Q1 Highlights
(All comparisons are year-over-year,
unless otherwise noted)
(Prior-year adjusted results and core revenue exclude European
operations that were divested in the 4Q 2023)
- Revenue was $1.05 billion; core
revenue up 6%, including 2% growth from acquisitions
- GAAP Operating Income $167
million; adjusted segment profit up 17% to $167 million
- GAAP diluted EPS up 26% to $3.47;
adjusted diluted EPS up 23% to $3.47
- Raising 2024 EPS guidance range to $19.00-$20.00 from
prior range of $18.50-$20.00
DALLAS, April 24,
2024 /PRNewswire/ -- Lennox (NYSE: LII), a
leader in energy-efficient climate-control solutions, today
reported first quarter financial results with $1.05 billion of revenue, a record $167 million of operating profit and $3.47 GAAP diluted earnings per share.
Core revenue grew 6% to $1.05
billion. Adjusted segment profit rose 17% to $167 million. Adjusted segment margin was up 157
basis points to 15.9%. Adjusted earnings per share rose 23% to
$3.47.
"The Lennox team's unwavering commitment to our
self-help transformation plan has resulted in another record
quarter despite continued residential destocking," said Chief
Executive Officer, Alok Maskara. "We
remain cautiously optimistic regardless of end-market
uncertainties, particularly given the increased clarity around the
industry's upcoming transition to low GWP refrigerant
products.
We are focused on areas within our control,
including strengthening distribution expertise, elevating customer
experience, advancing innovative platforms, executing pricing
excellence, and driving productivity. The transformation plan is
positioning us for long-term share gain and margin resilience."
In the first quarter, the Home Comfort Solutions
segment experienced a revenue decline of 1%, primarily due to
ongoing destocking in the two-step distribution channel. Industry
destocking is expected to be approaching an end, and the segment's
pricing initiatives will expand margin resiliency by offsetting
inflation and the impact of volume decline. Additionally, Lennox is
investing to enhance distribution capabilities, improve customer
experience, and execute an on-schedule refrigerant regulatory
transition to meet customer needs.
The Business Climate Solutions segment achieved
21% revenue growth in the first quarter, including 6% growth from
acquisitions. The 15% organic growth was driven by improved
production volume, enhanced product mix and continued price
excellence. Progress is on track for the new factory in
Mexico, which will begin
production in the second half of the year. This factory will be a
key enabler in normalizing lead times and growing emergency
replacement revenue.
FIRST QUARTER 2024 FINANCIAL
HIGHLIGHTS
(All comparisons are year-over-year, unless
otherwise noted)
Revenue: $1.05 billion was
flat and up 6% for core operations, with organic revenue up 4%
driven by price and favorable sales volume.
Operating Income: $167
million, up 20%, with operating profit margin of 15.9%, up
264 bps.
Adjusted Segment Profit: $167
million, up 17%, and adjusted segment profit margin of
15.9%, up 157 basis points. Profit growth was driven by
$40 million of price/mix benefits,
$8 million in organic and inorganic
sales volume and $2 million in
product costs. This was partially offset by inflation and
investment in SG&A and distribution.
Net Income: $124 million,
or $3.47 per share, compared to
$98 million, or $2.75 per share, in the prior-year quarter.
Adjusted Net Income: $124 million,
or $3.47 per share, compared to
$101 million, or $2.83 per share, in the prior-year quarter.
Cash: Operating cash flow used was $23 million compared to $79 million in the prior-year quarter. Capital
expenditures were $30 million
compared to $35 million in the
prior-year quarter. Total debt at the end of the first quarter was
approximately $1.4 billion. Total
cash, cash equivalents and short-term investments were $58 million at the end of the quarter.
Home Comfort Solutions: Business segment revenue was
$675 million, down 1%. Segment profit
was $112 million, up 1%, and segment
margin was 16.6%, up 30 basis points. Segment profit increased
$1 million compared to the prior-year
quarter. The increase was attributed to $20
million price/mix benefit partially offset by $4 million decrease in sales volume and
$15 million impact from inflation and
investments in distribution and selling.
Building Climate Solutions: Business segment revenue was
$373 million, up 21%. Organic revenue
was $354 million, up 15%. Segment
profit was $78 million, up
$28 million or 56%, and segment
margin expanded 480 basis points to 21.0%. This profit improvement
was driven by $20 million of
price/mix benefits, $12 million in
organic and inorganic sales volume and $1
million in product cost productivity. This was partially
offset by $5 million inflationary
wage and distribution impacts.
