William Blair 40th Annual Growth Stock Conference June 2020 FORWARD-LOOKING STATEMENTS This presentation 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 that could cause actual results to differ materially from such statements. Such risks and uncertainties include, but are not limited to, the economic impact of the COVID-19 pandemic on the company and its employees, customers and ...

Goldman Sachs Industrials & Materials Conference May 2020 FORWARD-LOOKING STATEMENTS This presentation 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 that could cause actual results to differ materially from such statements. Such risks and uncertainties include, but are not limited to, the economic impact of the COVID-19 pandemic on the company and its employees, customers and su ...

Financial Data and Key Metrics Changes - Company revenue for Q1 2020 was $724 million, down 8% on a GAAP basis and down 4% on an adjusted basis excluding divestitures [10] - GAAP operating income decreased to $36 million from $95 million in the prior year, with GAAP EPS from continuing operations at $0.32 compared to $1.73 previously [11] - Adjusted segment profit was $38 million, down from $99 million, with adjusted EPS from continuing operations at $0.56 compared to $1.68 in the prior year [12] Business Segment Performance Changes - Residential segment revenue decreased by 5% to $442 million, with segment profit down 62% to $33 million [30][31] - Commercial segment revenue increased by 3% to $170 million, with segment profit rising 24% to $19 million [33] - Refrigeration segment revenue was down 12% to $103 million, with segment profit down 93% to $1 million [34][35] Market Data and Key Metrics Changes - North American residential HVAC shipments are expected to decline mid-teens, a significant drop from previous expectations of mid-single-digit growth [40] - Commercial unitary shipments and Refrigeration shipments in North America are projected to decrease by 25% [41] Company Strategy and Industry Competition - The company has reset its financial expectations for 2020, now anticipating revenue to decline by 11% to 17% compared to previous guidance of 4% to 8% growth [24] - Cost reduction actions are expected to yield approximately $150 million in SG&A savings for the remainder of the year [25] - The company is maintaining its focus on key growth initiatives while pausing new store openings and share repurchase plans [68] Management's Comments on Operating Environment and Future Outlook - Management indicated that the HVAC market is expected to be negatively impacted by approximately 20% due to the pandemic [23] - The company remains confident in its ability to manage through economic downturns, drawing on past experiences [22] - There is an expectation of a shift towards repair rather than replacement in the residential business due to economic conditions [97] Other Important Information - The company plans to maintain its quarterly dividend of $0.70 per share, totaling over $150 million for the year [27] - Free cash flow is targeted at $340 million for 2020, with capital expenditures reduced from $153 million to $120 million [26][46] Q&A Session Summary Question: Can you break down the residential mid-teens decline into replacement and new construction? - Management did not provide a specific breakdown but indicated that new construction may remain stable while replacement is expected to decline [50] Question: What is the sales cadence through March and into April? - Sales have been down mid-to-high teens in early April, with a notable slowdown in dealer stocking for the summer [51] Question: How much of the $150 million cost savings is temporary versus permanent? - Approximately 20% comes from salaried headcount reductions, 40% from discretionary spending cuts, and 40% from pay actions [54] Question: What are the expectations for decremental margins? - Decremental margins in Q1 were primarily driven by unfavorable mix, but cost reductions are expected to improve margins moving forward [61] Question: How is the company managing its distribution network during this time? - The company is protecting key investments and maintaining its distribution network while pausing new store openings [68] Question: What indicators is the company watching to assess volume declines? - Management is monitoring employment numbers and consumer confidence as key indicators [120]

