Exhibit 99.1
Lennox International Reports Fourth Quarter Results
| • | | 4Q08 adjusted EPS from continuing operations of $0.52; GAAP EPS from continuing operations of $0.21 |
| • | | Full year 2008 adjusted EPS from continuing operations of $2.71; GAAP EPS from continuing operations of $2.15 |
| • | | Full year cash from operations of $183 million and free cash flow of $121 million |
| • | | Restructuring initiatives on track and additional measures announced |
| • | | Reaffirm 2009 adjusted EPS guidance from continuing operations; GAAP EPS guidance from continuing operations now $1.91 to $2.31 |
DALLAS, February 5, 2009 — Lennox International Inc. (NYSE: LII) today reported fourth quarter and full year 2008 results. Financial results presented have been adjusted for discontinued operations.
For the fourth quarter, revenue was $746 million, down 15% from the prior year, including a 5 point negative impact from foreign exchange. Adjusted EBIT margin was up 20 basis points to 6.7%. Diluted earnings per share from continuing operations on an adjusted basis, a non-GAAP measure, was $0.52 compared to $0.55 in the year-ago quarter. Diluted earnings per share from continuing operations on a GAAP basis was $0.21 compared to $0.59 in the year-ago quarter.
For the full year, revenue was $3.5 billion, down 7% from the prior year, including a 1 point benefit from foreign exchange. Adjusted EBIT margin was up 10 basis points to 7.6%. Diluted earnings per share from continuing operations on an adjusted basis, a non-GAAP measure, was $2.71 compared to $2.51 in the prior year, up 8%. Diluted earnings per share from continuing operations on a GAAP basis was $2.15 compared to $2.44 in the prior year, down 12%.
“Despite difficult market conditions, Lennox posted improved EBIT margins for both the fourth quarter and full year on strong cost controls and operational execution,” said Todd Bluedorn, Chief Executive Officer. “Our cash generation was strong in 2008 and our free cash flow for the full year was $121 million. For 2009, we reaffirm our outlook provided in December of adjusted earnings per share from continuing operations in the range of $2.10 to $2.50. Our GAAP EPS guidance from continuing operations is now a range of $1.91 to $2.31, reflecting additional restructuring initiatives. While the global slowdown can be seen across our end markets, we continue to lower our cost structure and execute on our strategic priorities.”
(Note: See attached schedules for full financial details, reconciliations of non-GAAP financial measures, and a description of adjusting items.)
FOURTH QUARTER 2008 FINANCIAL HIGHLIGHTS
Revenue:Revenue for the fourth quarter was $746 million, down 15% from the prior year. At constant currency, revenue was down 10%.
Gross Profit:Gross profit in the fourth quarter was $205 million, down 17% from adjusted gross profit of $247 million in the year-ago quarter, which excludes a $17 million favorable warranty adjustment. Adjusted gross margin declined slightly to 27.5% from 28.0% in the year-ago quarter, primarily due to lower volume and higher commodity costs, with offsets from improved pricing and favorable product mix.
Income from Continuing Operations:For the fourth quarter, adjusted income from continuing operations was $29 million, or $0.52 diluted earnings per share, compared to $36 million, or $0.55 diluted earnings per share from continuing operations in the fourth quarter of 2007. On a GAAP basis, fourth quarter 2008 income from continuing operations was $12 million, or $0.21 diluted earnings per share. Fourth quarter 2007 GAAP income from continuing operations was $39 million, with diluted earnings per share of $0.59.
Adjusted income from continuing operations for the fourth quarter of 2008 excludes net after-tax charges of $17.4 million, which are derived from:
| | • | | $7.7 million charge from restructuring activities |
| | • | | $6.9 million charge for impairment of an equity method investment |
| | • | | $2.8 million charge primarily from the net change in unrealized losses on open futures contracts |
FULL YEAR 2008 FINANCIAL HIGHLIGHTS
Revenue:For the full year, revenue was $3.5 billion, down 7% from the prior year. At constant currency, revenue was down 8%.
Gross Profit:Gross profit for the year was $974 million, down 6% from adjusted gross profit of $1,031 million in the prior year, which excludes a $17 million favorable warranty adjustment. Adjusted gross margin increased 40 basis points to 28.0% compared to 27.6% in the prior year, primarily due to improved pricing and favorable product mix.
Income from Continuing Operations:Adjusted income from continuing operations for the full year was $158 million, or $2.71 diluted earnings per share, compared to $174 million, or $2.51 diluted earnings per share in 2007. On a GAAP basis, income from continuing operations was $125 million, or $2.15 diluted earnings per share, compared to $170 million, or $2.44 diluted earnings per share in 2007.
Adjusted income from continuing operations for 2008 excludes net after tax charges of $33.2 million, which are derived from:
| | • | | $20.7 million charge from restructuring activities |
| | • | | $9.1 million charge for impairment of an equity method investment |
| | • | | $3.4 million charge primarily from the net change in unrealized losses on open futures contracts |
Free Cash Flow and Total Debt:Cash generated from operations for the year was $183 million and the company invested $62 million in capital assets, resulting in free cash flow of $121 million versus $170 million in 2007. Total debt as of December 31, 2008 was $420 million. Total cash, cash equivalents and short-term investments were $156 million, and the current ratio exceeded 1.6.
During 2008, the company returned $344 million to shareholders through share repurchases of $311 million and dividend payments of approximately $33 million. The company repurchased 8,907,650 shares during 2008. The company has $285 million remaining of its outstanding $300 million share repurchase program after buying 603,007 shares in the fourth quarter.