Corporate and Other: Corporate expenses were $24 million, up $5
million, including $3 million
of expenses previously considered non-core adjustments.
FULL YEAR 2024 GUIDANCE
For full year 2024, we
reaffirm revenue guidance of approximately 7%, with 2% of benefit
from the AES acquisition.
Earnings per share revised range is $19.00 to $20.00
versus the prior range of $18.50 to
$20.00.
Free Cash Flow is estimated to be within the range of
$500 million to $600 million.
CONFERENCE CALL INFORMATION
A conference call to
discuss the company's first quarter results and 2024 outlook will
be held this morning at 8:30 a.m. Central
Time. To participate in the earnings conference, please call
800-274-8461 (U.S.) or +1 203-518-9765 (international) at least 10
minutes prior to the scheduled start time and use conference ID
LIIQ124. The conference call also will be webcast live on the
company's investor relations web site at investor.lennox.com. A
replay of the conference call will be available until May 2, 2024, by calling toll-free 800-839-8798
(U.S.) or +1 402-220-6078 (international). The call will also be
archived on the company's investor relations website at
investor.lennox.com.
ABOUT LENNOX
Lennox (NYSE: LII) is a leader in
energy-efficient climate-control solutions. Dedicated to
sustainability and creating comfortable and healthier environments
for our residential and commercial customers while reducing their
carbon footprint, we lead the field in innovation with our cooling,
heating, indoor air quality, and refrigeration systems. Additional
information on Lennox is available at www.lennox.com or by
contacting investor@lennox.com.
FORWARD-LOOKING STATEMENTS & NON-GAAP FINANCIAL
MEASURES
The statements in this document that are not
historical statements, including statements regarding the 2024
full-year outlook and expected consolidated and segment financial
results, as well as financial targets for future years, are
forward-looking statements within the meaning of the Private
Securities Litigation Reform Act of 1995. These forward-looking
statements are based on information currently available as well as
management's assumptions and beliefs today. These statements are
subject to numerous risks and uncertainties that could cause actual
results to differ materially from the results expressed or implied
by the statements, and investors should not place undue reliance on
them. Risks and uncertainties that could cause actual results to
differ materially from such statements include risks that the North
American unitary HVAC and refrigeration markets perform worse than
current assumptions. Additional risks include but are not limited
to competition in the HVACR business; our ability to successfully
develop and market new products or execute our business strategy;
our ability to meet and anticipate customer demands; our ability to
continue to license or enforce our intellectual property rights;
our ability to attract, motivate, develop, and retain our
employees, as well as labor relations problems; a decline in new
construction activity and related demand for our products and
services; the impact of weather on our business; the impact of
higher raw material prices and significant supply interruptions;
changes in environmental and climate-related legislation or
government regulations or policies; changes in tax legislation; the
impact of new or increased trade tariffs; warranty, intellectual
property infringement, product liability and other claims;
litigation risks; general economic conditions in the United States and abroad; extraordinary
events beyond our control; foreign currency fluctuations and
changes in local government regulation associated with our
international operations; cyber attacks and other disruptions or
misuse of information systems; our ability to successfully realize,
complete and integrate acquisitions; and impairment of the value of
our goodwill.
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,
except as required by law.
A reconciliation of non-GAAP financial measures appearing in
this document to financial measures prepared in accordance with
U.S. Generally Accepted Accounting Principles (GAAP) are included
in the Annex to this document.
This document includes forward-looking statements regarding core
revenue, segment profit, adjusted segment profit, adjusted net
income, adjusted earnings per share, free cash flow and Debt to
EBITDA, which are non-GAAP financial measures. These non-GAAP
financial measures are derived by excluding certain amounts from
the corresponding financial measures determined in accordance with
GAAP. The determination of the amounts excluded is a matter of
management judgment and depends upon, among other factors, the
nature of the underlying expense or income amounts recognized in a
given period and the high variability of certain amounts, such as
unusual gains and losses, the ultimate outcome of pending
litigation, fluctuations in foreign currency exchange rates,
changes in environmental liabilities, the impact and timing of
potential acquisitions and divestitures, future restructuring
costs, and other structural changes or their probable significance.
