================================================================================ UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D. C. 20549 FORM 10-Q (MARK ONE) [X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE QUARTERLY PERIOD ENDED SEPTEMBER 30, 2000 OR [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from ________ to ________ Commission file number 001-15149 LENNOX INTERNATIONAL INC. (Exact name of registrant as specified in its charter) DELAWARE 42-0991521 (State or other jurisdiction (I.R.S. Employer of incorporation or organization) Identification No.) 2140 LAKE PARK BLVD. RICHARDSON, TEXAS 75080 - -------------------------------------------------------------------------------- (Address of principal executive offices) (Zip Code) (972) 497-5000 - -------------------------------------------------------------------------------- (Registrant's telephone number, including area code) Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. YES X NO ____ --------- As of October 31, 2000, the number of shares outstanding of the registrant's common stock, par value $.01 per share, was 55,509,455. 1
LENNOX INTERNATIONAL INC. INDEX Page No. Part I. Financial Information Item 1. Financial Statements Consolidated Balance Sheets - September 30, 2000 (Unaudited) and December 31, 1999 3 Consolidated Statements of Income (Unaudited) - Three Months and Nine Months Ended September 30, 2000 and 1999 4 Consolidated Statements of Cash Flows (Unaudited) - Nine Months Ended September 30, 2000 and 1999 5 Notes to Consolidated Financial Statements (Unaudited) 6 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations 11 Item 3. Quantitative and Qualitative Disclosures About Market Risk 17 Part II. Other Information Item 6. Exhibits and Reports on Form 8-K 19 2
PART I -- FINANCIAL INFORMATION ITEM 1. FINANCIAL STATEMENTS. LENNOX INTERNATIONAL INC. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS As of September 30, 2000 and December 31, 1999 (In thousands, except share data) <TABLE> <CAPTION> ASSETS September 30, December 31, 2000 1999 ---- ---- (unaudited) CURRENT ASSETS: <S> <C> <C> Cash and cash equivalents $ 45,473 $ 29,174 Accounts and notes receivable, net 475,360 443,107 Inventories 380,427 345,424 Deferred income taxes 36,551 25,367 Other assets 43,783 44,526 ----------- ----------- Total current assets 981,594 887,598 INVESTMENTS IN JOINT VENTURES 12,264 12,434 PROPERTY, PLANT AND EQUIPMENT, net 355,642 329,966 GOODWILL, net 676,618 394,252 OTHER ASSETS 53,697 59,423 ----------- ----------- TOTAL ASSETS $ 2,079,815 $ 1,683,673 =========== =========== LIABILITIES AND STOCKHOLDER'S EQUITY CURRENT LIABILITIES: Short-term debt $ 30,645 $ 22,219 Current maturities of long-term debt 37,763 34,554 Accounts payable 241,597 196,143 Accrued expenses 258,155 200,221 Income taxes payable 8,406 9,859 ----------- ----------- Total current liabilities 576,566 462,996 LONG-TERM DEBT 670,233 520,276 DEFERRED INCOME TAXES 500 928 POSTRETIREMENT BENEFITS, OTHER THAN PENSIONS 14,725 15,125 OTHER LIABILITIES 73,377 72,377 ----------- ----------- Total liabilities 1,335,401 1,071,702 MINORITY INTEREST 2,010 14,075 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, 59,719,869 shares and 46,161,607 shares issued for 2000 and 1999, respectively 597 462 Additional paid-in capital 367,442 215,523 Retained earnings 443,993 409,851 Accumulated other comprehensive loss (41,928) (12,706) Deferred compensation (3,400) (2,848) Treasury stock, at cost, 2,474,784 and 1,172,200 shares for 2000 and 1999, respectively (24,300) (12,386) ----------- ------------ Total stockholders' equity 742,404 597,896 ----------- ------------ TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 2,079,815 $ 1,683,673 =========== =========== </TABLE> The accompanying notes are an integral part of these consolidated financial statements. 3
LENNOX INTERNATIONAL INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF INCOME For the Three Months and Nine Months Ended September 30, 2000 and 1999 (Unaudited, in thousands, except per share data) <TABLE> <CAPTION> For the For the Three Months Ended Nine Months Ended September 30, September 30, -------------------- ------------------- 2000 1999 2000 1999 ---- ---- ---- ---- <S> <C> <C> <C> <C> NET SALES $ 857,618 $ 669,053 $ 2,468,142 $ 1,749,953 COST OF GOODS SOLD 583,613 456,611 1,667,042 1,199,611 ----------- ----------- ----------- ----------- Gross Profit 274,005 212,442 801,100 550,342 OPERATING EXPENSES: Selling, general and administrative 238,276 157,813 672,164 429,015 ----------- ----------- ----------- ----------- Income from operations 35,729 54,629 128,936 121,327 INTEREST EXPENSE, net 13,968 9,093 41,960 24,193 OTHER 497 378 1,243 (403) MINORITY INTEREST 88 832 (427) 212 ----------- ----------- ----------- ----------- Income before income taxes 21,176 44,326 86,160 97,325 PROVISION FOR INCOME TAXES 8,790 17,042 35,757 39,840 ----------- ----------- ----------- ----------- Net income $ 12,386 $ 27,284 $ 50,403 $ 57,485 =========== =========== =========== =========== EARNINGS PER SHARE: Basic $ 0.22 $ 0.65 $ 0.90 $ 1.52 Diluted $ 0.22 $ 0.64 $ 0.89 $ 1.48 </TABLE> The accompanying notes are an integral part of these consolidated financial statements. 4
LENNOX INTERNATIONAL INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS For the Nine Months Ended September 30, 2000 and 1999 (Unaudited, in thousands) <TABLE> <CAPTION> For the Nine Months Ended September 30, --------------- 2000 1999 ---- ---- CASH FLOWS FROM OPERATING ACTIVITIES: <S> <C> <C> Net income $ 50,403 $ 57,485 Adjustments to reconcile net income to net cash provided by operating activities - Minority interest (427) 212 Joint venture losses 1,106 2,409 Depreciation and amortization 65,018 41,825 Loss on disposal of equipment 1,297 701 Other (220) (994) Changes in assets and liabilities, net of effects of acquisitions - Accounts and notes receivable 24,477 (94,086) Inventories (17,725) (11,873) Other current assets (217) (3,682) Accounts payable 12,361 18,718 Accrued expenses 16,333 (9,946) Deferred income taxes (5,390) 2,184 Income taxes payable and receivable 2,679 17,014 Long-term warranty, deferred income and other liabilities 1,067 (2,559) --------- --------- Net cash provided by operating activities 150,762 17,408 CASH FLOWS FROM INVESTING ACTIVITIES: Proceeds from the disposal of property, plant and equipment 2,454 746 Purchases of property, plant and equipment (39,749) (53,203) Investment in joint ventures (1,029) (567) Acquisitions, net of cash acquired (227,236) (226,127) Proceeds from sale of business -- 5,490 --------- --------- Net cash used in investing activities (265,560) (273,661) CASH FLOWS FROM FINANCING ACTIVITIES: Proceeds from revolving short-term debt 11,697 96,554 Proceeds from revolving long-term debt 106,323 43,917 Proceeds from new long-term debt 60,000 -- Repayment of long-term debt (14,564) (2,619) Proceeds from issuance of common stock 790 141,799 Repurchases of common stock (15,532) (152) Cash dividends paid (16,263) (9,924) --------- --------- Net cash provided by financing activities 132,451 269,575 INCREASE IN CASH AND CASH EQUIVALENTS 17,653 13,322 EFFECT OF EXCHANGE RATES ON CASH AND CASH EQUIVALENTS (1,354) (589) --------- --------- CASH AND CASH EQUIVALENTS, beginning of period 29,174 28,389 --------- --------- CASH AND CASH EQUIVALENTS, end of period $ 45,473 $ 41,122 ========= ========= Supplementary disclosures of cash flow information: Cash paid during the period for: Interest $ 39,460 $ 20,830 ========= ========= Income taxes $ 41,727 $ 21,637 ========= ========= </TABLE> The accompanying notes are an integral part of these consolidated financial statements. 5