[Part I - Financial Information](index=3&type=section&id=Part%20I%20Financial%20Information) This part presents the company's unaudited interim financial statements and management's analysis of performance [Item 1. Financial Statements](index=3&type=section&id=Item%201.%20Financial%20Statements) This section contains the unaudited consolidated financial statements and accompanying notes for the period [Consolidated Balance Sheets](index=3&type=section&id=Consolidated%20Balance%20Sheets%20-%20March%2031%2C%202020%20(Unaudited)%20and%20December%2031%2C%202019) Details the company's assets, liabilities, and stockholders' deficit at the end of the reporting period Balance Sheet Summary | Metric | March 31, 2020 (Millions) | December 31, 2019 (Millions) | Change (Millions) | | :-------------------------------- | :-------------------------- | :--------------------------- | :---------------- | | Total Assets | $2,128.4 | $2,034.9 | $93.5 | | Total Liabilities | $2,446.7 | $2,205.1 | $241.6 | | Total Stockholders' Deficit | $(318.3) | $(170.2) | $(148.1) | | Cash and cash equivalents | $39.1 | $37.3 | $1.8 | | Total current assets | $1,225.1 | $1,120.9 | $104.2 | | Total current liabilities | $894.6 | $1,002.7 | $(108.1) | | Long-term debt | $1,189.9 | $849.3 | $340.6 | [Consolidated Statements of Operations](index=4&type=section&id=Consolidated%20Statements%20of%20Operations%20(Unaudited)%20-%20Three%20Months%20Ended%20March%2031%2C%202020%20and%202019) Summarizes revenues, costs, and expenses to present the company's net income and earnings per share Quarterly Performance | Metric | 3 Months Ended March 31, 2020 (Millions) | 3 Months Ended March 31, 2019 (Millions) | Change (Millions) | % Change | | :----------------------------------- | :--------------------------------------- | :--------------------------------------- | :---------------- | :------- | | Net sales | $723.8 | $790.3 | $(66.5) | (8.4)% | | Cost of goods sold | $558.1 | $588.7 | $(30.6) | (5.2)% | | Gross profit | $165.7 | $201.6 | $(35.9) | (17.8)% | | Operating income | $36.4 | $94.7 | $(58.3) | (61.6)% | | Net income | $12.9 | $69.3 | $(56.4) | (81.4)% | | Diluted EPS | $0.33 | $1.73 | $(1.40) | (80.9)% | [Consolidated Statements of Comprehensive Income](index=5&type=section&id=Consolidated%20Statements%20of%20Comprehensive%20Income%20(Unaudited)%20-Three%20Months%20Ended%20March%2031%2C%202020%20and%202019) Reports changes in equity from non-owner sources, including net income and other comprehensive income items Comprehensive Income Summary | Metric | 3 Months Ended March 31, 2020 (Millions) | 3 Months Ended March 31, 2019 (Millions) | Change (Millions) | | :------------------------------------ | :--------------------------------------- | :--------------------------------------- | :---------------- | | Net income | $12.9 | $69.3 | $(56.4) | | Foreign currency translation adjustments | $(20.3) | $0.5 | $(20.8) | | Net change in fair value of cash flow hedges | $(14.6) | $6.2 | $(20.8) | | Other comprehensive (loss) income, net of tax | $(29.3) | $8.6 | $(37.9) | | Comprehensive (loss) income | $(16.4) | $77.9 | $(94.3) | [Consolidated Statements of Stockholders' Deficit](index=6&type=section&id=Consolidated%20Statements%20of%20Stockholders'%20Deficit%20(Unaudited)%20-%20Three%20Months%20Ended%20March%2031%2C%202020%20and%202019) Reconciles the beginning and ending balances of the stockholders' deficit accounts for the period Stockholders' Deficit Reconciliation | Metric | As of March 31, 2020 (Millions) | As of December 31, 2019 (Millions) | Change (Millions) | | :-------------------------------- | :------------------------------ | :------------------------------- | :---------------- | | Total Stockholders' Deficit | $(318.3) | $(170.2) | $(148.1) | | Net income (3 months) | $12.9 | N/A | N/A | | Dividends (3 months) | $(29.4) | N/A | N/A | | Foreign currency translation adjustments (3 months) | $(20.3) | N/A | N/A | | Treasury stock purchases (3 months) | $(105.5) | N/A | N/A | [Consolidated Statements of Cash Flows](index=7&type=section&id=Consolidated%20Statements%20of%20Cash%20Flows%20(Unaudited)%20-%20Three%20Months%20Ended%20March%2031%2C%202020%20and%202019) Details the cash inflows and outflows from operating, investing, and financing activities during the period Cash Flow Summary | Metric | 3 Months Ended March 31, 2020 (Millions) | 3 Months Ended March 31, 2019 (Millions) | Change (Millions) | | :------------------------------------ | :--------------------------------------- | :--------------------------------------- | :---------------- | | Net cash used in operating activities | $(98.8) | $(141.0) | $42.2 | | Net cash (used in) provided by investing activities | $(25.7) | $13.6 | $(39.3) | | Net cash provided by financing activities | $133.0 | $108.9 | $24.1 | | Increase (decrease) in cash and cash equivalents | $8.5 | $(18.5) | $27.0 | | Cash and cash equivalents, end of period | $39.1 | $31.7 | $7.4 | [Note 1. General](index=8&type=section&id=Note%201.%20General) Outlines the basis of preparation for the financial statements and discusses the impact of COVID-19 - The unaudited interim financial statements are prepared in accordance with **GAAP** for interim financial information and Form 10-Q instructions[21](index=21&type=chunk) - The **COVID-19 pandemic** has disrupted business operations, caused a significant unfavorable impact, and may lead to supply chain disruptions, higher employee absenteeism, and short-term manufacturing suspensions, potentially having a material adverse effect on 2020 results[25](index=25&type=chunk)[26](index=26&type=chunk)[27](index=27&type=chunk) - Adopted ASU 2016-13 (Credit Losses) on January 1, 2020, resulting in a **$1.3 million net decrease** to retained earnings[28](index=28&type=chunk) - Adoption of ASU 2017-04 (Goodwill Impairment) and ASU 2018-15 (Cloud Computing Arrangements) **did not have a material impact**[29](index=29&type=chunk)[30](index=30&type=chunk) [Note 2. Reportable Business Segments](index=9&type=section&id=Note%202.%20Reportable%20Business%20Segments) Provides a breakdown of financial performance across the company's three primary business segments - The company operates in three reportable business segments: **Residential Heating & Cooling, Commercial Heating & Cooling, and Refrigeration**[31](index=31&type=chunk) - Segment profit is defined as income or loss from continuing operations before income taxes, excluding certain items like loss on sale of business, natural disaster gains/losses, and restructuring charges[31](index=31&type=chunk)[35](index=35&type=chunk) Segment Performance | Segment | Net Sales 2020 (Millions) | Net Sales 2019 (Millions) | % Change Net Sales | Segment Profit 2020 (Millions) | Segment Profit 2019 (Millions) | % Change Segment Profit | | :-------------------------- | :------------------------ | :------------------------ | :----------------- | :----------------------------- | :----------------------------- | :------------------------ | | Residential Heating & Cooling | $442.1 | $465.6 | (5.0)% | $32.5 | $86.7 | (62.5)% | | Commercial Heating & Cooling | $178.4 | $173.3 | 2.9% | $18.7 | $15.1 | 23.8% | | Refrigeration | $103.3 | $151.4 | (31.8)% | $0.7 | $8.4 | (91.7)% | | Total Consolidated Net Sales | $723.8 | $790.3 | (8.4)% | N/A | N/A | N/A | [Note 3. Earnings Per Share](index=11&type=section&id=Note%203.%20Earnings%20Per%20Share) Presents the calculation of basic and diluted earnings per share from continuing operations and net income Earnings Per Share Calculation | Metric | 3 Months Ended March 31, 2020 | 3 Months Ended March 31, 2019 | Change | | :-------------------------------- | :---------------------------- | :---------------------------- | :----- | | Diluted EPS from continuing operations | $0.32 | $1.73 | $(1.41) | | Net income per diluted share | $0.33 | $1.73 | $(1.40) | | Weighted Average Shares Outstanding - Diluted | 38.7 million | 40.1 million | (1.4) million | [Note 4. Commitments and Contingencies](index=11&type=section&id=Note%204.