Lennox International Reports First Quarter Earnings; Announces Plans For Retail Segment

Apr 24, 2001, 01:00 ET from Lennox International Inc.

    DALLAS, April 24 /PRNewswire Interactive News Release/ -- Lennox
 International Inc. (NYSE:   LII) announced earnings for first quarter 2001
 today, in line with guidance issued on March 19, 2001.  Total company sales
 for first quarter 2001 were flat versus last year at $716 million.  Company-
 wide sales, after adjusting for currency fluctuations, grew 2.0%.  Revenues
 outside of the U.S. and Canada, represented 14% of total corporate sales.
     The company reported an operating loss of $4.0 million in the first
 quarter, versus operating income of $23.5 million the previous year.  EBITDA
 in the first quarter was $17.1 million, compared with $44.1 million a year
 ago.
     Net loss for the first quarter was $10.2 million versus net income of
 $5.7 million in 2000.  Diluted earnings per share were ($0.18), again in line
 with previously issued guidance, compared with $0.10 last year.
     "The downturn that hit the domestic economy depressed demand in most of
 our end markets, compounding what is typically a weak quarter for us," said
 Bob Schjerven, chief executive officer.  "The Air Conditioning and
 Refrigeration Institute (ARI) recently reported that factory shipments of
 unitary air conditioners and heat pumps were down 13% for the first two months
 of the year.  We have also seen some slowdowns in orders for commercial
 refrigeration equipment and heat transfer products.  Despite widespread
 industry softness, we are confident our market positions are strong, with
 improved market shares in most segments."
     Lennox continues to focus on free cash flow, with emphasis on working
 capital management and capital spending.  Free cash flow in the first quarter
 was ($26.4) million.  "Given the seasonal nature of our business, Lennox
 typically uses cash in the first half of the year and generates cash in the
 second half," Schjerven said.
 
     Results and plans for retail business segment
     Revenues in the retail segment grew 14% to $222 million, achieved by the
 acquisition of Service Experts in late January 2000.  The segment reported an
 operating loss of $10.0 million.
     "We are clearly not satisfied with the performance of our retail
 operations and are disappointed we did not see a sequential improvement in
 operating profitability from last quarter," Schjerven said.  "We are firmly
 committed to improving retail's profitability and realizing the earnings power
 we are convinced is inherent in its operations.  That's why we are taking
 immediate measures to significantly restructure this business."
     After a thorough review of retail center operations, Lennox has identified
 38 centers that require action.  Ten of these centers will be sold or closed,
 while the remaining 28 will be merged into other company-owned service centers
 or repositioned.  Lennox expects the sales, closures, and mergers will be
 completed in the second quarter of 2001.
     The company expects to take a pre-tax restructuring charge of
 approximately $38 million.  The net cash impact of the restructuring is a
 projected outflow of $7 million, the majority of which will occur in second
 quarter 2001.  As a result of this restructuring, Lennox anticipates a
 reduction of $50 million in retail revenues for the full-year 2001.  The
 company also anticipates that operating margins for the year in the retail
 segment, excluding the one-time charge, will be improved over the level
 achieved in 2000.
     Other initiatives already in place -- including efforts to optimize labor
 utilization, center level SG&A expenses, product mix, and pricing structures
 through the operations accountability program -- have resulted in strong
 operating performance at many centers.  "Twenty-five percent of our retail
 centers have double-digit operating profitability as a percentage of sales
 over the past 12 months," Schjerven said.  He noted Lennox also continues to
 improve its financial control of the retail business by implementing STARS, an
 integrated information system.  STARS has been implemented in 126 centers,
 with the company on track to have over 90% of all U.S. centers on STARS by the
 end of third quarter 2001.
     Schjerven also reaffirmed Lennox's commitment to its retail business.  "As
 we have said all along, the retail strategy makes sense," he said.  "It
 provides access to very large revenue and profit streams and brings us closer
 to our end customer.  We believe the restructuring will get us back on track
 to build our retail operations into a business that provides sustained,
 long-term shareholder value."
 