LENNOX INTERNATIONAL INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (unaudited) 1. BASIS OF PRESENTATION AND OTHER ACCOUNTING INFORMATION: The accompanying unaudited consolidated balance sheet as of September 30, 2000, and the consolidated statements of income for the three months and nine months ended September 30, 2000 and 1999 and the consolidated statements of cash flows for the nine months ended September 30, 2000 and 1999 should be read in conjunction with Lennox International Inc.'s (the "Company") consolidated financial statements and the accompanying footnotes as of December 31, 1999 and 1998 and for each of the three years in the period ended December 31, 1999. In the opinion of management, the accompanying consolidated financial statements contain all material adjustments, consisting principally of normal recurring adjustments, necessary for a fair presentation of the Company's financial position, results of operations, and cash flows. Certain information and footnote disclosures normally included in financial statements prepared in accordance with generally accepted accounting principles have been condensed or omitted pursuant to applicable rules and regulations, although the Company believes that the disclosures herein are adequate to make the information presented not misleading. The operating results for the interim periods are not necessarily indicative of the results to be expected for a full year. The Company's fiscal year ends on December 31 of each year, and the Company's quarters are each comprised of 13 weeks. For convenience, throughout these financial statements, the 13 weeks comprising each three month period are denoted by the last day of the respective calendar quarter. 2. REPORTABLE BUSINESS SEGMENTS: In accordance with Statement of Financial Accounting Standards ("SFAS") No. 131, the Company discloses business segment data for its reportable business segments, which have been determined using the "management approach." The management approach is based on the way segments are organized within the Company for making operating decisions and assessing performance. Operations for the North American retail segment include primarily the retail sale and service of heating and air conditioning products that have historically been included in the North American residential segment. As a result of the growth in operations of this segment, retail segment results have now been stated separately on a comparative basis. Therefore, the Company's business operations are organized within the following five reportable business segments (in thousands): <TABLE> <CAPTION> For the For the Three Months Ended Nine Months Ended September 30, September 30, ------------------- ------------------- NET SALES 2000 1999 2000 1999 --------- ---- ---- ---- ---- <S> <C> <C> <C> <C> North American residential $308,370 $328,173 $ 954,040 $ 917,257 North American retail 288,817 66,067 772,283 109,788 Commercial air conditioning 136,368 127,922 354,390 337,985 Commercial refrigeration 88,795 94,176 273,975 238,351 Heat transfer (1) 61,640 60,847 191,421 164,206 Eliminations (26,372) (8,132) (77,967) (17,634) -------- -------- ---------- ---------- $857,618 $669,053 $2,468,142 $1,749,953 ======== ======== ========== ========== </TABLE> [FN] (1) The Heat Transfer segment had intersegment sales of $5,503 and $5,722 for the three months ended September 30, 2000 and 1999, respectively, and $17,901 and $17,696 for the nine months ended September 30, 2000 and 1999, respectively. </FN> <TABLE> <CAPTION> For the For the Three Months Ended Nine Months Ended September 30, September 30, --------------------- -------------------- INCOME (LOSS) FROM OPERATIONS 2000 1999 2000 1999 - ----------------------------- ---- ---- ---- ---- <S> <C> <C> <C> <C> North American residential $23,663 $42,824 $ 86,631 $105,812 North American retail 11,822 3,698 36,482 6,174 Commercial air conditioning 6,015 5,138 7,695 6,285 Commercial refrigeration 9,216 9,925 24,711 19,095 Heat transfer 3,525 2,851 12,792 10,308 Corporate and other (1) (16,283) (8,075) (34,223) (23,802) Eliminations (2,229) (1,732) (5,152) (2,545) ------- ------- --------- --------- $35,729 $54,629 $128,936 $121,327 ======= ======= ======== ======== </TABLE> [FN] (1) Includes $5,100 for closing operations in Mexico and Argentina. </FN> 6
As of September 30, As of December 31, TOTAL ASSETS 2000 1999 - ------------ ---- ---- North American residential $ 571,822 $ 596,895 North American retail 775,662 290,978 Commercial air conditioning 235,449 251,226 Commercial refrigeration 229,240 252,176 Heat transfer 154,785 179,615 Corporate and other 144,221 127,320 Eliminations (31,364) (14,537) ----------- ----------- $ 2,079,815 $ 1,683,673 =========== =========== 3. INVENTORIES: Components of inventories are as follows (in thousands): As of September 30, As of December 31, 2000 1999 ---- ---- Finished goods $243,583 $219,303 Repair parts 50,776 36,153 Work in process 19,997 20,957 Raw materials 113,598 117,209 -------- -------- 427,954 393,622 Reduction for last-in, first-out 47,527 48,198 -------- -------- $380,427 $345,424 ======== ======== 4. LINES OF CREDIT AND FINANCING ARRANGEMENTS: The Company has bank lines of credit aggregating $688 million, of which $430 million was outstanding at September 30, 2000 with the remaining $258 million available for future borrowings, subject to covenant limitations. Included in the lines of credit are two $300 million domestic facilities governed by revolving credit facility agreements between the Company and syndicates of banks. The facilities contain certain financial covenants and bear interest, at the Company's option, at a rate equal to either (a) the greater of the bank's prime rate or the federal funds rate plus 0.5% or (b) the London Interbank Offered Rate plus a margin equal to 0.5% to 1.25%, depending upon the ratio of total funded debt to EBITDA. The Company pays a commitment fee equal to 0.10% to 0.30% of the unused commitment, depending upon the ratio of total funded debt to EBITDA. The agreements provide restrictions on the Company's ability to incur additional indebtedness, encumber its assets, sell its assets, or pay dividends. On August 29, 2000, the Company borrowed $25.0 million under a shelf agreement with The Prudential Insurance Company of America. Terms of the borrowing include an interest rate of 7.75%, interest to be paid semi-annually and an ultimate maturity date of August 25, 2005. Terms and conditions of the borrowing are similar to those of the existing revolving credit agreements. 7