BUSINESS SEGMENT FINANCIAL HIGHLIGHTS
Residential Heating and Cooling
| | • | | 4Q08 revenue of $299 million, down 15% from $354 million in the year-ago quarter; down 13% at constant currency |
| | • | | 4Q08 segment profit of $27 million, down 12% from $31 million in 4Q07 |
| | • | | 4Q08 segment profit margin of 9.1%, up 30 basis points from 8.8% in 4Q07 |
| | • | | 2008 revenue of $1.5 billion, down 11% from $1.7 billion in 2007, with and without the effect of foreign exchange |
| | • | | 2008 segment profit of $146 million, down 16% from $174 million in 2007 |
| | • | | 2008 profit margin of 9.8%, down 60 basis points from 10.4% in 2007 |
Fourth quarter and full year results were impacted by lower volume, with offsets from improved pricing, improved product mix, and lower expenses from cost reduction initiatives.
Commercial Heating and Cooling
| | • | | 4Q08 revenue of $189 million, down 16% from $224 million in the year-ago quarter; down 11% at constant currency |
| | • | | 4Q08 segment profit of $20 million, down 17% from $24 million in 4Q07 |
| | • | | 4Q08 segment profit margin of 10.6%, down 30 basis points from 10.9% in 4Q07 |
| | • | | 2008 revenue of $835 million, down 5% from $875 million in 2007; down 7% at constant currency |
| | • | | 2008 segment profit of $93 million, down 8% from $101 million in 2007 |
| | • | | 2008 profit margin of 11.2%, down 30 basis points from 11.5% in 2007 |
Fourth quarter and full year results were impacted by lower volume, with offsets from improved pricing and lower expenses from cost reduction initiatives. Product mix was favorable in the fourth quarter but was relatively flat for the full year.
Service Experts (Continuing Operations)
| | • | | 4Q08 revenue of $145 million, down 13% from $166 million in the year-ago quarter; down 8% at constant currency |
| | • | | 4Q08 segment profit of $8 million, up 11% from $7 million in 4Q07 |
| | • | | 4Q08 segment profit margin of 5.3%, up 110 basis points from 4.2% in 4Q07 |
| | • | | 2008 revenue of $627 million, down 6% from $667 million in 2007, with and without the effect of foreign exchange |
| | • | | 2008 segment profit of $20 million, down 23% from $26 million in 2007 |
| | • | | 2008 profit margin of 3.2%, down 70 basis points from 3.9% in 2007 |
Fourth quarter and full year results were impacted by lower volume, with offsets from improved pricing, favorable business mix, and lower expenses. In the fourth quarter, the company announced plans to exit from seven unprofitable service centers, which became discontinued operations.
Refrigeration
| | • | | 4Q08 revenue of $131 million, down 17% from $158 million in the year-ago quarter; down 4% at constant currency |
| | • | | 4Q08 segment profit of $11 million, down 24% from $15 million in 4Q07 |
| | • | | 4Q08 segment profit margin of 8.6%, down 90 basis points from 9.5% in 4Q07 |
| | • | | 2008 revenue of $618 million, up 2% from $608 million in 2007; down 1% at constant currency |
| | • | | 2008 segment profit of $60 million, down 2% from $62 million in 2007 |
| | • | | 2008 profit margin of 9.7%, down 40 basis points from 10.1% in 2007 |
Fourth quarter and full year results were impacted by lower volume, with offsets from improved pricing and lower expenses from cost reduction initiatives.
2009 FULL YEAR OUTLOOK
The company reaffirms its 2009 outlook originally provided on December 17, 2008, except for a lower GAAP EPS from continuing operations range due to additional restructuring charges expected in the first quarter. The charges relate to the recently announced plans to close the company’s Blackville, South Carolina facility.
| | • | | Revenue down 8-12%, including 5 points of negative foreign exchange impact |
| | • | | Adjusted EPS from continuing operations in the range of $2.10 to $2.50 |
| | • | | GAAP EPS from continuing operations in the range of $1.91 to $2.31, down from prior guidance of $2.05 to $2.45 |
| | • | | Capital expenditures of approximately $80 million |
CONFERENCE CALL INFORMATION
A conference call to discuss the company’s fourth quarter results will be held this morning at 9:30 a.m. (Central). To listen, please call the conference call line at 612-288-0329 at least 10 minutes prior to the scheduled start time and use reservation number 981987. This conference call will also be webcast on Lennox International’s web site at http://www.lennoxinternational.com.
A replay will be available from 12:00 p.m. (Central) February 5 through February 12 by dialing 800-475-6701 (USA) or 320-365-3844 (International) using access code 981987. This call will also be archived on the company’s web site.
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 Steve Harrison, 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 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.