     Highlights for other business segments
 
     North American residential:  Despite a difficult selling environment,
 revenues declined by a modest 3% from the previous year to $282 million, with
 market share gains in the core residential heating, ventilation, and air
 conditioning (HVAC) segment.  Segment operating income for the quarter
 decreased 40.7% to $12.3 million from $20.8 million last year, with operating
 margins declining to 4.4% from 7.1% in 2000.  The margin decline was
 attributed to lower volumes, production inefficiencies in the company's hearth
 products operations, and start-up costs associated with manufacturing
 operations in Orangeburg, South Carolina.
 
     Worldwide commercial air conditioning:  Revenues declined by 2% to
 $93 million, but were up 1.0% when adjusted for currency.  The segment
 operating loss was $1.8 million, compared with a loss of $3.1 million the
 previous year.  Operating margins were (1.9%), a 130 basis point improvement
 from 2000.  The improvement was largely a result of the introduction of the
 cost-effective Value Series product and the company's consequent ability to
 improve margins on the L Series product line.
 
     Worldwide commercial refrigeration:  Segment revenues declined by 7% to
 $85 million, but were flat when adjusted for currency exchange.  Segment
 operating income was $6.2 million compared with $7.1 million last year, the
 decline driven entirely by currency fluctuations.
 
     Worldwide heat transfer:  Sales decreased 11% to $58 million.  Adjusted
 for foreign exchange, sales were down 8%.  Segment operating income decreased
 to $1.8 million due to volume declines, with operating margins for the quarter
 at 3.1% versus 7.5% in 2000.
 
     Business outlook
     Reinforcing guidance provided earlier, Lennox reported no acquisitions
 were planned for 2001 and that the company is focused on realizing the
 potential in the business portfolio it has assembled.  Total corporate revenue
 growth is expected to be in the low single digits and full year earnings per
 share, before restructuring charges, are expected to be up by more than 10%.
     The company reported it is also on track to generate $80 to $90 million in
 free cash flow for the year before restructuring charges, and plans to use the
 cash generated to retire long-term debt.
     "First quarter 2001 was a difficult quarter for Lennox International,"
 said CEO Schjerven.  "However, we are confident we have assembled a strong
 portfolio of businesses and are focused on addressing the issues under our
 control to improve their profitability."
     Lennox International Inc. has scheduled a conference call to discuss
 financial results for the first quarter 2001 on Wednesday, April 25 at
 9:30 a.m. Central time.  All interested parties are invited to listen as Bob
 Schjerven, CEO and Rick Smith, CFO comment on the company's results.  To
 listen, please call the conference call line at 847-413-3156 ten minutes prior
 to the scheduled start time and use reservation number 581396.  The number of
 connections for this call is limited to 200.
     This conference call will also be broadcast live on the Internet by
 PR Newswire and can be accessed at
 http://www.videonewswire.com/LENNOX/042501/.  A link to the broadcast can also
 be found on the company's web site at http://www.lennoxinternational.com.  If
 you are unable to participate in this conference call, a replay will be
 available through May 2, 2001 on the Internet or by dialing 800-475-6701,
 access code 581396.
     A Fortune 500 company operating in over 70 countries, Lennox International
 Inc. is a global leader in the heating, ventilation, 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 Bill Moltner,
 Director, Investor Relations, at 972-497-6670.
     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 that could cause actual results to
 differ materially from such statements.  For information concerning these
 risks and uncertainties, see Lennox' publicly available filings with the
 Securities and Exchange Commission.  Lennox 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 INCOME
               For the Three Months Ended March 31, 2001 and 2000
                (Unaudited, in thousands, except per share data)
 
