Lennox International Announces Record Sales, Net Income and EPS For Full-Year 2006; Fourth Quarter Adjusted EPS of $0.46; Expects EPS of $2.50 to $2.60 in 2007
DALLAS, Feb. 8 /PRNewswire-FirstCall/ -- Lennox International Inc. (NYSE: LII) today announced results for fourth quarter and full-year 2006. "Despite a year of numerous challenges, Lennox International achieved record sales and profitability in 2006," said Bob Schjerven, chief executive officer. "We successfully managed commodity price increases, the transition to a new 13 SEER energy efficiency standard for residential air conditioning, a downturn in housing starts, and unfavorable heating season weather to chart the best financial performance in our 112-year history."
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Sales for full-year 2006 increased 9% to $3.7 billion, with all business segments contributing to the growth. Net income was $166 million, or $2.26 per diluted share. For full-year 2006, adjusted income from continuing operations, a non-GAAP measure, was $160 million, or $2.18 per diluted share - a 19% increase over the $1.83 per share earned from adjusted income from continuing operations in 2005. A description and reconciliation of this measure to net income are provided in the attached table.
The company generated $200 million in cash from operations and invested $74 million in capital expenditures, resulting in full-year free cash flow of $126 million. LII used $156 million to repurchase almost six million shares of common stock in 2006, including $32 million in the fourth quarter. The company ended the year with a total debt to capitalization ratio of 12%, despite an approximate $24 million reduction in equity resulting primarily from the adoption of Statement of Financial Accounting Standards No. 158, "Employers' Accounting for Defined Benefit Pension and Other Postretirement Plans".
Unseasonably warm winter weather and the decline in residential new construction contributed to lower demand in the fourth quarter. Fourth quarter sales decreased 1% to $862 million and net income was $41 million, or $0.58 per share. Adjusted income from continuing operations was $33 million or $0.46 per share, compared to adjusted income from continuing operations of $34 million, or $0.46 per share, in the previous year's fourth quarter.
Fourth quarter results include a pre-tax loss of $2 million related to futures contracts for copper and aluminum. This amount consists of $14 million in pre-tax gains on contracts that settled in the fourth quarter, and a $16 million pre-tax loss primarily reflecting net unrealized losses on open contracts that were marked to market and the offset for net unrealized gains recorded in prior periods for contracts that settled in the fourth quarter. In addition, the company recorded net tax benefits totaling $18 million related to the release of tax contingency reserves established in prior years and the revaluation of deferred tax asset valuation allowances. These tax benefits were excluded from adjusted results.
Fourth quarter and full-year 2006 financial statements reflect the adoption of Staff Accounting Bulletin No. 108, "Considering the Effects of Prior Year Misstatements when Quantifying Misstatements in Current Year Financial Statements" ("SAB No. 108"). In accordance with SAB No. 108, the Company reduced retained earnings for 2006 by $12 million and increased net income for the second quarter of 2006 by $4 million to reflect understatements in product warranty reserves caused by misstatements that occurred in prior years, primarily for products no longer in production. The resulting adjustments do not affect previously reported cash flows from operations and the impact on prior years' results was concluded to be immaterial. Adjusted quarterly financial statements for 2006 are included with this release.
2007 Outlook
"Lennox International has established a positive earnings trend and we have opportunities in each of our businesses that will allow us to continue to grow and build shareholder value in 2007," said Schjerven. "We expect a 6% to 8% increase in LII's total revenue and an improvement of 50 basis points or more in the company's segment profit margin, resulting in 2007 earnings per share in the range of $2.50 to $2.60."
The company also reported a slow start to the year, particularly those businesses exposed to residential end markets, and consequently expects that first quarter earnings in 2007 could be below the prior year.
Fourth Quarter Segment Performance
Residential Heating & Cooling segment revenue decreased 11% during the quarter to $394 million. Industry unit volumes of heating and cooling equipment declined by an estimated 37%, as last year's fourth quarter received a significant boost from 13 SEER pre-buy activity making year-over-year comparisons difficult. Segment profit decreased to $43 million from $53 million last year due primarily to lower volume. Price improvement more than offset commodities cost increases during the quarter.