LENNOX INTERNATIONAL INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
For the Three and Twelve Months Ended December 31, 2008 and 2007
(Unaudited, in millions, except per share data)
| | | | | | | | | | | | | | | | | |
| | | For the | | | For the | |
| | | Three Months Ended | | | Twelve Months Ended | |
| | | December 31, | | | December 31, | |
| | | 2008 | | | 2007 | | | 2008 | | | 2007 | |
| | | | | | | | | | | | | | | | | |
| NET SALES | | $ | 746.4 | | | $ | 882.8 | | | $ | 3,481.4 | | | $ | 3,735.3 | |
| COST OF GOODS SOLD | | | 541.5 | | | | 618.7 | | | | 2,507.9 | | | | 2,687.4 | |
| | | | | | | | | | | | | |
| Gross profit | | | 204.9 | | | | 264.1 | | | | 973.5 | | | | 1,047.9 | |
| OPERATING EXPENSES: | | | | | | | | | | | | | | | | |
| Selling, general and administrative expenses | | | 157.4 | | | | 194.8 | | | | 724.4 | | | | 773.4 | |
| Losses (gains) and other expenses, net | | | 2.9 | | | | (1.3 | ) | | | (1.9 | ) | | | (6.7 | ) |
| Restructuring charges | | | 11.5 | | | | 11.0 | | | | 30.4 | | | | 25.2 | |
| Impairment of equity method investment | | | 6.9 | | | | — | | | | 9.1 | | | | — | |
| Income from equity method investments | | | (0.6 | ) | | | (1.7 | ) | | | (8.6 | ) | | | (10.6 | ) |
| | | | | | | | | | | | | |
| Operational income from continuing operations | | | 26.8 | | | | 61.3 | | | | 220.1 | | | | 266.6 | |
| INTEREST EXPENSE, net | | | 3.4 | | | | 2.0 | | | | 13.7 | | | | 6.8 | |
| OTHER (INCOME) EXPENSE, NET | | | (0.1 | ) | | | 0.4 | | | | 0.1 | | | | 0.7 | |
| | | | | | | | | | | | | |
| Income from continuing operations before income taxes | | | 23.5 | | | | 58.9 | | | | 206.3 | | | | 259.1 | |
| PROVISION FOR INCOME TAXES | | | 11.7 | | | | 20.0 | | | | 81.2 | | | | 89.5 | |
| | | | | | | | | | | | | |
| Income from continuing operations | | | 11.8 | | | | 38.9 | | | | 125.1 | | | | 169.6 | |
| DISCONTINUED OPERATIONS | | | | | | | | | | | | | | | | |
| Loss from discontinued operations | | | 2.2 | | | | 0.2 | | | | 3.7 | | | | 0.9 | |
| Income tax benefit | | | (0.8 | ) | | | (0.1 | ) | | | (1.4 | ) | | | (0.3 | ) |
| | | | | | | | | | | | | |
| Loss from discontinued operations | | | 1.4 | | | | 0.1 | | | | 2.3 | | | | 0.6 | |
| | | | | | | | | | | | | |
| Net income | | $ | 10.4 | | | $ | 38.8 | | | $ | 122.8 | | | $ | 169.0 | |
| | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | |
| EARNINGS PER SHARE – BASIC: | | | | | | | | | | | | | | | | |
| Income from continuing operations | | $ | 0.22 | | | $ | 0.61 | | | $ | 2.21 | | | $ | 2.56 | |
| Loss from discontinued operations | | | (0.03 | ) | | | — | | | | (0.04 | ) | | | (0.01 | ) |
| | | | | | | | | | | | | |
| Net income | | $ | 0.19 | | | $ | 0.61 | | | $ | 2.17 | | | $ | 2.55 | |
| | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | |
| EARNINGS PER SHARE – DILUTED: | | | | | | | | | | | | | | | | |
| Income from continuing operations | | $ | 0.21 | | | $ | 0.59 | | | $ | 2.15 | | | $ | 2.44 | |
| Loss from discontinued operations | | | (0.03 | ) | | | — | | | | (0.04 | ) | | | (0.01 | ) |
| | | | | | | | | | | | | |
| Net income | | $ | 0.18 | | | $ | 0.59 | | | $ | 2.11 | | | $ | 2.43 | |
| | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | |
| AVERAGE SHARES OUTSTANDING: | | | | | | | | | | | | | | | | |
| Basic | | | 55.3 | | | | 63.4 | | | | 56.7 | | | | 66.4 | |
| Diluted | | | 56.7 | | | | 66.3 | | | | 58.3 | | | | 69.4 | |
| | | | | | | | | | | | | | | | | |
| CASH DIVIDENDS DECLARED PER SHARE | | $ | 0.14 | | | $ | 0.14 | | | $ | 0.56 | | | $ | 0.53 | |
LENNOX INTERNATIONAL INC. AND SUBSIDIARIES
SEGMENT NET SALES AND PROFIT
For the Three Months and Twelve Months Ended December 31, 2008 and 2007
(Unaudited, in millions)
| | | | | | | | | | | | | | | | | |
| | | For the | | | For the | |
| | | Three Months Ended | | | Twelve Months Ended | |
| | | December 31, | | | December 31, | |
| | | 2008 | | | 2007 | | | 2008 | | | 2007 | |
Net Sales | | | | | | | | | | | | | | | | |
| Residential Heating & Cooling | | $ | 299.4 | | | $ | 354.1 | | | $ | 1,493.4 | | | $ | 1,669.6 | |