                                                            For the
                                                       Three Months Ended
                                                            March 31,
                                                        2001         2000
     NET SALES                                         $715,966     $716,324
     COST OF GOODS SOLD                                 502,381      487,561
       Gross Profit                                     213,585      228,763
     SELLING, GENERAL AND ADMINISTRATIVE EXPENSE        217,556      205,280
       (Loss) income from operations                     (3,971)      23,483
     INTEREST EXPENSE, net                               12,777       12,750
     OTHER                                                  663          229
     MINORITY INTEREST                                      107         (546)
       (Loss) income before income taxes                (17,518)      11,050
     (BENEFIT) PROVISION FOR INCOME TAXES                (7,270)       5,310
       Net (loss) income                               $(10,248)    $  5,740
 
     REPORTED (LOSS) EARNINGS PER SHARE
       Basic                                           $  (0.18)    $   0.10
       Diluted                                         $  (0.18)    $   0.10
 
 
                                                            For the
                                                       Three Months Ended
                                                            March 31,
     Net Sales                                          2001         2000
     North American residential                        $282,025     $291,780
     North American retail                              222,424      194,528
     Commercial air conditioning                         93,378       95,084
     Commercial refrigeration                            85,089       91,672
     Heat transfer                                       58,275       65,447
     Eliminations                                       (25,225)     (22,187)
                                                       $715,966     $716,324
 
 
                                                             For the
                                                        Three Months Ended
                                                             March 31,
     (Loss) Income from Operations                      2001          2000
     North American residential                         $12,306       $20,765
     North American retail                               (9,973)        5,426
     Commercial air conditioning                         (1,817)       (3,053)
     Commercial refrigeration                             6,221         7,050
     Heat transfer                                        1,788         4,934
     Corporate and other                                (11,003)       (9,905)
     Eliminations                                        (1,493)       (1,734)
                                                        $(3,971)      $23,483
 
 
                   LENNOX INTERNATIONAL INC. AND SUBSIDIARIES
 
                          CONSOLIDATED BALANCE SHEETS
                   As of March 31, 2001 and December 31, 2000
                       (In thousands, except share data)
 
                                     ASSETS
                                                      March 31,    December 31,
                                                        2001           2000
     CURRENT ASSETS:
       Cash and cash equivalents                     $   25,489    $   40,633
       Accounts and notes receivable, net               360,822       399,136
       Inventories                                      374,156       359,531
       Deferred income taxes                             48,113        47,063
       Other assets                                      62,020        54,847
         Total current assets                           870,600       901,210
     PROPERTY, PLANT AND EQUIPMENT, net                 335,888       354,172
     GOODWILL, net                                      726,269       739,468
     OTHER ASSETS                                        57,769        60,181
         TOTAL ASSETS                                $1,990,526    $2,055,031
 
                      LIABILITIES AND STOCKHOLDERS' EQUITY
     CURRENT LIABILITIES:
       Short-term debt                               $   31,404    $   31,467
       Current maturities of long-term debt              29,336        31,450
       Accounts payable                                 257,408       260,208
       Accrued expenses                                 251,206       242,347
       Income taxes payable                              13,486        24,448
         Total current liabilities                      582,840       589,920
     LONG-TERM DEBT                                     610,162       627,550
     DEFERRED INCOME TAXES                                1,058           941
     POSTRETIREMENT BENEFITS, OTHER THAN PENSIONS        14,265        14,284
     OTHER LIABILITIES                                   77,241        77,221
         Total liabilities                            1,285,566     1,309,916
     MINORITY INTEREST                                    1,965         2,058
     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,
        60,524,220 shares and 60,368,599 shares
        issued for 2001 and 2000, respectively              605           604
       Additional paid-in capital                       372,585       372,690
       Retained earnings                                431,796       447,377
       Accumulated other comprehensive loss             (65,659)      (37,074)
       Deferred compensation                             (5,910)       (6,457)
       Treasury stock, at cost, 2,980,846 and
        3,332,784 shares for 2001 and 2000,
        respectively                                    (30,422)      (34,083)
         Total stockholders' equity                     702,995       743,057
         TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY  $1,990,526    $2,055,031
 
                     MAKE YOUR OPINION COUNT -  Click Here
                http://tbutton.prnewswire.com/prn/11690X99363632
 