5. EARNINGS PER SHARE: Basic earnings per share are computed by dividing net income by the weighted average number of common shares outstanding during the period. Diluted earnings per share are computed by dividing net income by the sum of the weighted average number of shares outstanding and the number of equivalent shares assumed outstanding, if dilutive, under the Company's stock-based compensation plans and from convertible securities. Diluted earnings per share are computed as follows (in thousands, except per share amounts): <TABLE> <CAPTION> For the For the Three Months Ended Nine Months Ended September 30, September 30, ------------------ ----------------- 2000 1999 2000 1999 ---- ---- ---- ---- <S> <C> <C> <C> <C> Net income $12,386 $27,284 $50,403 $57,485 ======= ======= ======= ======= Weighted average shares outstanding 56,308 42,164 56,070 37,910 Effect of diluted securities attributable to stock options and performance share awards 487 737 355 878 ------- ------- ------- ------- Weighted average shares outstanding, as adjusted 56,795 42,901 56,425 38,788 ======= ======= ======= ======= Diluted earnings per share $ 0.22 $ 0.64 $ 0.89 $ 1.48 ======= ======= ======= ======= </TABLE> 6. INVESTMENTS IN SUBSIDIARIES: SERVICE EXPERTS, INC. On January 21, 2000, the Company acquired Service Experts, Inc., a holding company owning retail outlets for heating and air conditioning products and services. The acquisition took place in the form of a merger wherein 0.67 of a share of the Company's common stock was exchanged for each share of Service Experts, Inc. common stock. The 12.2 million shares so exchanged were valued at approximately $140.5 million. In addition, transaction costs of approximately $4.1 million were paid, and $162.7 million of Service Experts, Inc. debt was assumed and concurrently repaid, resulting in a total purchase price of $307.3 million. The acquisition was accounted for under the purchase method of accounting. Based on current estimates, which may be revised at a later date, approximately $169.0 million was allocated to the fair value of the assets acquired, approximately $105.0 million was allocated to the fair value of liabilities assumed, and $243.3 million was allocated to goodwill, which is being amortized on a straight-line basis over 40 years. The results of Service Experts, Inc. have been fully consolidated with those of the Company since the date of acquisition. DEALERS In September of 1998, the Company initiated a program to acquire high quality heating and air conditioning dealers in metropolitan areas of the United States and Canada (the "Dealers"). During the first nine months of 2000, nine Dealers in the United States and two Dealers in Canada were purchased for a total price of approximately $40.6 million. In addition, approximately $21.8 million was paid in the first nine months of 2000 as additional payments on Dealers acquired in 1999. Of this $21.8 million, $6.3 million was in the form of 558,835 shares of the Company's common stock. The purchase of the Dealers in the first nine months of 2000 and the additional payments on Dealers acquired in 1999 were accounted for under the purchase method of accounting. Based on current estimates, which may be revised at a later date, approximately $12.9 million was allocated to the fair value of assets acquired, $8.5 million was allocated to the fair value of liabilities assumed and $57.9 million was allocated to goodwill which is being amortized on a straight-line basis over 40 years. The results of the acquired Dealers have been fully consolidated with those of the Company since the respective dates of acquisition. As of September 30, 2000, the Company had commitments to acquire two additional Dealers for approximately $8.0 million. 8
The following table presents the pro forma results as if the above companies had been acquired on January 1, 1999 (in thousands, except per share data): For the For the Three Months Ended Nine Months Ended September 30 September 30, ------------------ -------------------- 2000 1999 2000 1999 ---- ---- ---- ---- Net sales $859,008 $846,117 $2,516,773 $2,226,415 Net income 12,481 29,859 51,661 70,122 Basic earnings per share 0.22 0.54 0.92 1.38 Diluted earnings per share 0.22 0.54 0.92 1.36 7. TREASURY STOCK: On November 1, 1999, the Company's Board of Directors authorized the purchase of up to 5,000,000 shares of the issued and outstanding common stock. As of September 30, 2000, 2,729,300 of such shares had been purchased at a total cost of $27.8 million. On March 6, 2000, the Company entered into forward purchase contracts to purchase 1,557,100 shares of its common stock. On May 5, 2000, the Company entered into forward purchase contracts to purchase an additional 858,000 shares of its common stock. In accordance with the terms of these contracts, settlement is permitted on either a net cash settlement, net share settlement, or a physical settlement basis. Therefore, the shares so contracted remain issued and outstanding until such time as the contracts are settled. The Company settled the first of the forward contracts to acquire shares of its common stock. On July 7, 2000, 1,557,100 shares were purchased for a net cash settlement of $15.4 million. The Company expects to settle the remaining contracts in the fourth quarter of 2000. (See SUBSEQUENT EVENTS for further information.) 8. RECENT ACCOUNTING PRONOUNCEMENTS: In September 2000, the Emerging Issues Task Force issued EITF00-10 which requires disclosure of shipping and handling costs that are not included in costs of goods sold. These costs, for the Company, are included in the Consolidated Statements of Income under OPERATING EXPENSES as part of selling, general and administrative expense. Following are the amounts for shipping and handling (in thousands): For the For the Three Months Ended Nine Months Ended September 30, September 30, ------------------- ----------------- 2000 1999 2000 1999 ---- ---- ---- ---- $32,240 $29,505 $93,783 $85,614 In June 1998, the Financial Accounting Standards Board issued Statement of Financial Accounting Standards No. 133, "Accounting for Derivative Instruments and Hedging Activities." This statement establishes accounting and reporting standards for derivative instruments, including certain derivatives embedded in other contracts (collectively referred to as derivatives) and for hedging activities. This statement, for the Company, is effective beginning with the first quarter of 2001. Management does not believe that the adoption of this pronouncement will have a significant impact on the Company's financial statements. 9. COMPREHENSIVE INCOME: Comprehensive income is computed as follows (in thousands): For the For the Three Months Ended Nine Months Ended September 30, September 30, --------------- --------------- 2000 1999 2000 1999 ---- ---- ---- ---- Net income $ 12,386 $27,284 $ 50,403 $ 57,485 Cumulative foreign currency translation adjustments (12,741) 2,949 (29,222) (3,487) -------- -------- -------- -------- Total comprehensive income (loss) $ (355) $30,233 $ 21,181 $53,998 ========= ======= ======== ======= 9
