        146.8

$        100.1

$          32.9

Reconciliation of Net sales, a GAAP measure to Core net sales, a Non-GAAP measure

For the Three Months Ended June 30,

Corporate and Other

Consolidated

2023

2023

Net sales, a GAAP measure

$                                     67.7

$                                1,411.4

Net sales from non-core businesses (a)

(67.7)

(67.7)

Core net sales, a Non-GAAP measure

$                                        —

$                                1,343.7

(a) Non-Core businesses represent our business operations in Europe, which were sold in the fourth quarter of 2023.

Reconciliation of Net sales, a GAAP measure to Core net sales, a Non-GAAP measure

For the Six Months Ended June 30,

Corporate and Other

Consolidated

2023

2023

Net sales, a GAAP measure

$                                   127.4

$                                2,460.7

Net sales from non-core businesses (a)

(127.4)

(127.4)

Core net sales, a Non-GAAP measure

$                                        —

$                                2,333.3

(a) Non-Core businesses represent our business operations in Europe

Reconciliation of Segment profit (loss), a Non-GAAP measure to Adjusted Segment profit (loss), a Non-GAAP measure

For the Three Months Ended June 30,

Corporate and Other

Consolidated

2023

2023

Segment profit (loss), a Non-GAAP measure

$                                   (22.5)

$                                   283.1

Profit from non-core businesses (a)

2.4

2.4

Adjusted Segment profit (loss), a Non-GAAP measure

$                                   (24.9)

$                                   280.7

(a) Non-Core businesses represent our business operations in Europe, which were sold in the fourth quarter of 2023.

Reconciliation of Segment profit, a Non-GAAP measure to Adjusted Segment profit, a Non-GAAP measure

For the Six Months Ended June 30,

Corporate and Other

Consolidated

2023

2023

Segment profit (loss), a Non-GAAP measure

$                                   (41.9)

$                                   424.8

Profit (loss) from non-core businesses (a)

2.1

2.1

Adjusted Segment profit (loss), a Non-GAAP measure

$                                   (44.0)

$                                   422.7

(a) Non-Core businesses represent our business operations in Europe