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Actionable news in LII: LENNOX INTERNATIONAL Inc,

Lennox International Reports Record Third-Quarter Profit

The following excerpt is from the company's SEC filing.

Revenue up 6%, and up 11% at constant currency

Adjusted EPS from continuing operations up 26% to $1.82

GAAP EPS from continuing operations up 28% to $1.76

Narrowing 2015 revenue growth at constant currency guidance range from 4-7% to 5-7%

Narrowing 2015 adjusted EPS from continuing operations guidance range from $5.25-$5.50 to $5.25-$5.40

DALLAS, October 19, 2015 Lennox International Inc. (NYSE: LII) today reported financial results for the third quarter of 2015. Financial results reflect sold businesses in discontinued operations.

Revenue for the third quarter was $955 million, up 6% from the prior-year quarter including the negative impact from foreign exchange. At constant currency, revenue was up 11%. Adjusted earnings per share from continuing operations was a third-quarter record $1.82, up 26% from the prior-year quarter. On a GAAP basis, earnings per share from continuing operations was a third-quarter record $1.76, up 28% from the prior-year quarter.

Lennox International realized strong revenue growth at constant currency and significant margin expansion across all three of our businesses in the third quarter, said Chairman and CEO Todd Bluedorn. For the company overall, total segment profit set a third-quarter record, and profit margin expanded 140 basis points from the prior-year quarter to a record level of 13.7%. Our Residential business set third-quarter records for revenue, margin and profit as strong business momentum continued. Residential revenue was up 13% at constant currency, and margin expanded 240 basis points to 17.4%. In Commercial, segment profit and margin set new highs on 8% revenue growth at constant currency. North America and Europe both saw high single-digit revenue growth at constant currency. Commercial segment margin expanded 70 basis points to 18.2%. In Refrigeration, revenue was up 8% at constant currency, with double-digit growth in North America and Europe. Refrigeration margin expanded 220 basis points from the prior-year quarter to 10.7%.

Looking ahead for the company overall, we now expect revenue growth of 5-7% at constant currency for the full year. We are narrowing 2015 guidance for adjusted EPS from continuing operations to $5.25-$5.40. The company is well-positioned for continued momentum in the fourth quarter and as we look ahead to 2016. We remain focused on capitalizing on end market growth, capturing additional market share, and driving operational initiatives for higher profitability.

FINANCIAL HIGHLIGHTS

Revenue:

Revenue for the third quarter was $955 million, up 6% from the prior-year quarter. At constant currency, revenue was up 11%. Volume and price/mix were up on a revenue basis from the prior-year quarter.

Gross Profit:

Gross profit in the third quarter was $273 million, up 11% from $247 million in the prior-year quarter. Gross margin was 28.6%, up 110 basis points from 27.5% in the prior-year quarter. Gross profit was positively impacted by higher volume, favorable price, lower material costs, and higher productivity, with partial offsets from negative mix, unfavorable foreign exchange, and investments in distribution expansion.

Income from Continuing Operations:

Adjusted income from continuing operations in the third quarter was $83.2 million, or $1.82 per share, compared to $70.3 million, or $1.44 per share, in the prior-year quarter. Adjusted earnings from continuing operations for the third quarter of 2015 excludes $2.9 million in after-tax charges: $0.8 million for special legal contingency charges, $0.7 million related to contractor tax payments in a non-U.S. subsidiary, $0.5 million for the net change in unrealized losses on unsettled future contracts, and $0.9 million, net, for other items.

On a GAAP basis, income from continuing operations for the third quarter was $80.3 million, or $1.76 per share, compared to $67.5 million, or $1.38 per share, in the prior-year quarter.

Free Cash Flow and Total Debt:

Net cash from operations in the third quarter was $159 million compared to $97 million in the prior-year quarter. Capital expenditures were $14 million in the third quarter compared to $19 million in the third quarter a year ago. Free cash flow was $145 million compared to $78 million in the prior-year quarter. Total debt at the end of the third quarter was $918 million. Total cash and cash equivalents were $35 million at the end of the quarter. The company paid $16 million in dividends in the third quarter. The companys previously announced $450 million accelerated stock repurchase program continues and will be completed in the fourth quarter of 2015.

BUSINESS SEGMENT HIGHLIGHTS

Residential Heating & Cooling

Revenue in the Residential Heating & Cooling business segment was a third-quarter record $518 million, up 12% from the prior-year quarter. At constant currency, revenue was up 13%. Segment profit was a third-quarter record $90 million, up 30% from the prior-year quarter. Segment profit margin was a third-quarter record 17.4%, up 240 basis points from the prior-year quarter. Results were impacted by higher volume, favorable price/mix, lower material costs, and higher productivity, with partial offsets from unfavorable foreign exchange and investments in SG&A and distribution expansion.

Commercial Heating & Cooling

Revenue in the Commercial Heating & Cooling business segment was $247 million in the third quarter, up 2% from the prior-year quarter. At constant currency, revenue was up 8%. Segment profit was a record $45 million, up 6% from the prior-year...


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