10. OTHER EVENTS: On July 27, 2000, the Board of Directors of the Company declared a dividend of one right ("Right") for each outstanding share of its common stock to stockholders of record at the close of business on August 7, 2000. Each Right entitles the registered holder to purchase from the Company a unit consisting of one one-hundredth of a share (a "Fractional Share") of Series A Junior Participating Preferred Stock, par value $.01 per share, at a purchase price of $75.00 per Fractional Share, subject to adjustment. 11. SUBSEQUENT EVENTS: The Company settled the last of the forward contracts to acquire shares of its common stock. On October 6, 2000, 858,000 shares were purchased for a net cash settlement of $9.8 million. 10
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS OVERVIEW Lennox participates in five reportable business segments of the heating, ventilation, air conditioning and refrigeration ("HVACR") industry. The first segment is the North American residential market, in which Lennox manufactures and markets a full line of heating, air conditioning and hearth products for the residential replacement and new construction markets in the United States and Canada. The second segment is the North American retail market which includes sales and installation of, and maintenance and repair services for, HVACR equipment by Lennox-owned dealers in the United States and Canada. The third segment is the global commercial air conditioning market, in which Lennox manufactures and sells rooftop products and applied systems for commercial applications. The fourth segment is the global commercial refrigeration market, which consists of unit coolers, condensing units and other commercial refrigeration products. The fifth segment is the heat transfer market, in which Lennox designs, manufactures and sells evaporator and condenser coils, copper tubing and related manufacturing equipment to original equipment manufacturers and other specialty purchasers on a global basis. Lennox sells its products and services to numerous types of customers, including distributors, installing dealers, homeowners, national accounts and original equipment manufacturers. The demand for Lennox's products is influenced by national and regional economic and demographic factors, such as interest rates, the availability of financing, regional population and employment trends and general economic conditions, especially consumer confidence. In addition to economic cycles, demand for Lennox's products is seasonal and dependent on the weather. Hotter than normal summers generate strong demand for replacement air conditioning and refrigeration products and colder than normal winters have the same effect on heating products. Conversely, cooler than normal summers and warmer than normal winters depress sales of HVACR products. The principal components of cost of goods sold are labor, raw materials, component costs, factory overhead and estimated costs of warranty expense. The principal raw materials used in Lennox's manufacturing processes are copper, aluminum and steel. In instances where Lennox is unable to pass on to its customers increases in the costs of copper and aluminum, Lennox may enter into forward contracts for the purchase of those materials. Lennox attempts to minimize the risk of price fluctuations in key components by entering into contracts, typically at the beginning of the year, which generally provide for fixed prices throughout the year. These hedging strategies enable Lennox to establish product prices for the entire model year while minimizing the impact of price increases of components and raw materials on its margins. Warranty expense is estimated based on historical trends and other factors. Lennox acquired James N. Kirby Pty. Ltd., an Australian company that participates in the commercial refrigeration and heat transfer markets in Australia, in June 1999 for approximately $65 million in cash, common stock and seller financing. In addition, Lennox assumed approximately $20.5 million of Kirby's debt. Lennox, through its Excel Comfort Systems subsidiary, purchased the heating, ventilation and air conditioning ("HVAC") related assets of The Ducane Company, Inc. in October 1999 for approximately $53 million in cash. This purchase adds to the brands offered in the North American residential segment. In September 1998, Lennox initiated a program to acquire high quality heating and air conditioning dealers in metropolitan areas in the United States and Canada to market "Lennox" and other brands of heating and air conditioning products. This strategy enables Lennox to extend its distribution directly to the consumer and permits it to participate in the revenues and margins available at the retail level while strengthening and protecting its brand equity. Lennox believes that the retail sales and service market represents a significant growth opportunity because this market is large and highly fragmented. The retail sales and service market in the United States is comprised of over 30,000 dealers. In addition, Lennox believes that the heating and air conditioning service business is somewhat less seasonal than the business of manufacturing and selling heating and air conditioning products. As of September 30, 2000, Lennox had acquired over 225 dealers in the U.S. and Canada, including the dealers acquired through the acquisition of Service Experts, Inc. The aggregate purchase price of these dealers was approximately $611 million as of September 30, 2000. 11
On January 21, 2000, Lennox completed the acquisition of Service Experts, Inc., an HVAC company comprised of HVAC retail businesses across the United States, for approximately 12.2 million shares of Lennox common stock and the assumption of approximately $163 million of debt, which was concurrently repaid. The success of the Service Experts acquisition, along with Lennox's other acquisitions, will depend on Lennox's ability to integrate these businesses into its business without substantial costs, delays or other operational or financial difficulties. The acquisition added over 120 dealers to the U.S. retail network. Lennox's fiscal year ends on December 31 of each year, and its fiscal quarters are each comprised of 13 weeks. For convenience, throughout this Management's Discussion and Analysis of Financial Condition and Results of Operations, the 13 week periods comprising each fiscal quarter are denoted by the last day of the calendar quarter. RESULTS OF OPERATIONS The following table sets forth, as a percentage of net sales, income data for the three months and nine months ended September 30, 2000 and 1999: <TABLE> <CAPTION> THREE MONTHS NINE MONTHS ENDED SEPTEMBER 30, ENDED SEPTEMBER 30, ------------------- ------------------- 2000 1999 2000 1999 ---- ---- ---- ---- <S> <C> <C> <C> <C> Net sales 100.0% 100.0% 100.0% 100.0% Cost of goods sold 68.1 68.2 67.5 68.6 ------ ------ ----- ------ Gross