Core revenue, adjusted segment profit, and adjusted earnings per
share exclude net sales and profit/(loss) from our European
portfolio, which was sold in 4Q 2023. We are unable to
present a quantitative reconciliation of the aforementioned
forward-looking non-GAAP financial measures to their most directly
comparable forward-looking GAAP financial measures because such
information is not available, and management cannot reliably
predict the necessary components of such GAAP measures without
unreasonable effort or expense. The unavailable information could
have a significant impact on LII's full year GAAP financial
results.
|
LENNOX INTERNATIONAL
INC. AND SUBSIDIARIES
Consolidated
Statements of Operations
(Unaudited)
|
|
(Amounts in
millions, except per share data)
|
For the Three Months
Ended March 31,
|
|
|
|
2024
|
|
2023
|
|
|
Net
sales
|
$
1,047.1
|
|
$
1,049.4
|
|
|
Cost of goods
sold
|
707.1
|
|
742.8
|
|
|
Gross
profit
|
340.0
|
|
306.6
|
|
|
Operating
Expenses:
|
|
|
|
|
|
Selling, general and
administrative expenses
|
170.7
|
|
167.5
|
|
|
Losses (gains) and
other expenses, net
|
3.7
|
|
0.3
|
|
|
Income from equity
method investments
|
(1.2)
|
|
(0.7)
|
|
|
Operating
income
|
166.8
|
|
139.5
|
|
|
Pension
settlements
|
—
|
|
0.2
|
|
|
Interest expense,
net
|
11.8
|
|
14.2
|
|
|
Other expense (income),
net
|
0.8
|
|
—
|
|
|
Income before income
taxes
|
154.2
|
|
125.1
|
|
|
Provision for income
taxes
|
29.9
|
|
27.1
|
|
|
Net
income
|
$
124.3
|
|
$
98.0
|
|
|
|
|
|
|
|
Earnings per
share – Basic:
|
$
3.49
|
|
$
2.76
|
|
|
|
|
|
|
|
Earnings per
share – Diluted:
|
$
3.47
|
|
$
2.75
|
|
|
|
|
|
|
|
Weighted Average
Number of Shares Outstanding - Basic
|
35.6
|
|
35.5
|
|
|
Weighted Average
Number of Shares Outstanding - Diluted
|
35.8
|
|
35.6
|
|
|
LENNOX INTERNATIONAL
INC. AND SUBSIDIARIES
Segment Net Sales
and Profit (Loss)
(Unaudited)
|
|
|
(Amounts in
millions)
|
For the Three Months
Ended March 31,
|
|
|
2024
|
|
2023
|
|
Net
Sales
|
|
|
|
|
Home Comfort
Solutions
|
$
674.6
|
|
$
681.0
|
|
Building Climate
Solutions
|
372.5
|
|
308.7
|
|
Corporate and other
(1)
|
—
|
|
59.7
|
|
$
1,047.1
|
|
$
1,049.4
|
|
Segment Profit
(Loss) (2)
|
|
|
|
|
Home Comfort
Solutions
|
$
112.1
|
|
$
111.1
|
|
Building Climate
Solutions
|
78.2
|
|
50.0
|
|
Corporate and
other
|
(23.5)
|
|
(19.4)
|
|
Total segment
profit
|
166.8
|
|
141.7
|
|
Reconciliation to
Operating income:
|
|
|
|
|
Items in Losses (gains)
and other expenses, net which are excluded from segment
profit (loss) (2)
|
—
|
|
2.2
|
|
Operating
income
|
$
166.8
|
|
$
139.5
|
|
|
|
(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 (gains) and other expenses,
net:
|
|
|
|
â—¦
Net change in unrealized (gains) losses on unsettled futures
contracts,
|
|
|
â—¦
Environmental liabilities and special litigation charges,
and;
|
|
|
|
â—¦
Other items, net
|
|
|
LENNOX INTERNATIONAL
INC. AND SUBSIDIARIES
Consolidated Balance
Sheets
|
|
|
|
(Amounts in
millions, except shares and par values)
|
As of March 31,
2024
|
|
As of December 31,
2023
|
|
ASSETS
|
(Unaudited)
|
|
|
|
Current
Assets:
|
|
|
|
|
Cash and cash
equivalents
|
$
45.7
|
|
$
60.7
|
|
Short-term
investments
|
11.9
|
|
8.4
|
|
Accounts and notes
receivable, net of allowances of $15.4 and $14.4 in 2024 and 2023,
respectively
|
616.0
|
|
594.6
|
|
Inventories,
net
|
823.4
|