Commercial Heating & Cooling segment revenue grew 17% to $190 million. Profit doubled from $10 million in 2005 to $20 million. Sales and profitability improved in both North America and Europe, with price improvement more than offsetting material cost increases. Profitability improvement in Europe was due to strong volume growth and lower freight costs.
Service Experts segment sales decreased 3% to $161 million, but segment profit increased 32% to $8 million from $6 million in the previous year. Lower insurance costs resulting from an emphasis on safety programs and lower advertising expenses drove the improvement.
Refrigeration segment revenue rose 13% to $134 million, led by strong sales growth in the company's international markets. Segment profit decreased to $12 million from $13 million in the previous year, primarily due to an increased environmental reserve accrual in South America.
Conference Call
Lennox International will hold a conference call to discuss financial results for the fourth quarter and full-year 2006 on Thursday, February 8, at 9:30 a.m. (CST). All interested parties are invited to listen as Bob Schjerven, CEO, and Sue Carter, CFO, comment on the company's operating results.
To listen, please call the conference call line at 612-234-9959 ten minutes prior to the scheduled start time and use reservation number 860925. The number of connections for this call is limited. 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. February 8 through February 15 by dialing 800-475- 6701, access code 860925. This call will also be archived on the company's web site.
Operating in over 100 countries, Lennox International Inc. is a global leader in the heating, 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, vice president, 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 including the impact of higher raw material prices, LII's ability to implement price increases for its products and services, and the impact of unfavorable weather and a decline in new construction activity on the demand for products and services, that could cause actual results to differ materially from such statements. For information concerning these 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.
LENNOX INTERNATIONAL INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
For the Three Months and Twelve Months Ended December 31, 2006 and 2005
(In millions, except per share data)
For the For the
Three Months Ended Twelve Months Ended
December 31, December 31,
2006 2005 2006 2005
(unaudited) (unaudited) (unaudited)
NET SALES $862.4 $870.6 $3,671.1 $3,366.2
COST OF GOODS SOLD 594.2 585.0 2,515.9 2,258.2
Gross Profit 268.2 285.6 1,155.2 1,108.0
OPERATING EXPENSES:
Selling, general and
administrative
expenses 232.5 245.2 973.2 916.6
(Gains), losses and
other expenses, net 1.7 (18.8) (45.7) (50.2)
Restructuring charges 0.1 - 13.3 2.4
Equity in earnings of
unconsolidated
affiliates (0.5) (2.2) (8.0) (14.2)
Operational income from
continuing operations 34.4 61.4 222.4 253.4
INTEREST EXPENSE, net 0.8 1.0 4.4 15.4
OTHER (INCOME) EXPENSE, net (0.5) - (0.4) 3.0
Income from continuing
operations before
income taxes and
cumulative effect of
accounting change 34.1 60.4 218.4 235.0
(BENEFIT) PROVISION FOR
INCOME TAXES (7.0) 18.4 52.4 83.0
Income from continuing