| Commercial Heating & Cooling | | | 189.2 | | | | 224.4 | | | | 835.3 | | | | 875.0 | |
| Service Experts | | | 144.5 | | | | 165.7 | | | | 626.6 | | | | 667.1 | |
| Refrigeration | | | 131.5 | | | | 157.6 | | | | 618.2 | | | | 607.7 | |
| Eliminations (A) | | | (18.2 | ) | | | (19.0 | ) | | | (92.1 | ) | | | (84.1 | ) |
| | | | | | | | | | | | | |
| | | $ | 746.4 | | | $ | 882.8 | | | $ | 3,481.4 | | | $ | 3,735.3 | |
| | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | |
Segment Profit (Loss)(B) | | | | | | | | | | | | | | | | |
| Residential Heating & Cooling | | $ | 27.3 | | | $ | 31.2 | | | $ | 145.8 | | | $ | 174.4 | |
| Commercial Heating & Cooling | | | 20.1 | | | | 24.4 | | | | 93.3 | | | | 101.0 | |
| Service Experts | | | 7.7 | | | | 6.9 | | | | 20.0 | | | | 26.1 | |
| Refrigeration | | | 11.3 | | | | 14.9 | | | | 60.2 | | | | 61.5 | |
| Corporate and other | | | (16.7 | ) | | | (20.9 | ) | | | (53.8 | ) | | | (85.0 | ) |
| Eliminations (A) | | | — | | | | 0.8 | | | | (0.6 | ) | | | 0.6 | |
| | | | | | | | | | | | | |
| Subtotal that includes segment profit and eliminations | | | 49.7 | | | | 57.3 | | | | 264.9 | | | | 278.6 | |
| Reconciliation to income from continuing operations: | | | | | | | | | | | | | | | | |
| Warranty program adjustment | | | — | | | | (16.9 | ) | | | — | | | | (16.9 | ) |
| Losses (gains) and other expenses, net of gain on sale of fixed assets | | | 7.5 | | | | (1.3 | ) | | | 3.0 | | | | (6.4 | ) |
| Restructuring charges | | | 11.5 | | | | 11.0 | | | | 30.4 | | | | 25.2 | |
| Impairment of equity investment | | | 6.9 | | | | — | | | | 9.1 | | | | — | |
| Interest expense, net | | | 3.4 | | | | 2.0 | | | | 13.7 | | | | 6.8 | |
| Other (income) expense, net | | | (0.1 | ) | | | 0.4 | | | | 0.1 | | | | 0.7 | |
| | | | | | | | | | | | | | | | | |
| Less: Realized (losses) gains on settled futures contracts | | | (1.9 | ) | | | 0.7 | | | | (0.9 | ) | | | 3.9 | |
| Less: Foreign currency exchange (losses) gains | | | (1.1 | ) | | | 2.5 | | | | 3.2 | | | | 6.2 | |
| | | | | | | | | | | | | |
| | | $ | 23.5 | | | $ | 58.9 | | | $ | 206.3 | | | $ | 259.1 | |
| | | | | | | | | | | | | |
| | | |
| (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 and loss as a segment’s income or loss from continuing operations before income taxes included in the accompanying Consolidated Statements of Operations: |
Excluding:
| | • | | Gains and/or losses and other expenses, net except for gains and/or losses on the sale of fixed assets. |
| |
| | • | | Restructuring charges. |
| |
| | • | | Goodwill and equity method investment impairments. |
| |
| | • | | Interest expense, net. |
| |
| | • | | Other expense, net. |
Less amounts included in Losses (Gains) and Other Expenses, net:
| | • | | Realized gains and/or losses on settled futures contracts. |
| |
| | • | | Foreign currency exchange gains and/or losses. |
LENNOX INTERNATIONAL INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
As of December 31, 2008 and 2007
(In millions, except share and per share data)
| | | | | | | | | |
| | | 2008 | | | 2007 | |
| | | (Unaudited) | | | | |
| ASSETS | |
| CURRENT ASSETS: | | | | | | | | |
| Cash and cash equivalents | | $ | 122.1 | | | $ | 145.5 | |
| Short-term investments | | | 33.4 | | | | 27.7 | |
| Accounts and notes receivable, net | | | 369.6 | | | | 492.0 | |
| Inventories, net | | | 298.3 | | | | 325.2 | |
| Deferred income taxes | | | 24.2 | | | | 30.9 | |
| Other assets | | | 87.4 | | | | 49.4 | |
| | | | | | | |
| Total current assets | | | 935.0 | | | | 1,070.7 | |
| PROPERTY, PLANT AND EQUIPMENT, net | | | 329.5 | | | | 317.8 | |
| GOODWILL, net | | | 232.3 | | | | 262.8 | |
| DEFERRED INCOME TAXES | | | 113.5 | | | | 94.0 | |
| OTHER ASSETS | | | 49.2 | | | | 69.3 | |
| | | | | | | |
| TOTAL ASSETS | | $ | 1,659.5 | | | $ | 1,814.6 | |
| | | | | | | |
| | | | | | | | | |
| LIABILITIES AND STOCKHOLDERS’ EQUITY | |
| CURRENT LIABILITIES: | | | | | | | | |
| Short-term debt | | $ | 6.1 | | | $ | 4.8 | |
| Current maturities of long-term debt | | | 0.6 | | | | 36.4 | |