|
699.1
|
|
Other
assets
|
67.5
|
|
70.7
|
|
Total current
assets
|
1,564.5
|
|
1,433.5
|
|
Property, plant and
equipment, net of accumulated depreciation of $928.1 and $910.8 in
2024 and 2023, respectively
|
759.1
|
|
720.4
|
|
Right-of-use assets
from operating leases
|
223.7
|
|
213.6
|
|
Goodwill
|
219.9
|
|
222.1
|
|
Deferred income
taxes
|
60.3
|
|
51.8
|
|
Other assets,
net
|
157.9
|
|
156.9
|
|
Total
assets
|
$
2,985.4
|
|
$
2,798.3
|
|
|
|
|
|
LIABILITIES AND
STOCKHOLDERS' EQUITY
|
|
|
|
|
Current
Liabilities:
|
|
|
|
|
Accounts
payable
|
$
437.8
|
|
$
374.7
|
|
Accrued
expenses
|
302.3
|
|
416.1
|
|
Income taxes
payable
|
28.1
|
|
4.2
|
|
Commercial
paper
|
250.0
|
|
150.0
|
|
Current maturities of
long-term debt
|
22.5
|
|
12.1
|
|
Current operating
lease liabilities
|
56.7
|
|
57.5
|
|
Total current
liabilities
|
1,097.4
|
|
1,014.6
|
|
Long-term
debt
|
1,153.7
|
|
1,143.1
|
|
Long-term operating
lease liabilities
|
174.3
|
|
164.6
|
|
Pensions
|
17.5
|
|
22.5
|
|
Other
liabilities
|
173.7
|
|
168.2
|
|
Total
liabilities
|
2,616.6
|
|
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
|
1,190.6
|
|
1,184.6
|
|
Retained
earnings
|
3,591.1
|
|
3,506.2
|
|
Accumulated other
comprehensive loss
|
(57.9)
|
|
(56.9)
|
|
Treasury stock, at
cost, 51,548,073 shares and 51,588,103 shares for 2024
and 2023, respectively
|
(4,355.9)
|
|
(4,349.5)
|
|
Total stockholders'
equity
|
368.8
|
|
285.3
|
|
Total liabilities
and stockholders' equity
|
$
2,985.4
|
|
$
2,798.3
|
|
LENNOX INTERNATIONAL
INC. AND SUBSIDIARIES
Consolidated
Statements of Cash Flows
(Unaudited)
|
|
|
(Amounts in
millions)
|
For the Three Months
Ended March 31,
|
|
2024
|
|
2023
|
|
Cash flows from
operating activities:
|
|
|
|
|
Net income
|
$
124.3
|
|
$
98.0
|
|
Adjustments to
reconcile net income to net cash used in operating
activities:
|
|
|
|
|
Income from equity
method investments
|
(1.2)
|
|
(0.7)
|
|
Provision for credit
losses
|
1.8
|
|
2.0
|
|
Unrealized losses, net
on derivative contracts
|
4.4
|
|
1.6
|
|
Stock-based
compensation expense
|
6.6
|
|
6.1
|
|
Depreciation and
amortization
|
24.0
|
|
19.6
|
|
Deferred income
taxes
|
(9.3)
|
|
(8.2)
|
|
Pension
expense
|
0.1
|
|
0.7
|
|
Pension
contributions
|
(5.1)
|
|
(1.2)
|
|
Other items,
net
|
(0.1)
|
|
(0.3)
|
|
Changes in assets and
liabilities, net of effects of acquisitions and
divestitures:
|
|
|
|
|
Accounts and notes
receivable
|
(24.9)
|
|
(34.9)
|
|
Inventories
|
(125.4)
|
|
(150.4)
|
|
Other current
assets
|
(7.7)
|
|
1.2
|
|
Accounts
payable
|
65.0
|
|
22.3
|
|
Accrued
expenses
|
(113.8)
|
|
(32.5)
|
|
Income taxes payable
and receivable, net
|
34.7
|
|
0.8
|
|
Leases,
net
|
(1.1)
|
|
0.1
|
|
Other, net
|
4.9
|
|
(3.0)
|
|
Net cash used in
operating activities
|
(22.8)
|
|
(78.8)
|
|
Cash flows from
investing activities:
|
|
|
|
|
Proceeds from the
disposal of property, plant and equipment
|
0.5
|
|
0.3
|
|
Purchases of property,
plant and equipment
|
(29.5)
|
|
(35.4)
|
|
Acquisitions, net of
cash
|
1.8
|
|
—
|
|
(Purchases of)
proceeds from short-term investments
|
(3.5)
|
|
1.4
|
|
Net cash used in
investing activities
|
(30.7)
|
|
(33.7)
|
|
Cash flows from
financing activities:
|
|
|
|
|
Commercial paper
payments
|
(76.4)
|
|
—
|
|
Commercial paper
borrowings
|
176.4
|
|
—
|
|
Asset securitization
payments
|
—
|
|
(53.0)
|
|
Long-term debt