operations before
cumulative effect of
accounting change 41.1 42.0 166.0 152.0
CUMULATIVE EFFECT OF
ACCOUNTING CHANGE, NET - 0.1 - (0.1)
Income from continuing
operations 41.1 41.9 166.0 152.1
DISCONTINUED OPERATIONS:
Loss from operations of
discontinued operations - 0.1 - 2.0
Income tax benefit - - - (0.5)
Loss on disposal of
discontinued operations - - - 0.1
Income tax benefit - - - (0.2)
Loss from discontinued
operations - 0.1 - 1.4
Net income $41.1 $41.8 $166.0 $150.7
INCOME PER SHARE FROM
CONTINUING OPERATIONS
BEFORE CUMULATIVE EFFECT OF
ACCOUNTING CHANGE:
Basic $0.61 $0.60 $2.37 $2.37
Diluted $0.58 $0.56 $2.26 $2.13
CUMULATIVE EFFECT OF
ACCOUNTING CHANGE
PER SHARE:
Basic $- $- $- $-
Diluted $- $- $- $-
INCOME PER SHARE FROM
CONTINUING OPERATIONS:
Basic $0.61 $0.60 $2.37 $2.37
Diluted $0.58 $0.56 $2.26 $2.13
LOSS PER SHARE FROM
DISCONTINUED OPERATIONS:
Basic $- $ (0.01) $- $ (0.02)
Diluted $- $ (0.01) $- $ (0.02)
NET INCOME PER SHARE:
Basic $0.61 $0.59 $2.37 $2.35
Diluted $0.58 $0.55 $2.26 $2.11
AVERAGE SHARES OUTSTANDING:
Basic 67.4 70.3 69.9 64.2
Diluted 71.1 75.5 73.5 73.7
CASH DIVIDENDS DECLARED
PER SHARE: $0.13 $0.11 $0.46 $0.41
LENNOX INTERNATIONAL INC. AND SUBSIDIARIES
SEGMENT REVENUES AND OPERATING PROFIT
For the Three Months and Twelve Months Ended December 31, 2006 and 2005
(Unaudited, in millions)
For the For the
Three Months Ended Twelve Months Ended
December 31, December 31,
2006 2005 2006 2005
Net Sales
Residential
Heating & Cooling $393.9 $443.5 $1,848.4 $1,685.8
Commercial Heating &
Cooling 189.8 162.4 723.2 651.7
Service Experts 161.3 165.9 654.1 641.4
Refrigeration 134.4 118.8 526.4 467.2
Eliminations (A) (17.0) (20.0) (81.0) (79.9)
$862.4 $870.6 $3,671.1 $3,366.2
Segment Profit (Loss) (B)
Residential
Heating & Cooling $43.2 $53.0 $212.1 $206.9
Commercial Heating &
Cooling 19.7 10.1 73.1 56.9
Service Experts 8.2 6.2 19.2 17.0
Refrigeration 11.9 13.5 52.3 44.4
Corporate and other (33.6) (32.4) (101.5) (103.1)
Eliminations (A) 0.5 0.2 0.8 0.2
49.9 50.6 256.0 222.3
Reconciliation to income
from continuing operations
before income taxes:
(Gains), losses and
other expenses, net 1.7 (18.8) (45.7) (50.2)
Restructuring charges 0.1 - 13.3 2.4
Interest expense, net 0.8 1.0 4.4 15.4
Other (income) expense, net (0.5) - (0.4) 3.0
47.8 68.4 284.4 251.7
Less: Realized gains on
settled futures
contracts 13.7 8.0 66.0 16.7
$34.1 $60.4 $218.4 $235.0
(A) Eliminations consist of intercompany sales between business segments,
such as products sold to Service Experts by the Residential Heating &
Cooling segment.
(B) In the third quarter of 2006, the Company changed its definition of
segment profit (loss) to include realized gains (losses) on settled
futures contracts. Realized gains (losses) on settled futures
contracts are a component of (gains), losses and other expenses, net
in the accompanying Consolidated Statements of Operations. As a result
of this change, the Company now defines segment profit (loss) as a
segment's income (loss) from continuing operations before income taxes
included in the accompanying Consolidated Statements of Operations;
excluding (gains), losses and other expenses, net; restructuring
charges; goodwill impairment; interest expense, net; and other
(income) expense, net; less (plus) realized gains (losses) on settled
futures contracts.