 

SOURCE Lennox International Inc.
    DALLAS, April 24 /PRNewswire Interactive News Release/ -- Lennox
 International Inc. (NYSE:   LII) announced earnings for first quarter 2001
 today, in line with guidance issued on March 19, 2001.  Total company sales
 for first quarter 2001 were flat versus last year at $716 million.  Company-
 wide sales, after adjusting for currency fluctuations, grew 2.0%.  Revenues
 outside of the U.S. and Canada, represented 14% of total corporate sales.
     The company reported an operating loss of $4.0 million in the first
 quarter, versus operating income of $23.5 million the previous year.  EBITDA
 in the first quarter was $17.1 million, compared with $44.1 million a year
 ago.
     Net loss for the first quarter was $10.2 million versus net income of
 $5.7 million in 2000.  Diluted earnings per share were ($0.18), again in line
 with previously issued guidance, compared with $0.10 last year.
     "The downturn that hit the domestic economy depressed demand in most of
 our end markets, compounding what is typically a weak quarter for us," said
 Bob Schjerven, chief executive officer.  "The Air Conditioning and
 Refrigeration Institute (ARI) recently reported that factory shipments of
 unitary air conditioners and heat pumps were down 13% for the first two months
 of the year.  We have also seen some slowdowns in orders for commercial
 refrigeration equipment and heat transfer products.  Despite widespread
 industry softness, we are confident our market positions are strong, with
 improved market shares in most segments."
     Lennox continues to focus on free cash flow, with emphasis on working
 capital management and capital spending.  Free cash flow in the first quarter
 was ($26.4) million.  "Given the seasonal nature of our business, Lennox
 typically uses cash in the first half of the year and generates cash in the
 second half," Schjerven said.
 
     Results and plans for retail business segment
     Revenues in the retail segment grew 14% to $222 million, achieved by the
 acquisition of Service Experts in late January 2000.  The segment reported an
 operating loss of $10.0 million.
     "We are clearly not satisfied with the performance of our retail
 operations and are disappointed we did not see a sequential improvement in
 operating profitability from last quarter," Schjerven said.  "We are firmly
 committed to improving retail's profitability and realizing the earnings power
 we are convinced is inherent in its operations.  That's why we are taking
 immediate measures to significantly restructure this business."
     After a thorough review of retail center operations, Lennox has identified
 38 centers that require action.  Ten of these centers will be sold or closed,
 while the remaining 28 will be merged into other company-owned service centers
 or repositioned.  Lennox expects the sales, closures, and mergers will be
 completed in the second quarter of 2001.
     The company expects to take a pre-tax restructuring charge of
 approximately $38 million.  The net cash impact of the restructuring is a
 projected outflow of $7 million, the majority of which will occur in second
 quarter 2001.  As a result of this restructuring, Lennox anticipates a
 reduction of $50 million in retail revenues for the full-year 2001.  The
 company also anticipates that operating margins for the year in the retail
 segment, excluding the one-time charge, will be improved over the level
 achieved in 2000.
     Other initiatives already in place -- including efforts to optimize labor
 utilization, center level SG&A expenses, product mix, and pricing structures
 through the operations accountability program -- have resulted in strong
 operating performance at many centers.  "Twenty-five percent of our retail
 centers have double-digit operating profitability as a percentage of sales
 over the past 12 months," Schjerven said.  He noted Lennox also continues to
 improve its financial control of the retail business by implementing STARS, an
 integrated information system.  STARS has been implemented in 126 centers,
 with the company on track to have over 90% of all U.S. centers on STARS by the
 end of third quarter 2001.
     Schjerven also reaffirmed Lennox's commitment to its retail business.  "As
 we have said all along, the retail strategy makes sense," he said.  "It
 provides access to very large revenue and profit streams and brings us closer
 to our end customer.  We believe the restructuring will get us back on track
 to build our retail operations into a business that provides sustained,
 long-term shareholder value."
 