payments
|
(3.5)
|
|
(3.2)
|
|
Borrowings from credit
facility
|
127.2
|
|
610.5
|
|
Payments on credit
facility
|
(135.2)
|
|
(414.5)
|
|
Proceeds from employee
stock purchases
|
1.1
|
|
0.9
|
|
Repurchases of common
stock to satisfy employee withholding tax obligations
|
(8.1)
|
|
(2.0)
|
|
Cash dividends
paid
|
(39.1)
|
|
(37.6)
|
|
Net cash provided by
financing activities
|
42.4
|
|
101.1
|
|
Decrease in cash and
cash equivalents
|
(11.1)
|
|
(11.4)
|
|
Effect of exchange
rates on cash and cash equivalents
|
(3.9)
|
|
(0.8)
|
|
Cash and cash
equivalents, beginning of period
|
60.7
|
|
52.6
|
|
Cash and cash
equivalents, end of period
|
$
45.7
|
|
$
40.4
|
|
|
|
|
|
Supplemental
disclosures of cash flow information:
|
|
|
|
|
Interest
paid
|
$
21.8
|
|
$
13.0
|
|
Income taxes paid (net
of refunds)
|
$
4.0
|
|
$
34.4
|
|
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 March 31,
|
|
2024
|
|
2023
|
|
Amount after
tax
|
Per Diluted
Share
|
|
Amount after
tax
|
Per Diluted
Share
|
|
Net income, a GAAP
measure
|
$
124.3
|
$
3.47
|
|
$
98.0
|
$
2.75
|
|
Pension
settlements
|
—
|
—
|
|
0.2
|
0.01
|
|
Items in Losses
(gains) and other expenses, net which are
excluded from segment profit (loss) (a)
|
—
|
—
|
|
0.9
|
0.03
|
|
Non-core business
results (b)
|
—
|
—
|
|
1.4
|
0.04
|
|
Adjusted net income,
a non-GAAP measure
|
$
124.3
|
$
3.47
|
|
$
100.5
|
$
2.83
|
|
|
|
|
|
|
|
(a) Recorded in Losses
(gains) and other expenses, net in the Consolidated Statements of
Operations
|
|
|
|
|
|
(b) Non-core business
results represent activity related to our business operations in
Europe not included elsewhere in the reconciliations. We completed
the sale of our European businesses in the fourth quarter of
2023.
|
|
Reconciliation of
Net Cash Provided by Operating Activities, a GAAP measure, to Free
Cash Flow, a Non-GAAP measure
|
|
|
For the Three Months
Ended March 31,
|
|
2024
|
|
2023
|
|
Net cash used in
operating activities
|
$
(22.8)
|
|
$
(78.8)
|
|
Purchases of property,
plant and equipment
|
(29.5)
|
|
(35.4)
|
|
Proceeds from the
disposal of property, plant and equipment
|
0.5
|
|
0.3
|
|
Free cash flow, a
Non-GAAP measure
|
$
(51.8)
|
|
$
(113.9)
|
|
|
Reconciliation of
Net sales, a GAAP measure to Core net sales, a Non-GAAP
measure
|
|
|
|
For the Three Months
Ended March 31,
|
|
|
|
Corporate and
Other
|
|
Consolidated
|
|
2023
|
|
2023
|
|
Net sales, a GAAP
measure
|
$
59.7
|
|
$
1,049.4
|
|
Net sales from non-core
businesses (a)
|
(59.7)
|
|
(59.7)
|
|
Core net sales, a
Non-GAAP measure
|
$
—
|
|
$
989.7
|
|
|
|
|
|
(a) Non-Core businesses
represent our business operations in Europe, which were sold in the
fourth quarter of 2023.
|
|
|
|
|
|
Reconciliation of
Segment profit (loss), a Non-GAAP measure to Adjusted Segment
profit (loss), a Non-GAAP measure
|
|
|
For the Three Months
Ended March 31,
|
|
|
|
Corporate and
Other
|
|
Consolidated
|
|
2023
|
|
2023
|
|
Segment profit (loss),
a Non-GAAP measure
|
$
(19.4)
|
|
$
141.7
|
|
Profit from non-core
businesses (a)
|
0.4
|
|
0.4
|
|
Adjusted Segment profit
(loss), a Non-GAAP measure
|
$
(19.0)
|
|
$
142.1
|
|
|
|
|
|
(a) Non-Core businesses
represent our business operations in Europe, which were sold in the
fourth quarter of 2023.
|
|
|
|
|
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SOURCE Lennox International Inc.