%20Commitments%20and%20Contingencies) Discloses information on warranty liabilities, litigation, and other potential financial obligations - A final settlement of **$367.5 million** with insurance carriers for the Marshalltown tornado losses was reached in December 2019, with all recoveries received in 2018 and 2019[49](index=49&type=chunk)[50](index=50&type=chunk) Warranty Liability | Metric | As of March 31, 2020 (Millions) | As of December 31, 2019 (Millions) | | :------------------------ | :------------------------------ | :------------------------------- | | Total warranty liability | $114.1 | $112.8 | Asbestos-Related Litigation | Metric | 3 Months Ended March 31, 2020 (Millions) | 3 Months Ended March 31, 2019 (Millions) | | :------------------------------------ | :--------------------------------------- | :--------------------------------------- | | (Gain) expense for asbestos-related litigation, net | $(1.7) | $1.4 | [Note 5. Stock Repurchases](index=13&type=section&id=Note%205.%20Stock%20Repurchases) Details the company's share repurchase activities, including authorizations and transactions during the period - The Board of Directors authorized **$3 billion** for share repurchases, with **$446 million remaining** as of March 31, 2020[51](index=51&type=chunk) - The company entered into a Fixed Dollar Accelerated Share Repurchase Transaction (ASR Agreement) in February 2020, paying **$100.0 million** and repurchasing **0.4 million shares**[53](index=53&type=chunk) - An additional **$5.5 million** in shares were repurchased in Q1 2020 to satisfy employee tax withholding obligations[54](index=54&type=chunk) [Note 6. Divestitures](index=15&type=section&id=Note%206.%20Divestitures) Provides information on the sale of business units and their financial impact on the company - The sale of the Kysor Warren business was completed on March 29, 2019, resulting in a net loss of **$10.6 million** in 2019[55](index=55&type=chunk)[56](index=56&type=chunk) [Note 7. Restructuring Charges](index=15&type=section&id=Note%207.%20Restructuring%20Charges) Outlines the costs incurred from restructuring activities aimed at improving operational efficiency - Restructuring charges for Q1 2020 were primarily related to activities initiated in 2019 in the **Commercial Heating & Cooling ($0.3 million)** and **Residential Heating & Cooling ($0.2 million)** segments[58](index=58&type=chunk) Restructuring Charges by Category | Category | Incurred in 2020 (Millions) | | :-------------------------------- | :-------------------------- | | Severance and related expense | $0.1 | | Asset write-offs and accelerated depreciation | $0.1 | | Other | $0.3 | | Total restructuring charges | $0.5 | [Note 8. Revenue Recognition](index=15&type=section&id=Note%208.%20Revenue%20Recognition) Explains the company's policies for recognizing revenue and provides a breakdown by geography and segment - Revenue for equipment sales is recognized at a point in time when control transfers to the customer, generally at shipment[62](index=62&type=chunk)[63](index=63&type=chunk)[64](index=64&type=chunk) Net Sales by Geographic Area (Q1 2020) | Segment | United States (Millions) | Canada (Millions) | Other International (Millions) | Total (Millions) | | :-------------------------- | :----------------------- | :-------------------- | :----------------------------- | :--------------- | | Residential Heating & Cooling | $412.4 | $29.7 | — | $442.1 | | Commercial Heating & Cooling | $161.1 | $17.1 | $0.2 | $178.4 | | Refrigeration | $59.5 | — | $43.8 | $103.3 | | Consolidated Total | $633.0 | $46.8 | $44.0 | $723.8 | Contract Liabilities | Metric | March 31, 2020 (Millions) | December 31, 2019 (Millions) | | :-------------------------- | :-------------------------- | :--------------------------- | | Contract liabilities - current | $(8.5) | $(8.4) | | Contract liabilities - noncurrent | $(5.8) | $(5.9) | | Total contract liabilities | $(14.3) | $(14.3) | [Note 9. Other Financial Statement Details](index=18&type=section&id=Note%209.