     Highlights for other business segments
 
     North American residential:  Despite a difficult selling environment,
 revenues declined by a modest 3% from the previous year to $282 million, with
 market share gains in the core residential heating, ventilation, and air
 conditioning (HVAC) segment.  Segment operating income for the quarter
 decreased 40.7% to $12.3 million from $20.8 million last year, with operating
 margins declining to 4.4% from 7.1% in 2000.  The margin decline was
 attributed to lower volumes, production inefficiencies in the company's hearth
 products operations, and start-up costs associated with manufacturing
 operations in Orangeburg, South Carolina.
 
     Worldwide commercial air conditioning:  Revenues declined by 2% to
 $93 million, but were up 1.0% when adjusted for currency.  The segment
 operating loss was $1.8 million, compared with a loss of $3.1 million the
 previous year.  Operating margins were (1.9%), a 130 basis point improvement
 from 2000.  The improvement was largely a result of the introduction of the
 cost-effective Value Series product and the company's consequent ability to
 improve margins on the L Series product line.
 
     Worldwide commercial refrigeration:  Segment revenues declined by 7% to
 $85 million, but were flat when adjusted for currency exchange.  Segment
 operating income was $6.2 million compared with $7.1 million last year, the
 decline driven entirely by currency fluctuations.
 
     Worldwide heat transfer:  Sales decreased 11% to $58 million.  Adjusted
 for foreign exchange, sales were down 8%.  Segment operating income decreased
 to $1.8 million due to volume declines, with operating margins for the quarter
 at 3.1% versus 7.5% in 2000.
 
     Business outlook
     Reinforcing guidance provided earlier, Lennox reported no acquisitions
 were planned for 2001 and that the company is focused on realizing the
 potential in the business portfolio it has assembled.  Total corporate revenue
 growth is expected to be in the low single digits and full year earnings per
 share, before restructuring charges, are expected to be up by more than 10%.
     The company reported it is also on track to generate $80 to $90 million in
 free cash flow for the year before restructuring charges, and plans to use the
 cash generated to retire long-term debt.
     "First quarter 2001 was a difficult quarter for Lennox International,"
 said CEO Schjerven.  "However, we are confident we have assembled a strong
 portfolio of businesses and are focused on addressing the issues under our
 control to improve their profitability."
     Lennox International Inc. has scheduled a conference call to discuss
 financial results for the first quarter 2001 on Wednesday, April 25 at
 9:30 a.m. Central time.  All interested parties are invited to listen as Bob
 Schjerven, CEO and Rick Smith, CFO comment on the company's results.  To
 listen, please call the conference call line at 847-413-3156 ten minutes prior
 to the scheduled start time and use reservation number 581396.  The number of
 connections for this call is limited to 200.
     This conference call will also be broadcast live on the Internet by
 PR Newswire and can be accessed at
 http://www.videonewswire.com/LENNOX/042501/.  A link to the broadcast can also
 be found on the company's web site at http://www.lennoxinternational.com.  If
 you are unable to participate in this conference call, a replay will be
 available through May 2, 2001 on the Internet or by dialing 800-475-6701,
 access code 581396.
     A Fortune 500 company operating in over 70 countries, Lennox International
 Inc. is a global leader in the heating, ventilation, 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 Bill Moltner,
 Director, Investor Relations, at 972-497-6670.
     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 that could cause actual results to
 differ materially from such statements.  For information concerning these
 risks and uncertainties, see Lennox' publicly available filings with the
 Securities and Exchange Commission.  Lennox 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 INCOME
               For the Three Months Ended March 31, 2001 and 2000
                (Unaudited, in thousands, except per share data)
 
