Lennox Reports First Quarter Results and Raises Full Year Profit Guidance
- Revenue increased by 6% to $1.05 billion.
- Adjusted diluted EPS rose by 23% to $3.47.
- The company raised its 2024 EPS guidance range to $19.00-$20.00.
- The Business Climate Solutions segment achieved 21% revenue growth.
- Lennox remains cautiously optimistic about its transformation plan and industry transition to low GWP refrigerant products.
- None.
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 6% , including2% growth from acquisitions - GAAP Operating Income
$167 million 17% to$167 million - GAAP diluted EPS up
26% to$3.47 23% to$3.47 - Raising 2024 EPS guidance range to
$19.00 -$20.00 $18.50 -$20.00
Core revenue grew
"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
The Business Climate Solutions segment achieved
FIRST QUARTER 2024 FINANCIAL HIGHLIGHTS
(All comparisons are year-over-year, unless otherwise noted)
Revenue:
Operating Income:
Adjusted Segment Profit:
Net Income:
Adjusted Net Income:
Cash: Operating cash flow used was
Home Comfort Solutions: Business segment revenue was
Building Climate Solutions: Business segment revenue was
Corporate and Other: Corporate expenses were
FULL YEAR 2024 GUIDANCE
For full year 2024, we reaffirm revenue guidance of approximately
Earnings per share revised range is
Free Cash Flow is estimated to be within the range of
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 (
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
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
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: | |||
◦ Net change in unrealized (gains) losses on unsettled futures contracts, | |||
◦ Environmental liabilities and special litigation charges, and; | |||
◦ 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 | 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 | 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, | — | — | |
Common stock, | 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 | |||||
(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 | |||||
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 | 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 | — | — | 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 | |||||
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 | |||
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 | |||
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SOURCE Lennox International Inc.
FAQ
What was Lennox's revenue in the first quarter of 2024?
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