profit 31.9 31.8 32.5 31.4 Selling, general and administrative expenses 27.7 23.6 27.3 24.5 ------ ------ ----- ------ Income from operations 4.2 8.2 5.2 6.9 Interest expense, net 1.6 1.4 1.6 1.3 Other 0.1 0.1 0.1 0.0 Minority interest -- 0.1 -- -- ------- ------- ----- ------ Income before income taxes 2.5 6.6 3.5 5.6 Provision for income taxes 1.1 2.5 1.5 2.3 ------- ------- ----- ------ Net income 1.4% 4.1% 2.0% 3.3% ======= ======= ===== ====== </TABLE> The following table sets forth net sales by business segment and geographic market (dollars in millions): <TABLE> <CAPTION> THREE MONTHS ENDED SEPTEMBER 30, NINE MONTHS ENDED SEPTEMBER 30, 2000 1999 2000 1999 ----------------- ----------------- ------------------ ------------------ AMOUNT % AMOUNT % AMOUNT % AMOUNT % ------ - ------- - ------ - ------ - BUSINESS SEGMENT: <S> <C> <C> <C> <C> <C> <C> <C> <C> North American residential $308.4 36.0% $328.1 49.0% $ 954.0 38.7% $ 917.3 52.4% North American retail 288.8 33.7 66.1 9.9 772.3 31.3 109.7 6.3 Commercial air conditioning 136.4 15.8 127.9 19.1 354.4 14.3 338.0 19.3 Commercial refrigeration 88.8 10.4 94.2 14.1 274.0 11.1 238.4 13.6 Heat transfer 61.6 7.2 60.9 9.1 191.4 7.8 164.2 9.4 Eliminations (26.4) (3.1) (8.1) (1.2) (78.0) (3.2) (17.6) (1.0) ------ ----- ------ ----- -------- ----- -------- ----- Total net sales $857.6 100.0% $669.1 100.0% $2,468.1 100.0% $1,750.0 100.0% ====== ===== ====== ===== ======== ===== ======== ===== GEOGRAPHIC MARKET: U.S $684.6 79.8% $475.5 71.1% $1,952.1 79.1% $1,301.3 74.4% International 173.0 20.2 193.6 28.9 516.0 20.9 448.7 25.6 ------ ----- ------ ----- -------- ----- -------- ----- Total net sales $857.6 100.0% $669.1 100.0% $2,468.1 100.0% $1,750.0 100.0% ====== ===== ====== ===== ======== ===== ======== ===== </TABLE> 12
THREE MONTHS ENDED SEPTEMBER 30, 2000 COMPARED TO THREE MONTHS ENDED SEPTEMBER 30, 1999 NET SALES. Net sales increased $188.5 million, or 28.2%, to $857.6 million for the quarter ended September 30, 2000 from $669.1 million for the quarter ended September 30, 1999. Net sales related to the North American residential segment were $308.4 million for the quarter ended September 30, 2000, a decrease of $19.7 million, or 6.0%, from $328.1 million for the quarter ended September 30, 1999. Included in the third quarter of 2000 are $16.0 million of sales from the acquired Ducane operations. Excluding these acquired sales, North American residential net sales decreased $35.7 million, or 10.9%, compared to the third quarter of 1999. Over 50% of Lennox's North American residential equipment sales are concentrated in geographic locations that had a cold summer in 2000. Cooling degree days through August of this year were 50% below last year's levels in the Northeast region of the United States and 27% below last year's levels in the Midwest region of the United States. This unusually cool summer reduced the stress on existing air conditioning equipment, which depressed equipment sales and reduced demand for profitable add-on air conditioning in those markets where air conditioning is a discretionary purchase. Lennox's hearth products business also contributed to the sales decrease as a result of declining housing starts and delays in realizing synergies from the individual hearth operations acquired in the past 24 months. Net sales in the North American retail segment were $288.8 million for the quarter ended September 30, 2000, an increase of $222.7 million from the $66.1 million of net sales for the quarter ended September 30, 1999. This increase was almost entirely due to acquisitions. Commercial air conditioning net sales increased $8.5 million, or 6.6%, to $136.4 million for the quarter ended September 30, 2000 compared to the quarter ended September 30, 1999. North American sales were particularly strong, achieving growth of 14.7% for the quarter. The addition of two new commercial districts early in the year and the phase-in of Lennox's cost-effective Value line contributed to the growth. The increase domestically was offset by a decrease in net sales internationally, primarily due to the impact of the Euro exchange rate. International sales growth was 5.0%, after adjusting for the impact of currency exchange rate movements. Net sales related to the commercial refrigeration segment were $88.8 million for the quarter ended September 30, 2000, a decrease of $5.4 million, or 5.7%, from $94.2 million for the quarter ended September 30, 1999. North American commercial refrigeration net sales increased 3.7% due to strength in all served segments. Europe and Australia, two of Lennox's key refrigeration markets, had significant decreases in the value of their currency compared to the U.S. dollar. Excluding the impact of currency fluctuations, international sales decreased 2.8% for the third quarter of 2000. Some slowdown in the Australian business was a result of the Olympic games being held in Sydney for three weeks in the third quarter of 2000. Heat transfer revenues increased $0.7 million, or 1.3 %, to $61.6 million for the quarter ended September 30, 2000 compared to the quarter ended September 30, 1999. Net sales in the North American heat transfer business increased $3.5 million, or 9.0%. Part of this increase can be attributed to the SAP system installation negatively impacting third quarter 1999 results. Installation of the SAP system included a one-week plant shutdown at the Grenada, Mississippi facility. International heat transfer operations net sales decreased $2.7 million primarily due to the large drop in the U.S. exchange rate of the Euro and the Australian dollar. GROSS PROFIT. Gross profit was $274.0 million for the quarter ended September 30, 2000 compared to $212.4 million for the quarter ended September 30, 1999, an increase of $61.6 million. Gross profit margin was 31.9% for the quarter ended September 30, 2000 and 31.8% for the quarter ended September 30, 1999. Acquisitions account for the majority of the increase of $80.1 million in gross profit. Acquired businesses contributed 0.6% to the increase in gross profit margins. The decrease in sales resulting from unfavorable weather conditions and foreign currency translations resulted in gross profit dollars of Lennox's traditional businesses decreasing $18.5 million. The gross profit margins of Lennox's traditional businesses decreased 0.5% for the third quarter of 2000, compared to the third quarter of 1999, primarily due to a decrease in purchases of replacement and discretionary air conditioning in the Northern United States and Canada as a result of the cold summer. Lennox's European and Australian businesses' gross margins were negatively impacted to the extent components of U.S. origin were used, due to foreign currency exchange rate movements. 13