| Accounts payable | | | 234.5 | | | | 289.2 | |
| Accrued expenses | | | 331.1 | | | | 352.7 | |
| Income taxes payable | | | 3.7 | | | | 1.1 | |
| | | | | | | |
| Total current liabilities | | | 576.0 | | | | 684.2 | |
| LONG-TERM DEBT | | | 413.7 | | | | 166.7 | |
| POSTRETIREMENT BENEFITS, OTHER THAN PENSIONS | | | 12.5 | | | | 16.2 | |
| PENSIONS | | | 107.7 | | | | 34.8 | |
| OTHER LIABILITIES | | | 91.0 | | | | 104.2 | |
| | | | | | | |
| Total liabilities | | | 1,200.9 | | | | 1,006.1 | |
| | | | | | | | | |
| 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, 84,215,904 shares and 81,897,439 shares issued for 2008 and 2007, respectively | | | 0.8 | | | | 0.8 | |
| Additional paid-in capital | | | 805.6 | | | | 760.7 | |
| Retained earnings | | | 538.8 | | | | 447.4 | |
| Accumulated other comprehensive (loss) income | | | (98.8 | ) | | | 63.6 | |
| Treasury stock, at cost, 29,109,058 shares and 19,844,677 shares for 2008 and 2007, respectively | | | (787.8 | ) | | | (464.0 | ) |
| | | | | | | |
| Total stockholders’ equity | | | 458.6 | | | | 808.5 | |
| | | | | | | |
| TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY | | $ | 1,659.5 | | | $ | 1,814.6 | |
| | | | | | | |
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 Income From Continuing Operations to Adjusted Income From Continuing Operations
| | | | | | | | | | | | | | | | | | | | | |
| | | For the Three Months Ended December 31, 2008 | |
| | | | | | | Net Change in | | | | | | | | | | | |
| | | | | | | Unrealized | | | | | | | | | | | |
| | | | | | | Losses on | | | | | | | | | | | |
| | | | | | | Open Futures | | | | | | | Impairment | | | | |
| | | | | | | Contracts and | | | | | | | of Equity | | | | |
| | | As | | | Other Items, | | | Restructuring | | | Method | | | As | |
| | | Reported | | | Net | | | Charges | | | Investment | | | Adjusted | |
| NET SALES | | $ | 746.4 | | | $ | — | | | $ | — | | | $ | — | | | $ | 746.4 | |
| COST OF GOODS SOLD | | | 541.5 | | | | — | | | | — | | | | — | | | | 541.5 | |
| | | | | | | | | | | | | | | | |
| Gross profit | | | 204.9 | | | | — | | | | — | | | | — | | | | 204.9 | |
| OPERATING EXPENSES: | | | | | | | | | | | | | | | | | | | | |
| Selling, general and administrative expenses | | | 157.4 | | | | — | | | | — | | | | — | | | | 157.4 | |
Losses (gains) and other expenses, net1 | | | 2.9 | | | | (4.5 | ) | | | — | | | | — | | | | (1.6 | ) |
| Restructuring charges | | | 11.5 | | | | — | | | | (11.5 | ) | | | — | | | | — | |
| Impairment of equity method investment | | | 6.9 | | | | — | | | | — | | | | (6.9 | ) | | | — | |
| Income from equity method investments | | | (0.6 | ) | | | — | | | | — | | | | — | | | | (0.6 | ) |
| | | | | | | | | | | | | | | | |
| Operational income from continuing operations | | | 26.8 | | | | 4.5 | | | | 11.5 | | | | 6.9 | | | | 49.7 | |
| INTEREST EXPENSE, net | | | 3.4 | | | | — | | | | — | | | | — | | | | 3.4 | |
| OTHER EXPENSE, NET | | | (0.1 | ) | | | — | | | | — | | | | — | | | | (0.1 | ) |
| | | | | | | | | | | | | | | | |
| Income from continuing operations before income taxes | | | 23.5 | | | | 4.5 | | | | 11.5 | | | | 6.9 | | | | 46.4 | |
| PROVISION FOR INCOME TAXES | | | 11.7 | | | | 1.7 | | | | 3.8 | | | | — | | | | 17.2 | |
| | | | | | | | | | | | | | | | |
| Income from continuing operations | | $ | 11.8 | | | $ | 2.8 | | | $ | 7.7 | | | $ | 6.9 | | | $ | 29.2 | |
| | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | |
| INCOME PER SHARE FROM CONTINUING OPERATIONS – DILUTED | | $ | 0.21 | | | $ | 0.05 | | | $ | 0.14 | | | $ | 0.12 | | | $ | 0.52 | |
| | | | | | | | | | | | | | | | |
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 period-over-period changes in operating income with and without the effects of certain losses (gains) and other expenses, net, restructuring charges, warranty program adjustment, certain tax items and impairment of equity method investment. Management believes that excluding these effects is helpful in assessing the overall performance of the Company.