%20Other%20Financial%20Statement%20Details) Provides supplementary details on various financial statement line items, including inventories and goodwill - Goodwill carrying amount remained at **$186.5 million** as of March 31, 2020, with no changes in foreign currency translation rates[72](index=72&type=chunk) - The company uses cash flow hedging programs for commodity price and foreign currency risk, with unrealized losses on unsettled hedges of **$13.7 million** as of March 31, 2020[73](index=73&type=chunk)[75](index=75&type=chunk)[76](index=76&type=chunk) Inventory Components | Inventory Component | March 31, 2020 (Millions) | December 31, 2019 (Millions) | | :-------------------- | :-------------------------- | :--------------------------- | | Finished goods | $462.1 | $402.9 | | Work in process | $5.7 | $6.0 | | Raw materials and parts | $207.6 | $198.8 | | Total inventories, net | $611.8 | $544.1 | [Note 10. Pension Benefit Plan](index=20&type=section&id=Note%2010.%20Pension%20Benefit%20Plan) Discloses the components of net periodic benefit cost for the company's defined benefit pension plans Net Periodic Benefit Cost | Component | 3 Months Ended March 31, 2020 (Millions) | 3 Months Ended March 31, 2019 (Millions) | | :------------------------ | :--------------------------------------- | :--------------------------------------- | | Service cost | $1.4 | $1.2 | | Interest cost | $1.8 | $3.5 | | Expected return on plan assets | $(2.2) | $(4.7) | | Recognized actuarial loss | $1.5 | $2.0 | | Net periodic benefit cost | $2.5 | $2.0 | [Note 11. Income Taxes](index=20&type=section&id=Note%2011.%20Income%20Taxes) Details the company's income tax provisions, unrecognized tax benefits, and valuation allowances - As of March 31, 2020, total gross unrecognized tax benefits were approximately **$3.1 million**[79](index=79&type=chunk) - A **$7.6 million valuation allowance** was recorded on certain foreign deferred tax assets in Q1 2020 due to the adverse impact of the COVID-19 pandemic[81](index=81&type=chunk) [Note 12. Lines of Credit and Financing Arrangements](index=21&type=section&id=Note%2012.%20Lines%20of%20Credit%20and%20Financing%20Arrangements) Describes the company's debt structure, credit facilities, and compliance with debt covenants - The Asset Securitization Program (ASP) was renewed, increasing the maximum amount to a range of **$250.0 million to $400.0 million**[85](index=85&type=chunk) - The Domestic Credit Facility consists of a **$1,000.0 million** unsecured revolving credit facility and a **$160.0 million** unsecured term loan[89](index=89&type=chunk) - The company issued **$350.0 million** of senior unsecured notes in November 2016, maturing on November 15, 2023, with a **3.00% interest rate**[94](index=94&type=chunk) - The company believes it was in **compliance with all covenant requirements** under its debt agreements as of March 31, 2020[88](index=88&type=chunk)[91](index=91&type=chunk)[94](index=94&type=chunk) Total Debt | Debt Category | March 31, 2020 (Millions) | December 31, 2019 (Millions) | | :-------------------------------- | :-------------------------- | :--------------------------- | | Current maturities of long-term debt | $252.3 | $321.9 | | Long-term debt | $1,189.9 | $849.3 | | Total debt | $1,442.2 | $1,171.2 | [Note 13. Comprehensive Income](index=25&type=section&id=Note%2013.%20Comprehensive%20Income) Provides details on the changes in accumulated other comprehensive loss (AOCL) during the period Changes in Accumulated Other Comprehensive Loss (AOCL) | Component | Balance Dec 31, 2019 (Millions) | Net Other Comprehensive (Loss) Income (Millions) | Balance Mar 31, 2020 (Millions) | | :-------------------------------- | :------------------------------ | :--------------------------------------- | :------------------------------ | | Gains (Losses) on Cash Flow Hedges | $0.0 | $(9.6) | $(9.6) | | Defined Benefit Pension Plan Items | $(81.5) | $0.6 | $(80.9) | | Foreign Currency Translation Adjustments | $(22.3) | $(20.3) | $(42.6) | | Total AOCL | $(103.8) | $(29.3) | $(133.1) | Reclassifications from AOCL | Metric | 3 Months Ended March 31, 2020 (Millions) | 3 Months Ended March 31, 2019 (Millions) | | :-------------------------- | :--------------------------------------- | :--------------------------------------- | | Total reclassifications from AOCL | $(2.1) | $(5.4) | [Note 14. Fair Value Measurements](index=26&type=section&id=Note%2014.