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES. Selling, general and administrative expenses were $238.3 million for the quarter ended September 30, 2000, an increase of $80.5 million, or 51.0%, from $157.8 million for the quarter ended September 30, 1999. Selling, general and administrative expenses represented 27.7% and 23.6% of total revenues for the third quarter of 2000 and 1999, respectively. Of the $80.5 million increase, acquired companies represented $70.8 million, or 88.0%, of the increase in selling, general and administrative expenses. Acquired companies' selling, general and administrative expenses were 30.4% of sales. The majority of the remaining $9.7 million increase was due to a $5.1 million charge taken in the quarter to close two operations in Latin America. The two operations were a sales and distribution business in Mexico and a manufacturing plant that was part of our joint venture in Argentina. Fees of $2.3 million for an accounts receivable asset securitization program implemented in June of 2000 were all incremental to the third quarter of 1999. Increased personnel and facilities costs account for the balance of the growth in selling, general and administrative expense. INTEREST EXPENSE, NET. Interest expenses, net for the quarter ended September 30, 2000, increased to $14.0 million from $9.1 million for the quarter ended September 30, 1999. Increased borrowings to fund acquisitions were responsible for the increase in interest expense. PROVISION FOR INCOME TAXES. The provision for income taxes was $8.8 million for the quarter ended September 30, 2000 and $17.0 million for the quarter ended September 30, 1999. The effective tax rate of 41.5% and 38.4% for the quarters ended September 30, 2000 and 1999, respectively, differs from the statutory federal rate of 35.0% principally due to state and local taxes, non-deductible goodwill expenses, and foreign operating losses for which no tax benefits have been recognized. NINE MONTHS ENDED SEPTEMBER 30, 2000 COMPARED TO NINE MONTHS ENDED SEPTEMBER 30, 1999 NET SALES. Net sales increased $718.1 million, or 41.0%, to $2,468.1 million for the nine months ended September 30, 2000 from $1,750.0 million for the nine months ended September 30, 1999. Net sales related to the North American residential segment were $954.0 million for the nine months ended September 30, 2000, an increase of $36.7 million, or 4.0%, from $917.3 million for the nine months ended September 30, 1999. Of the $36.7 million increase, $47.5 million was due to sales from an acquired hearth products company and the acquisition of Ducane's HVAC product lines. The resulting $10.8 million decrease in North American residential net sales is due primarily to the following three factors: - A warmer than normal winter in the first quarter of 2000 in the Northern United States. - A cooler than normal summer in the third quarter of 2000 in the Northeast and Midwest regions of the United States and in Canada. - A decrease in Lennox's hearth products business as a result of declining housing starts and delays in realizing synergies from individual hearth operations acquired in the past 24 months. Net sales in the North American retail segment were $772.3 million for the nine months ended September 30, 2000, an increase of $662.6 million from the $109.7 million of net sales for the nine months ended September 30, 1999. This increase was almost entirely due to acquisitions. Commercial air conditioning net sales increased $16.4 million, or 4.9%, to $354.4 million for the nine months ended September 30, 2000 compared to the nine months ended September 30, 1999. North American commercial air conditioning sales increased 9.1% for the first nine months of 2000 compared to the first nine months of 1999. The addition of two new commercial districts early in the year and the phase-in of Lennox's cost-effective Value line contributed to the growth. The increase domestically was offset by a decrease in net sales internationally, due primarily to the impact of exchange rates. International sales growth was 9.0%, after adjusting for the impact of currency exchange rate movements. This growth is primarily due to the fact Lennox has rationalized its European products and they are being marketed throughout Europe rather than just within the country of manufacture. Net sales related to the commercial refrigeration segment were $274.0 million for the nine months ended September 30, 2000, an increase of $35.6 million, or 14.9%, from $238.4 million for the nine months ended September 30, 1999. 14
Of this increase, $27.5 million was due to the acquisition of James N. Kirby Pty. Ltd. North American commercial refrigeration net sales increased 11.2% as a result of strong sales in the walk-in cooler and telecommunications segments and the completion of some large cold storage projects. The increase domestically was offset by a decrease in net sales internationally, due to the impact of exchange rates. International net sales increased 5.7%, after adjusting for the impact of currency exchange rate movements. International sales volume growth was primarily a result of Lennox's increased participation in two areas of the European refrigeration market - sales of supermarket rack systems and direct sales to contractors through Lennox's H K Refrigeration brand. Heat transfer revenues increased $27.2 million, or 16.6%, to $191.4 million for the nine months ended September 30, 2000 compared to the nine months ended September 30, 1999. The acquisitions of James N. Kirby Pty. Ltd. and Livernois Engineering Holding Company contributed $22.0 million to heat transfer revenues in the first nine months of 2000. Net sales growth in the North American heat transfer business increased 5.5%. The increase domestically was offset by a decrease in net sales internationally, primarily due to the impact of exchange rates. International net sales increased 5.0%, after adjusting for the impact of currency exchange rate movements. GROSS PROFIT. Gross profit was $801.1 million for the nine months ended September 30, 2000 compared to $550.3 million for the nine months ended September 30, 1999, an increase of $250.8 million. Gross profit margin was 32.5% for the nine months ended September 30, 2000 and 31.4% for the nine months ended September 30, 1999. Acquisitions account for an increase of $256.1 million in gross profit. Acquired businesses contributed 0.5% to the increase in gross profit margins. The decrease in sales resulting from unfavorable weather conditions and foreign currency translations resulted in the gross profit dollars of Lennox's traditional businesses decreasing $5.3 million. However, gross profit margins of Lennox's traditional businesses increased 0.6% for the first nine months of 2000 compared to the first nine months of 1999, primarily due to manufacturing efficiencies, product mix and selected price increases. SELLING, GENERAL AND ADMINISTRATIVE EXPENSES. Selling, general and administrative expenses were $672.2 million for the nine months ended September 30, 2000, an increase of $243.2 million, or 56.7%, from $429.0 million for the nine months ended September 30, 1999. Selling, general and administrative expenses represented 27.3% and 24.5% of total revenues for the first nine months of 2000 and 1999, respectively. Of the $243.2 million increase, acquired companies represented $218.7 