| | | |
| 1 | | Losses (gains) and other expenses, net include the following: |
| | | | | | | | | | | | | |
| | | For the Three Months Ended December 31, 2008 | |
| | | Pre-tax | | | Tax (Benefit) | | | After-tax Loss | |
| | | Loss (Gain) | | | Provision | | | (Gain) | |
| Realized losses on settled futures contracts | | | 1.9 | | | | (0.7 | ) | | | 1.2 | |
| Net change in unrealized losses on open futures contracts | | | 4.6 | | | | (1.7 | ) | | | 2.9 | |
| Foreign currency exchange loss | | | 1.1 | | | | (0.4 | ) | | | 0.7 | |
| Gain on disposal of fixed assets, net | | | (4.6 | ) | | | 0.7 | | | | (3.9 | ) |
| Other items, net | | | (0.1 | ) | | | — | | | | (0.1 | ) |
| | | | | | | | | | |
| Losses (gains) and other expenses, net | | $ | 2.9 | | | $ | (2.1 | ) | | $ | 0.8 | |
| | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | |
| | | For the Three Months Ended December 31, 2007 | |
| | | | | | | Net Change in | | | | | | | | | | | |
| | | | | | | Unrealized | | | | | | | | | | | |
| | | | | | | Losses on | | | | | | | | | | | |
| | | | | | | Open Futures | | | | | | | | | | | |
| | | | | | | Contracts and | | | | | | | Warranty | | | | |
| | | As | | | Other Items, | | | Restructuring | | | Program | | | As | |
| | | Reported | | | Net | | | Charges | | | Adjustment | | | Adjusted | |
| NET SALES | | $ | 882.8 | | | $ | — | | | $ | — | | | $ | — | | | $ | 882.8 | |
| COST OF GOODS SOLD | | | 618.7 | | | | — | | | | — | | | | 16.9 | | | | 635.6 | |
| | | | | | | | | | | | | | | | |
| Gross profit (loss) | | | 264.1 | | | | — | | | | — | | | | (16.9 | ) | | | 247.2 | |
| OPERATING EXPENSES: | | | | | | | | | | | | | | | | | | | | |
| Selling, general and administrative expenses | | | 194.8 | | | | — | | | | — | | | | — | | | | 194.8 | |
Gains and other expenses, net2 | | | (1.3 | ) | | | (1.9 | ) | | | — | | | | — | | | | (3.2 | ) |
| Restructuring charges | | | 11.0 | | | | — | | | | (11.0 | ) | | | — | | | | — | |
| Income from equity method investments | | | (1.7 | ) | | | — | | | | — | | | | — | | | | (1.7 | ) |
| | | | | | | | | | | | | | | | |
| Operational income (loss) from continuing operations | | | 61.3 | | | | 1.9 | | | | 11.0 | | | | (16.9 | ) | | | 57.3 | |
| INTEREST EXPENSE, net | | | 2.0 | | | | — | | | | — | | | | — | | | | 2.0 | |
| OTHER EXPENSE, NET | | | 0.4 | | | | — | | | | — | | | | — | | | | 0.4 | |
| | | | | | | | | | | | | | | | |
| Income (loss) from continuing operations before income taxes | | | 58.9 | | | | 1.9 | | | | 11.0 | | | | (16.9 | ) | | | 54.9 | |
| PROVISION FOR (BENEFIT FROM) INCOME TAXES | | | 20.0 | | | | 0.8 | | | | 4.1 | | | | (6.4 | ) | | | 18.5 | |
| | | | | | | | | | | | | | | | |
| Income (loss) from continuing operations | | $ | 38.9 | | | $ | 1.1 | | | $ | 6.9 | | | $ | (10.5 | ) | | $ | 36.4 | |
| | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | |
| INCOME (LOSS) PER SHARE FROM CONTINUING OPERATIONS – DILUTED | | $ | 0.59 | | | $ | 0.02 | | | $ | 0.10 | | | $ | (0.16 | ) | | $ | 0.55 | |
| | | | | | | | | | | | | | | | |
| | | |
| 2 | | Gains and other expenses, net include the following: |
| | | | | | | | | | | | | |
| | | For the Three Months Ended December 31, 2007 | |
| | | Pre-tax | | | Tax Provision | | | After-tax (Gain) | |
| | | (Gain) Loss | | | (Benefit) | | | Loss | |
| Realized gains on settled futures contracts | | $ | (0.7 | ) | | $ | 0.2 | | | $ | (0.5 | ) |
| Net change in unrealized losses on open futures contracts | | | 2.2 | | | | (0.8 | ) | | | 1.4 | |
| Foreign currency exchange gain | | | (2.5 | ) | | | 0.7 | | | | (1.8 | ) |
| Other items, net | | | (0.3 | ) | | | — | | | | (0.3 | ) |
| | | | | | | | | | |
| Gains and other expenses, net | | $ | (1.3 | ) | | $ | 0.1 | | | $ | (1.2 | ) |
| | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | |
| | | For the Year Ended December 31, 2008 | |
| | | | | | | Net Change in | | | | | | | | | | | |
| | | | | | | Unrealized | | | | | | | | | | | |
| | | | | | | Losses on | | | | | | | | | | | |
| | | | | | | Open Futures | | | | | | | Impairment | | | | |
| | | | | | | Contracts and | | | | | | | of Equity | | | | |
| | | As | | | Other Items, | | | Restructuring | | | Method | | | As | |
| | | Reported | | | Net | | | Charges | | | Investment | | | Adjusted | |
| NET SALES | | $ | 3,481.4 | | | $ | — | | | $ | — | | | $ | — | | | $ | 3,481.4 | |
| COST OF GOODS SOLD | | | 2,507.9 | | | | — | | | | — | | | | — | | | | 2,507.9 | |
| | | | | | | | | | | | | | | | |