%20Fair%20Value%20Measurements) Discloses the methodologies and inputs used to measure the fair value of financial assets and liabilities - Derivatives are classified as **Level 2** and valued using estimated future cash flows based on observed prices from exchange-traded derivatives[97](index=97&type=chunk) - The fair value of senior unsecured notes was **$356.8 million** as of March 31, 2020, and December 31, 2019, classified as **Level 2**[99](index=99&type=chunk) - Carrying amounts of cash, receivables, payables, and the domestic credit facility **approximate fair value**[98](index=98&type=chunk) [Note 15. Subsequent Event](index=26&type=section&id=Note%2015.%20Subsequent%20Event) Reports on material events that occurred after the balance sheet date but before the financial statements were issued - In April 2020, the company implemented cost reduction actions due to the COVID-19 pandemic, expecting to incur approximately **$10 million in pre-tax charges** in Q2 2020[100](index=100&type=chunk) [Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations](index=27&type=section&id=Item%202.%20Management's%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) Provides management's perspective on financial performance, condition, and outlook, focusing on COVID-19 impacts [Business Overview](index=27&type=section&id=Business%20Overview) Describes the company's operations, business segments, market factors, and cost structure - The company operates in three reportable business segments within the HVACR industry: **Residential Heating & Cooling, Commercial Heating & Cooling, and Refrigeration**[104](index=104&type=chunk) - Demand for products and services is **seasonal** and influenced by weather, economic factors, and new construction[106](index=106&type=chunk) - Principal elements of cost of goods sold include components, raw materials (steel, copper, aluminum), factory overhead, labor, warranty costs, and freight[107](index=107&type=chunk) [Impact of COVID-19 Pandemic and the Resulting Changes to our 2020 Financial Outlook](index=27&type=section&id=Impact%20of%20COVID-19%20Pandemic%20and%20the%20Resulting%20Changes%20to%20our%202020%20Financial%20Outlook) Details the operational and financial impacts of the COVID-19 pandemic and the revised 2020 guidance - The COVID-19 pandemic has disrupted business operations, causing **supply chain disruptions**, higher employee absenteeism, and short-term manufacturing facility suspensions[109](index=109&type=chunk)[110](index=110&type=chunk) - In Q1 2020, the company incurred **$2 million in factory inefficiencies** and recorded an **$8 million valuation allowance** on foreign deferred tax assets due to the pandemic's impact[111](index=111&type=chunk) - Revised 2020 financial outlook: North America unitary HVAC and refrigeration market expected to be **negatively impacted by ~20%**[113](index=113&type=chunk) Revised 2020 Outlook | Metric | Revised 2020 Outlook | | :------------------------------------ | :------------------- | | Revenue | Down 11%-17% | | Diluted EPS from continuing operations | $7.07 to $8.07 | | SG&A Savings (implemented April 2020) | $115 million | | Expected Q2 2020 Pre-tax Charges | ~$10 million | | Projected Cash Flows from Operations | ~$460 million | | Capital Expenditure Plans | Reduced to $120 million | | Share Repurchases (Q1 2020) | $100 million | | Share Repurchases (Q2 2020) | On hold | [Financial Overview](index=28&type=section&id=Financial%20Overview) Summarizes the key financial results and segment performance for the first quarter of 2020 - Q1 2020 results were driven by year-over-year **sales and profit declines** in the Residential Heating & Cooling and Refrigeration segments[115](index=115&type=chunk) - Residential Heating & Cooling net sales **decreased 5%**, with segment profit down **$54 million**, including a **$40 million** decline related to