million, or 89.9%, of the increase in selling, general and administrative expenses. Acquired companies' selling, general and administrative expenses were 28.7% of sales. The remaining $24.5 million increase includes a charge of $5.1 million to close two operations in Latin America. The two operations were a sales and distribution business in Mexico and a manufacturing plant that was part of our joint venture in Argentina. Fees of $3.0 million for an accounts receivable asset securitization program implemented in June of 2000 were all incremental to 1999. Increased advertising and promotion, personnel and facilities costs account for the balance of the growth in selling, general and administrative expense. INTEREST EXPENSE, NET. Interest expenses, net for the nine months ended September 30, 2000 increased to $42.0 million from $24.2 million for the nine months ended September 30, 1999. Increased borrowings to fund acquisitions were responsible for the increase in interest expense. PROVISION FOR INCOME TAXES. The provision for income taxes was $35.8 million for the nine months ended September 30, 2000 and $39.8 million for the nine months ended September 30, 1999. The effective tax rates of 41.5% and 40.9% for the nine months ended September 30, 2000 and 1999, respectively, differ from the statutory federal rate of 35.0% principally due to state and local taxes, non-deductible goodwill expenses, and foreign operating losses for which no tax benefits have been recognized. LIQUIDITY AND CAPITAL RESOURCES Lennox's recent capital requirements have related principally to acquisitions, the expansion of production capacity and increased working capital needs that have accompanied sales growth. Net cash provided by operating activities was $150.8 million and $17.4 million for the nine months ended September 30, 2000 and 1999, respectively. The increase in cash provided by operations is primarily due to the proceeds from the sale of $130 million in accounts receivables. Net cash used in investing activities totaled $265.6 million and $273.7 million for the nine months ended September 30, 2000 and 1999, respectively. Capital spending was $13.5 million less in the nine months ended September 30, 2000 than for the comparable period in 1999, reflecting opportunities taken by Lennox to lease equipment rather than buy. Net cash provided by financing activities was $132.5 15
million and $269.6 million for the nine months ended September 30, 2000 and 1999, respectively. Net borrowing needs decreased $25.6 million in the first nine months of 2000 versus the same period in 1999 primarily due to the cash received by Lennox from the sale of receivables. Due to the seasonality of the air conditioning and refrigeration businesses, Lennox typically uses cash in the first six months of the year and generates cash during the latter half of the year. In the past, Lennox has used a combination of internally generated funds, external borrowings and common stock to make acquisitions. With a base of over 225 dealers established in the retail sector, future acquisitions of such retail centers will be on a very selective basis. The aggregate purchase price of the Dealers acquired through September 30, 2000 was approximately $611 million. As of September 30, 2000, Lennox had commitments to acquire two additional Dealers for approximately $8.0 million. On April 5, 2000 Lennox purchased the remaining 30% of Ets. Brancher not already owned for 101,800,000 French francs ($16.2 million). In June 1999, James N. Kirby Pty. Ltd. was acquired for approximately $65 million. In addition, approximately $20.5 million of Kirby's debt was assumed. The purchase price consisted of approximately $16 million in cash, $33 million in deferred payments and 650,430 shares of common stock. If Lennox's common stock does not trade at a price greater than $29.09 per share for five consecutive days from the period of June 2000 to June 2001, then Lennox is obligated to pay the former owners of Kirby the difference between the trading price for the last five days of this period and $29.09 for 577,500 of the shares of common stock. Capital expenditures were $39.7 million for the nine months ended September 30, 2000. These expenditures primarily related to production equipment (including tooling) and information systems. Lennox has bank lines of credit aggregating $688 million, of which $430 million was outstanding at September 30, 2000 with the remaining $258 million available for future borrowings, subject to covenant limitations. Included in the lines of credit are two $300 million domestic facilities governed by revolving credit facility agreements between Lennox and syndicates of banks. The facilities contain certain financial covenants and bear interest, at Lennox's option, at a rate equal to either (a) the greater of the bank's prime rate or the federal funds rate plus 0.5% or (b) the London Interbank Offered Rate plus a margin equal to 0.5% to 1.25%, depending upon the ratio of total funded debt to EBITDA. Lennox pays a commitment fee equal to 0.10% to 0.30% of the unused commitment, depending upon the ratio of total funded debt to EBITDA. The agreements provide restrictions on Lennox's ability to incur additional indebtedness, encumber its assets, sell its assets, or pay dividends. On August 29, 2000, Lennox borrowed $25.0 million under a shelf agreement with The Prudential Insurance Company of America. Terms of the borrowing include an interest rate of 7.75%, interest to be paid semi-annually and an ultimate maturity date of August 25, 2005. Terms and conditions of the borrowing are similar to those of the existing revolving credit agreements. Lennox believes its shares of stock are undervalued and has initiated programs to repurchase shares. Lennox's Board of Directors has authorized the purchase of up to 5,000,000 shares. Through December 1999, 1,172,000 shares had been repurchased at a total cost of $12.4 million. To continue the repurchase program while maintaining available debt capacity, Lennox, on March 6, 2000, entered into forward purchase contracts for 1,557,100 shares that were settled on July 7, 2000 for a cash payment of $15.4 million. On May 5, 2000 Lennox entered into additional forward purchase contracts for 858,000 shares, which were settled on October 6, 2000 for a cash payment of $9.8 million. There are no forward purchase contracts unsettled as of the date of this report. Lennox believes that cash flow from operations, as well as available borrowings under its credit facilities will be sufficient to fund operations for the foreseeable future. 16