                                                            For the
                                                       Three Months Ended
                                                            March 31,
                                                        2001         2000
     NET SALES                                         $715,966     $716,324
     COST OF GOODS SOLD                                 502,381      487,561
       Gross Profit                                     213,585      228,763
     SELLING, GENERAL AND ADMINISTRATIVE EXPENSE        217,556      205,280
       (Loss) income from operations                     (3,971)      23,483
     INTEREST EXPENSE, net                               12,777       12,750
     OTHER                                                  663          229
     MINORITY INTEREST                                      107         (546)
       (Loss) income before income taxes                (17,518)      11,050
     (BENEFIT) PROVISION FOR INCOME TAXES                (7,270)       5,310
       Net (loss) income                               $(10,248)    $  5,740
 
     REPORTED (LOSS) EARNINGS PER SHARE
       Basic                                           $  (0.18)    $   0.10
       Diluted                                         $  (0.18)    $   0.10
 
 
                                                            For the
                                                       Three Months Ended
                                                            March 31,
     Net Sales                                          2001         2000
     North American residential                        $282,025     $291,780
     North American retail                              222,424      194,528
     Commercial air conditioning                         93,378       95,084
     Commercial refrigeration                            85,089       91,672
     Heat transfer                                       58,275       65,447
     Eliminations                                       (25,225)     (22,187)
                                                       $715,966     $716,324
 
 
                                                             For the
                                                        Three Months Ended
                                                             March 31,
     (Loss) Income from Operations                      2001          2000
     North American residential                         $12,306       $20,765
     North American retail                               (9,973)        5,426
     Commercial air conditioning                         (1,817)       (3,053)
     Commercial refrigeration                             6,221         7,050
     Heat transfer                                        1,788         4,934
     Corporate and other                                (11,003)       (9,905)
     Eliminations                                        (1,493)       (1,734)
                                                        $(3,971)      $23,483
 
 
                   LENNOX INTERNATIONAL INC. AND SUBSIDIARIES
 
                          CONSOLIDATED BALANCE SHEETS
                   As of March 31, 2001 and December 31, 2000
                       (In thousands, except share data)
 
                                     ASSETS
                                                      March 31,    December 31,
                                                        2001           2000
     CURRENT ASSETS:
       Cash and cash equivalents                     $   25,489    $   40,633
       Accounts and notes receivable, net               360,822       399,136
       Inventories                                      374,156       359,531
       Deferred income taxes                             48,113        47,063
       Other assets                                      62,020        54,847
         Total current assets                           870,600       901,210
     PROPERTY, PLANT AND EQUIPMENT, net                 335,888       354,172
     GOODWILL, net                                      726,269       739,468
     OTHER ASSETS                                        57,769        60,181
         TOTAL ASSETS                                $1,990,526    $2,055,031
 
                      LIABILITIES AND STOCKHOLDERS' EQUITY
     CURRENT LIABILITIES:
       Short-term debt                               $   31,404    $   31,467
       Current maturities of long-term debt              29,336        31,450
       Accounts payable                                 257,408       260,208
       Accrued expenses                                 251,206       242,347
       Income taxes payable                              13,486        24,448
         Total current liabilities                      582,840       589,920
     LONG-TERM DEBT                                     610,162       627,550
     DEFERRED INCOME TAXES                                1,058           941
     POSTRETIREMENT BENEFITS, OTHER THAN PENSIONS        14,265        14,284
     OTHER LIABILITIES                                   77,241        77,221
         Total liabilities                            1,285,566     1,309,916
     MINORITY INTEREST                                    1,965         2,058
     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,
        60,524,220 shares and 60,368,599 shares
        issued for 2001 and 2000, respectively              605           604
       Additional paid-in capital                       372,585       372,690
       Retained earnings                                431,796       447,377
       Accumulated other comprehensive loss             (65,659)      (37,074)
       Deferred compensation                             (5,910)       (6,457)
       Treasury stock, at cost, 2,980,846 and
        3,332,784 shares for 2001 and 2000,
        respectively                                    (30,422)      (34,083)
         Total stockholders' equity                     702,995       743,057
         TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY  $1,990,526    $2,055,031
 
                     MAKE YOUR OPINION COUNT -  Click Here
                http://tbutton.prnewswire.com/prn/11690X99363632
 
 SOURCE  Lennox International Inc.