LENNOX INTERNATIONAL INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
As of December 31, 2006 and December 31, 2005
(In millions, except share and per share data)
As of December 31,
2006 2005
(unaudited)
ASSETS
CURRENT ASSETS:
Cash and cash equivalents $144.3 $213.5
Accounts and notes receivable, net 502.6 508.4
Inventories 305.5 242.4
Deferred income taxes 22.2 20.3
Other assets 43.8 62.6
Total current assets 1,018.4 1,047.2
PROPERTY, PLANT AND EQUIPMENT, net 288.2 255.7
GOODWILL 239.8 223.9
DEFERRED INCOME TAXES 104.3 71.9
OTHER ASSETS 69.1 138.9
TOTAL ASSETS $1,719.8 $1,737.6
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Short-term debt $1.0 $1.2
Current maturities of long-term debt 11.4 11.3
Accounts payable 278.6 296.8
Accrued expenses 326.3 321.7
Income taxes payable 33.8 24.8
Liabilities held for sale - 0.7
Total current liabilities 651.1 656.5
LONG-TERM DEBT 96.8 108.0
POSTRETIREMENT BENEFITS, OTHER THAN PENSIONS 12.9 15.1
PENSIONS 49.6 80.8
OTHER LIABILITIES 105.0 82.8
Total liabilities 915.4 943.2
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,
76,974,791 shares and 74,671,494 shares issued
for 2006 and 2005, respectively 0.8 0.7
Additional paid-in capital 706.6 649.3
Retained earnings 312.5 191.0
Accumulated other comprehensive (loss) income (5.1) 0.4
Treasury stock, at cost, 9,818,904 shares and
3,635,947 for 2006 and 2005, respectively (210.4) (47.0)
Total stockholders' equity 804.4 794.4
TOTAL LIABILITIES AND STOCKHOLDERS'
EQUITY $1,719.8 $1,737.6
LENNOX INTERNATIONAL INC. AND SUBSIDIARIES
Reconciliation to U.S. GAAP (Generally Accepted Accounting Principles)
Measures
(Unaudited, in millions, except per share and ratio data)
Reconciliation of net income to adjusted income from continuing operations
For the Three Months Ended December 31,
2006 EPS 2005 EPS 2004 EPS
Net income, as reported $ 41.1 $ 0.58 $ 41.8 $ 0.55 $ 6.3 $ 0.11
Loss from discontinued
operations - - 0.1 0.01 12.8 0.18
Income from continuing
operations 41.1 0.58 41.9 0.56 19.1 0.29
Goodwill impairment,
net of income tax - - - - (0.3) -
(Gains), losses and other
expenses, net of
income tax(1) 1.1 0.02 (12.6) (0.17) - -
Realized gains on
settled futures
contracts, net of
income tax(1) 8.5 0.12 5.1 0.07 - -
Revaluation of deferred
tax asset valuation
allowances (3.8) (0.06) - - - -
Release of income tax
reserves related to
prior years, net
(excluding interest) (14.3) (0.20) - - - -
Adjusted income from
continuing operations $ 32.6 $ 0.46 $ 34.4 $ 0.46 $ 18.8 $ 0.29
(1)(Gains), losses and other expenses, net include the following:
For the Three Months Ended
December 31, 2006
Pre-tax Tax(Benefit) After-tax
(Gain) Loss Provision (Gain) Loss
Realized gains on settled
futures contracts $(13.7) $5.2 $(8.5)
Net change in unrealized losses on
open futures contracts 15.6 (5.8) 9.8
Other items, net (0.2) - (0.2)
(Gains), losses and other expenses, net $1.7 $(0.6) $1.1
For the Three Months Ended
December 31, 2005
Pre-tax After-tax
Gain Tax Provision Gain
Realized gains on settled
futures contracts $(8.0) $2.9 $(5.1)
Net change in unrealized gains
on open futures contracts (9.3) 3.3 (6.0)
Other items, net (1.5) - (1.5)
(Gains), losses and other
expenses, net $ (18.8) $6.2 $(12.6)
For the Twelve Months Ended December 31,
2006 EPS 2005 EPS
Net income, as reported $ 166.0 $2.26 $ 150.7 $2.11
Loss from discontinued
operations - - 1.4 0.02
Income from continuing
operations 166.0 2.26 152.1 2.13
(Gains), losses and other
expenses, net of income tax(2) (28.4) (0.39) (34.1) (0.46)
Realized gains on settled
futures contracts, net of
income tax(2) 41.2 0.56 10.7 0.14
Restructuring charges, net of
income tax 8.5 0.12 1.6 0.02
Reversal of valuation allowance
on deferred tax assets, offset
by other related charges (8.9) (0.12) - -
Revaluation of deferred tax asset
valuation allowances (3.8) (0.05) - -
Release of income tax reserves
related to prior years, net
(excluding interest) (14.3) (0.20) - -