RECENT ACCOUNTING PRONOUNCEMENTS In September 2000, the Emerging Issues Task Force issued EITF00-10 which requires disclosure of shipping and handling costs that are not included in costs of goods sold. These costs, for Lennox, are included in the Consolidated Statements of Income under OPERATING EXPENSES as part of selling, general and administrative expense. Following are the amounts for shipping and handling (in thousands): For the For the Three Months Ended Nine Months Ended September 30, September 30, ------------------ ------------------ 2000 1999 2000 1999 ---- ---- ---- ---- $32,240 $29,505 $93,783 $85,614 In June 1998, the Financial Accounting Standards Board issued Statement of Financial Accounting Standards No. 133, "Accounting for Derivative Instruments and Hedging Activities." This statement establishes accounting and reporting standards for derivative instruments, including certain derivatives embedded in other contracts (collectively referred to as derivatives) and for hedging activities. This statement, for Lennox, is effective beginning with the first quarter of 2001. Management does not believe that the adoption of this pronouncement will have a significant impact on Lennox's financial statements. FORWARD LOOKING INFORMATION This Report contains forward-looking statements and information that are based on the beliefs of Lennox's management as well as assumptions made by and information currently available to management. All statements other than statements of historical fact included in this Report constitute forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995, including but not limited to statements identified by the words "may," "will," "should," "plan," "predict," "anticipate," "believe," "intend," "estimate" and "expect" and similar expressions. Such statements reflect Lennox's current views with respect to future events, based on what it believes are reasonable assumptions; however, such statements are subject to certain risks, uncertainties and assumptions. These include, but are not limited to, warranty and product liability claims; ability to successfully complete and integrate acquisitions; ability to manage new lines of business; the consolidation trend in the HVACR industry; adverse reaction from customers to Lennox's acquisitions or other activities; the impact of the weather on business; competition in the HVACR business; increases in the prices of components and raw materials; general economic conditions in the U.S. and abroad; labor relations problems; operating risks and environmental risks. Should one or more of these risks or uncertainties materialize, or should underlying assumptions prove incorrect, actual results may differ materially from those in the forward-looking statements. Lennox disclaims any intention or obligation to update or review any forward-looking statements or information, whether as a result of new information, future events or otherwise. ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK. Lennox's results of operations can be affected by changes in exchange rates. Net sales and expenses in currencies other than the U.S. dollar are translated into U.S. dollars for financial reporting purposes based on the average exchange rate for the period. During the nine months ended September 30, 2000 and 1999, net sales from outside the U.S. represented 20.9% and 25.6%, respectively, of total net sales. Historically, foreign currency transaction gains (losses) have not had a material effect on operations. From time to time Lennox enters into foreign currency contracts to hedge receivables or payables denominated in foreign currencies. These contracts do not subject Lennox to risk from exchange rate movements because the gains or losses on the contracts offset losses or gains, respectively, on the items being hedged. As of September 30, 2000, Lennox had obligations to deliver the equivalent of $36.5 million of various foreign currencies at various dates through December 31, 2001, and contracts to buy $.3 million of various foreign currencies through December 29, 2000 for which the counterparties to the contracts will pay or receive fixed contract amounts. The net fair value of the currency contracts was a liability of $3.2 million at September 30, 2000. To minimize risks from fluctuations in the price of copper and aluminum, Lennox enters into combinations of long-term purchase commitments at fixed prices and forward contracts. Maturity dates on the forward contracts coincide with 17
expected actual cash purchases of the commodities. As of September 30, 2000, long-term purchase commitments for copper and aluminum aggregate $11.9 million, which approximates the fair value of the commitments. Forward contracts for copper and aluminum aggregate $63.2 million and have a fair value as an asset of $2.9 million. 18
PART II -- OTHER INFORMATION ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K. EXHIBIT NUMBER DESCRIPTION *3.1 -- Restated Certificate of Incorporation of Lennox (incorporated by reference to Exhibit 3.1 to Lennox's Registration Statement on Form S-1 (Registration No. 333-75725)). *3.2 -- Amended and Restated Bylaws of Lennox (incorporated by reference to Exhibit 3.2 to Lennox's Registration Statement on Form S-1 (Registration No. 333-75725)). *4.1 -- Specimen Stock Certificate for the Common Stock, par value $.01 per share, of Lennox (incorporated by reference to Exhibit 4.1 to Lennox's Registration Statement on Form S-1 (Registration No. 333-75725)). 10.1 -- Form of revised Employment Agreement entered into between Lennox and certain executive officers (filed herewith). 10.2 -- Form of revised Change of Control Employment Agreement entered into between Lennox and certain executive officers (filed herewith). 27.1 -- Financial Data Schedule (filed herewith). - ---------- [FN] * Incorporated herein by reference as indicated. REPORTS ON FORM 8-K A Current Report on Form 8-K dated July 27, 2000 was filed by Lennox. The Report includes information under Items 5 and 7 concerning a dividend by Lennox to its stockholders of certain preferred stock purchase rights. </FN> 19
SIGNATURE Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. LENNOX INTERNATIONAL INC. Date: November 10, 2000 /S/ CLYDE W. WYANT ---------------------------------------- Principal Financial Officer and Duly Authorized Signatory 20
EXHIBIT INDEX Exhibit Number Description * 3.1 -- Restated Certificate of Incorporation of Lennox (incorporated by reference to Exhibit 3.1 to Lennox's Registration Statement on Form S-1 (Registration No. 333-75725)). * 3.2 -- Amended and Restated Bylaws of Lennox (incorporated by reference to Exhibit 3.2 to Lennox's Registration Statement on Form S-1 (Registration No. 333-75725)). * 4.1 -- Specimen Stock Certificate for the Common Stock, par value $.01 per share, of Lennox (incorporated by reference to Exhibit 4.1 to Lennox's Registration Statement on Form S-1 (Registration No. 333-75725)). 10.1 -- Form of revised Employment Agreement entered into between Lennox and certain executive officers (filed herewith). 10.2 -- Form of revised Change of Control Employment Agreement entered into between Lennox and certain executive officers (filed herewith). 27.1 -- Financial Data Schedule (filed herewith). - ---------- [FN] * Incorporated herein by reference as indicated. Reports on Form 8-K A Current Report on Form 8-K dated July 27, 2000 was filed by Lennox. The Report includes information under Items 5 and 7 concerning a dividend by Lennox to its stockholders of certain preferred stock purchase rights. </FN>