| Gross profit | | | 973.5 | | | | — | | | | — | | | | — | | | | 973.5 | |
| OPERATING EXPENSES: | | | | | | | | | | | | | | | | | | | | |
| Selling, general and administrative expenses | | | 724.4 | | | | — | | | | — | | | | — | | | | 724.4 | |
Gains and other expenses, net3 | | | (1.9 | ) | | | (5.2 | ) | | | — | | | | — | | | | (7.1 | ) |
| Restructuring charges | | | 30.4 | | | | — | | | | (30.4 | ) | | | — | | | | — | |
| Impairment of equity method investment | | | 9.1 | | | | — | | | | — | | | | (9.1 | ) | | | — | |
| Income from equity method investments | | | (8.6 | ) | | | — | | | | — | | | | — | | | | (8.6 | ) |
| | | | | | | | | | | | | | | | |
| Operational income from continuing operations | | | 220.1 | | | | 5.2 | | | | 30.4 | | | | 9.1 | | | | 264.8 | |
| INTEREST EXPENSE, net | | | 13.7 | | | | — | | | | — | | | | — | | | | 13.7 | |
| OTHER EXPENSE, NET | | | 0.1 | | | | — | | | | — | | | | — | | | | 0.1 | |
| | | | | | | | | | | | | | | | |
| Income from continuing operations before income taxes | | | 206.3 | | | | 5.2 | | | | 30.4 | | | | 9.1 | | | | 251.0 | |
| PROVISION FOR INCOME TAXES | | | 81.2 | | | | 1.8 | | | | 9.7 | | | | — | | | | 92.7 | |
| | | | | | | | | | | | | | | | |
| Income from continuing operations | | $ | 125.1 | | | $ | 3.4 | | | $ | 20.7 | | | $ | 9.1 | | | $ | 158.3 | |
| | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | |
| INCOME PER SHARE FROM CONTINUING OPERATIONS – DILUTED | | $ | 2.15 | | | $ | 0.05 | | | $ | 0.35 | | | $ | 0.16 | | | $ | 2.71 | |
| | | | | | | | | | | | | | | | |
| | | |
| 3 | | Gains and other expenses, net include the following: |
| | | | | | | | | | | | | |
| | | For the Year Ended December 31, 2008 | |
| | | Pre-tax Loss | | | Tax (Benefit) | | | After-tax | |
| | | (Gain) | | | Provision | | | Loss (Gain) | |
| Realized losses on settled futures contracts | | $ | 0.9 | | | $ | (0.3 | ) | | $ | 0.6 | |
| Net change in unrealized losses on open futures contracts | | | 5.1 | | | | (1.8 | ) | | | 3.3 | |
| Foreign currency exchange gain | | | (3.2 | ) | | | (0.3 | ) | | | (3.5 | ) |
| Gain on disposal of fixed assets, net | | | (4.8 | ) | | | 0.6 | | | | (4.2 | ) |
| Other items, net | | | 0.1 | | | | — | | | | 0.1 | |
| | | | | | | | | | |
| Gains and other expenses, net | | $ | (1.9 | ) | | $ | (1.8 | ) | | $ | (3.7 | ) |
| | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | |
| | | For the Year Ended December 31, 2007 | |
| | | | | | | Net Change in | | | | | | | | | | | |
| | | | | | | Unrealized | | | | | | | | | | | |
| | | | | | | Losses on | | | | | | | Warranty | | | | |
| | | | | | | Open Futures | | | | | | | Program | | | | |
| | | | | | | Contracts and | | | | | | | Adjustment | | | | |
| | | As | | | Other Items, | | | Restructuring | | | and Income | | | As | |
| | | Reported | | | Net | | | Charges | | | Tax Items5 | | | Adjusted | |
| NET SALES | | $ | 3,735.3 | | | $ | — | | | $ | — | | | $ | — | | | $ | 3,735.3 | |
| COST OF GOODS SOLD | | | 2,687.4 | | | | — | | | | — | | | | 16.9 | | | | 2,704.3 | |
| | | | | | | | | | | | | | | | |
| Gross profit (loss) | | | 1,047.9 | | | | — | | | | — | | | | (16.9 | ) | | | 1,031.0 | |
| OPERATING EXPENSES: | | | | | | | | | | | | | | | | | | | | |
| Selling, general and administrative expenses | | | 773.4 | | | | — | | | | — | | | | — | | | | 773.4 | |
Gains and other expenses, net4 | | | (6.7 | ) | | | (3.7 | ) | | | — | | | | — | | | | (10.4 | ) |
| Restructuring charges | | | 25.2 | | | | — | | | | (25.2 | ) | | | — | | | | — | |
| Income from equity method investments | | | (10.6 | ) | | | — | | | | — | | | | — | | | | (10.6 | ) |
| | | | | | | | | | | | | | | | |
| Operational income (loss) from continuing operations | | | 266.6 | | | | 3.7 | | | | 25.2 | | | | (16.9 | ) | | | 278.6 | |
| INTEREST EXPENSE, net | | | 6.8 | | | | — | | | | — | | | | — | | | | 6.8 | |
| OTHER EXPENSE, NET | | | 0.7 | | | | — | | | | — | | | | — | | | | 0.7 | |
| | | | | | | | | | | | | | �� | | |
| Income (loss) from continuing operations before income taxes | | | 259.1 | | | | 3.7 | | | | 25.2 | | | | (16.9 | ) | | | 271.1 | |
| PROVISION FOR (BENEFIT FROM) INCOME TAXES | | | 89.5 | | | | 1.2 | | | | 9.4 | | | | (3.2 | ) | | | 96.9 | |
| | | | | | | | | | | | | | | | |
| Income (loss) from continuing operations | | $ | 169.6 | | | $ | 2.5 | | | $ | 15.8 | | | $ | (13.7 | ) | | $ | 174.2 | |
| | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | |
| INCOME (LOSS) PER SHARE FROM CONTINUING OPERATIONS – DILUTED | | $ | 2.44 | | | $ | 0.04 | | | $ | 0.23 | | | $ | (0.20 | ) | | $ | 2.51 | |
| | | | | | | | | | | | | | | | |
| | | |
| 4 | | Gains and other expenses, net include the following: |
| | | | | | | | | | | | | |
| | | For the Year Ended December 31, 2007 | |
| | | | | | | Tax | | | | |
| | | Pre-tax (Gain) | | | Provision | | | After-tax (Gain) | |
| | | Loss | | | (Benefit) | | | Loss | |
| Realized gains on settled futures contracts | | $ | (3.9 | ) | | $ | 1.3 | | | $ | (2.6 | ) |
| Net change in unrealized losses on open futures contracts | | | 3.3 | | | | (1.2 | ) | | | 2.1 | |
| Foreign currency exchange gain | | | (6.2 | ) | | | 2.1 | | | | (4.1 | ) |
| Gain on disposal of fixed assets, net | | | (0.3 | ) | | | 0.1 | | | | (0.2 | ) |
| Other items, net | | | 0.4 | | | | — | | | | 0.4 | |
| | | | | | | | | | |
| Gains and other expenses, net | | $ | (6.7 | ) | | $ | 2.3 | | | $ | (4.4 | ) |
| | | | | | | | | | |
| | | |
| 5 | | Warranty program adjustment and income tax items include the following: |
| | | | | | | | | | | | | |
| | | For the Year Ended December 31, 2007 | |
| | | | | | | Tax | | | | |
| | | Pre-tax | | | Provision | | | After-tax | |
| | | Gain | | | (Benefit) | | | Gain | |
| Warranty program adjustment | | $ | (16.9 | ) | | $ | 6.4 | | | $ | (10.5 | ) |
| Change in estimated tax gain from prior year | | | — | | | | (3.2 | ) | | | (3.2 | ) |
| | | | | | | | | | |
| | | $ | (16.9 | ) | | $ | 3.2 | | | $ | (13.7 | ) |
| | | | | | | | | | |
Reconciliation of Estimated Adjusted to GAAP Income per Share from Continuing Operations – Diluted
| | | | | |
| | | For the Year | |
| | | Ended | |
| | | December 31, 2009 | |
| | | ESTIMATED | |
| Adjusted income per share from continuing operations – diluted | | $2.10 - $2.50 | |
| Restructuring charges | | (0.22) | |
| Net change in unrealized gains on open futures contracts | | 0.03 | |
| | | | |
| GAAP income per share from continuing operations – diluted | | $1.91 - $2.31 | |
| | | | |
Free Cash Flow
| | | | | | | | | |
| | | For the Three Months | | | For the Three Months | |
| | | Ended | | | Ended | |
| | | December 31, 2008 | | | December 31, 2007 | |
| Net cash provided by operating activities | | $ | 43.4 | | | $ | 128.2 | |
| Purchase of property, plant and equipment | | | (23.8 | ) | | | (24.5 | ) |
| | | | | | | |
| Free cash flow | | $ | 19.6 | | | $ | 103.7 | |
| | | | | | | |
| | | | | | | | | |
| | | For the Year | | | For the Year | |
| | | Ended | | | Ended | |
| | | December 31, 2008 | | | December 31, 2007 | |
| Net cash provided by operating activities | | $ | 183.2 | | | $ | 239.9 | |
| Purchase of property, plant and equipment | | | (62.1 | ) | | | (70.2 | ) |
| | | | | | | |
| Free cash flow | | $ | 121.1 | | | $ | 169.7 | |
| | | | | | | |
Operational Working Capital
| | | | | | | | | | | | | | | | | |
| | | | | | | December 31, | | | | | | | December 31, | |
| | | | | | | 2008 | | | | | | | 2007 | |
| | | December 31, | | | Trailing | | | December 31, | | | Trailing | |
| | | 2008 | | | 12 Mo. Avg. | | | 2007 | | | 12 Mo. Avg. | |
| Accounts and Notes Receivable, Net | | $ | 369.6 | | | | | | | $ | 492.0 | | | | | |
| Asset Securitization | | | 30.0 | | | | | | | | — | | | | | |
| Allowance for Doubtful Accounts | | | 18.6 | | | | | | | | 17.1 | | | | | |
| | | | | | | | | | | | | | | |
| Accounts and Notes Receivable, Gross | | | 418.2 | | | $ | 528.0 | | | | 509.1 | | | $ | 579.8 | |
| | | | | | | | | | | | | | | | | |
| Inventories | | | 298.3 | | | | | | | | 325.2 | | | | | |
| Excess of Current Cost Over Last-in, First-out | | | 75.8 | | | | | | | | 70.4 | | | | | |
| | | | | | | | | | | | | | | |
| Inventories as Adjusted | | | 374.1 | | | | 430.7 | | | | 395.6 | | | | 445.1 | |
| | | | | | | | | | | | | | | | | |
| Accounts Payable | | | (234.5 | ) | | | (324.4 | ) | | | (289.2 | ) | | | (340.1 | ) |
| | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | |
| Operating Working Capital (a) | | | 557.8 | | | | 634.3 | | | | 615.5 | | | | 684.8 | |
| | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | |
| Net Sales, Trailing Twelve Months (b) | | | 3,481.4 | | | | 3,481.4 | | | | 3,735.3 | | | | 3,735.3 | |
| | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | |
| Operational Working Capital Ratio (a/b) | | | 16.0 | % | | | 18.2 | % | | | 16.5 | % | | | 18.3 | % |
| | | | | | | | | | | | | |
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.