Adjusted income from continuing
operations $160.3 $2.18 $130.3 $1.83
(2) (Gains), losses and other expenses, net include the following:
For the Twelve Months Ended
December 31, 2006
Pre-tax Tax(Benefit) After-tax
(Gain) Loss Provision (Gain) Loss
Realized gains on settled
futures contracts $ (66.0) $24.8 $(41.2)
Net change in unrealized losses
on open futures contracts 20.8 (7.7) 13.1
Other items, net (0.5) 0.2 (0.3)
(Gains), losses and other
expenses, net $ (45.7) $17.3 $(28.4)
For the Twelve Months Ended
December 31, 2005
Pre-tax Tax(Benefit) After-tax
(Gain) Loss Provision (Gain) Loss
Realized gains on settled
futures contracts $(16.7) $6.0 $(10.7)
Net change in unrealized gains
on open futures contracts (23.3) 8.4 (14.9)
Gain on sale of LII's 45% interest
in its heat transfer joint venture
to Outokumpu (9.3) 2.3 (7.0)
Estimated on-going remediation costs
in conjunction with the joint
remediation agreement LII entered
into with Outokumpu 2.2 (0.8) 1.4
Other items, net (3.1) 0.2 (2.9)
(Gains), losses and other expenses,
net $(50.2) $16.1 $(34.1)
Note: Management uses adjusted income from continuing operations, which is not defined by U.S. GAAP, to measure the Company's operating performance and to analyze year-over-year changes in operating income with and without the effects of goodwill impairment, certain (gains), losses and other expenses, net, restructuring charges, the revaluation of deferred tax asset valuation allowances, the reversal of valuation allowance on deferred tax assets, offset by other related charges and the release of income tax reserves related to prior years, net (excluding interest). Management believes that excluding these effects is helpful in assessing the overall performance of the Company.
Free Cash Flow
For the Three Months For the Twelve Months
Ended Ended
December 31, 2006 December 31, 2006
Net cash provided by
operating activities $115.0 $199.7
Purchase of property,
plant and equipment (24.0) (73.8)
Free cash flow $91.0 $125.9
Operational Working Capital - Continuing Operations
December 31, December 31,
2006 2005
December 31, Trailing December 31, Trailing
2006 12 Mo. Avg. 2005 12 Mo. Avg.
Accounts and Notes
Receivable, Net $502.6 $508.4
Allowance for Doubtful
Accounts 16.7 16.7
Accounts and Notes
Receivable, Gross 519.3 $565.9 525.1 $526.7
Inventories 305.5 242.4
Excess of current Cost
Over Last-in, First-out 56.9 55.1
Inventories as Adjusted 362.4 397.4 297.5 323.3
Accounts Payable (278.6) (336.6) (296.8) (292.9)
Operating Working Capital (a) 603.1 626.7 525.8 557.1
Net Sales, Trailing
Twelve Months (b) 3,671.1 3,671.1 3,366.2 3,366.2
Operational Working
Capital Ratio (a/b) 16.4% 17.1% 15.6% 16.5%
Note: Management uses free cash flow and operational working capital, which are not defined by U.S. 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.
LENNOX INTERNATIONAL INC. AND SUBSIDIARIES
SAB No. 108 Impact on Previously Reported Amounts
(Unaudited, in millions)
During the fourth quarter of 2006, the Company adopted Staff Accounting Bulletin No. 108, "Considering the Effects of Prior Year Misstatements when Quantifying Misstatements in Current Year Financial Statements" ("SAB No. 108"). In accordance with SAB No. 108, the Company increased net income for the second quarter of 2006 by approximately $4.3 million to reflect understatements in product warranty reserves caused by misstatements that occurred in prior years, primarily for products no longer in production. The resulting adjustments do not affect previously reported cash flows from operations and the impact on prior years' results was concluded to be immaterial. Additionally, the resulting adjustments had no impact on the previously reported June 30, 2006 consolidated balance sheet. The adoption of SAB No. 108 had no impact on the previously reported amounts for three months ended March 31, 2006 and the three months ended September 30, 2006.
The following provides the impact on previously reported amounts within
the Company's second quarter of 2006 related to the adoption of SFAS No. 108
(amounts in millions):
For the Three Months and
Six Months Ended
June 30, 2006 and for the
Nine Months Ended September 30, 2006
Increase (Decrease)
Cost of goods sold $(6.8)
Gross profit 6.8
Operational income 6.8
Income from operations before income taxes 6.8
Provision for income taxes 2.5
Net income 4.3
LENNOX INTERNATIONAL INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
For the Three Months and Six Months Ended June 30, 2006 and the Nine Months
Ended September 30, 2006
(Unaudited, in millions, except per share data)
For the Three For the Six For the Nine
Months Ended Months Ended Months Ended
June 30, June 30, September 30,
2006 2006 2006
Adjusted Adjusted Adjusted
NET SALES $1,002.0 $1,801.5 $2,808.7
COST OF GOODS SOLD 679.4 1,225.5 1,921.7
Gross Profit 322.6 576.0 887.0
OPERATING EXPENSES:
Selling, general and
administrative expenses 253.5 485.7 740.7
(Gains), losses and other
expenses, net (27.2) (45.3) (47.3)
Restructuring charges 2.3 8.6 13.1
Equity in earnings of
unconsolidated affiliates (2.9) (5.0) (7.5)
Operational income 96.9 132.0 188.0
INTEREST EXPENSE, net 1.8 2.4 3.6
OTHER EXPENSE (INCOME), net - 1.0 0.1
Income from operations before
income taxes 95.1 128.6 184.3
PROVISION FOR INCOME TAXES 26.8 39.3 59.4
Net income $68.3 $89.3 $124.9
NET INCOME PER SHARE:
Basic $0.96 $1.25 $1.77
Diluted $0.91 $1.18 $1.67
AVERAGE SHARES OUTSTANDING:
Basic 71.5 71.4 70.7
Diluted 75.2 75.4 74.6
CASH DIVIDENDS DECLARED PER SHARE $0.11 $0.22 $0.33
LENNOX INTERNATIONAL INC. AND SUBSIDIARIES
SEGMENT REVENUES AND OPERATING PROFIT
For the Three Months and Six Months Ended June 30, 2006 and the Nine Months
Ended September 30, 2006 (Unaudited, in millions)
For the For the For the
Three Months Six Months Nine Months
Ended Ended Ended
June 30, June 30, September 30,
2006 2006 2006
Adjusted Adjusted Adjusted
Net Sales
Residential $539.2 $955.6 $1,454.5
Commercial 181.1 314.0 533.4
Service Experts 177.8 318.8 492.8
Refrigeration 129.9 255.7 392.0
Eliminations (A) (26.0) (42.6) (64.0)
$1,002.0 $1,801.5 $2,808.7
Segment Profit (Loss) (B)
Residential $73.1 $115.3 $168.9
Commercial 19.4 27.7 53.4
Service Experts 9.5 3.3 11.0
Refrigeration 14.3 26.4 40.4
Corporate and other (21.0) (45.1) (67.9)
Eliminations (A) (0.4) (0.3) 0.3
94.9 127.3 206.1
Reconciliation to income from
operations before income taxes:
(Gains), losses and other
expenses, net (27.2) (45.3) (47.3)
Restructuring charges 2.3 8.6 13.1
Interest expense, net 1.8 2.4 3.6
Other expense (income), net - 1.0 0.1
118.0 160.6 236.6
Less: Realized gains on settled
futures contracts 22.9 32.0 52.3
$95.1 $128.6 $184.3
(A) Eliminations consist of intercompany sales between business segments,
such as products sold to Service Experts by the Residential Heating &
Cooling segment.
(B) The Company defines segment profit (loss) as a segment's income (loss)
from continuing operations before income taxes included in the
accompanying Consolidated Statements of Operations; excluding (gains),
losses and other expenses, net; restructuring charges; goodwill
impairment; interest expense, net; and other (income) expense, net;
less (plus) realized gains (losses) on settled futures contracts.
There was no impact on the Company's Consolidated Balance Sheets as of June 30, 2006 and September 30, 2006 due to SAB No. 108 adjustments. The following table shows the effects of SAB No. 108 on Retained Earnings (unaudited, in millions):
June 30, September 30,
2006 2006
Retained earnings, as previously reported $260.3 $288.3
Change in net income 4.3 4.3
SAB No. 108 cumulative effect (4.3) (4.3)
Retained earnings, adjusted $260.3 $288.3
SOURCE Lennox International Inc.
CONTACT: Bill Moltner, vice president, investor relations, Lennox
International Inc., +1-972-497-6670