non-recurring insurance recoveries in 2019[115](index=115&type=chunk) - Commercial Heating & Cooling net sales **increased 3%**, with segment profit up **$4 million** due to favorable mix and cost reductions[115](index=115&type=chunk) - Refrigeration net sales **declined 32%**, with segment profit down **$6 million**, primarily due to the Kysor Warren business sale in 2019 and lower volumes[115](index=115&type=chunk) [First Quarter of 2020 Compared to First Quarter of 2019 - Consolidated Results](index=28&type=section&id=First%20Quarter%20of%202020%20Compared%20to%20First%20Quarter%20of%202019%20-%20Consolidated%20Results) Provides a detailed analysis of the consolidated results of operations for the first quarter - Net sales **decreased $67 million (8.4%)** to $724 million, with half of the decline related to the Kysor Warren divestiture[117](index=117&type=chunk)[119](index=119&type=chunk) - Gross profit margin **decreased 260 basis points to 22.9%**, primarily due to lower volumes, factory inefficiencies, and higher product costs[120](index=120&type=chunk) - Operating income **decreased $58 million (61.6%)** to $36 million, mainly due to lower volumes and non-recurring insurance recoveries in 2019[117](index=117&type=chunk)[118](index=118&type=chunk) - Net income **decreased $56 million to $13 million**, and diluted EPS from continuing operations was **$0.32** compared to $1.73 in Q1 2019[117](index=117&type=chunk) - Selling, general and administrative (SG&A) expenses **declined $15 million** to $131 million, driven by the Kysor Warren divestiture and lower incentive compensation costs[121](index=121&type=chunk) - The effective tax rate **increased to 52.8%** from 16.4% in Q1 2019, primarily due to lower excess tax benefits and an **$8 million valuation allowance**[131](index=131&type=chunk) [First Quarter of 2020 Compared to First Quarter of 2019 - Results by Segment](index=33&type=section&id=First%20Quarter%20of%202020%20Compared%20to%20First%20Quarter%20of%202019%20-%20Results%20by%20Segment) Analyzes the financial performance of each of the company's reportable business segments - Residential Heating & Cooling net sales **decreased 5.0%** to $442.1 million, and profit **declined 62.5%** to $32.5 million, primarily due to **$40 million** of non-recurring insurance proceeds in 2019[133](index=133&type=chunk)[134](index=134&type=chunk) - Commercial Heating & Cooling net sales **increased 2.9%** to $178.4 million, and profit **increased 23.8%** to $18.7 million, driven by favorable mix and cost reductions[135](index=135&type=chunk)[136](index=136&type=chunk) - Refrigeration net sales **decreased 31.8%** to $103.3 million, and profit **declined 91.7%** to $0.7 million, mainly due to the divested Kysor Warren business[138](index=138&type=chunk)[139](index=139&type=chunk) - Corporate and other expenses **increased $2 million** due to higher information technology investments and unfavorable foreign currency exchange rates[140](index=140&type=chunk) [Liquidity and Capital Resources](index=35&type=section&id=Liquidity%20and%20Capital%20Resources) Discusses the company's sources of liquidity, cash flows, debt, and capital allocation strategy - Working capital and capital expenditure requirements are generally met through **internally generated funds, bank lines of credit, and an asset securitization arrangement**[141](index=141&type=chunk) - Net cash used in operating activities **decreased to $(98.8) million** in Q1 2020 from $(141.0) million in Q1 2019, due to the timing of working capital payments[142](index=142&type=chunk) - Net cash provided by financing activities **increased to $133 million** in Q1 2020 from $109 million in Q1 2019, driven by higher net borrowings[144](index=144&type=chunk) - Total debt **increased to $1,442.2 million**, leading to a debt-to-total-capital ratio increase to **128.3%** from 117.0%[146](index=146&type=chunk)[148](index=148&type=chunk) - The company maintains **investment-grade credit ratings** (Baa3 by Moody's, BBB by S&P) and believes its liquidity is sufficient to fund foreseeable needs[149](index=149&type=chunk)[150](index=150&type=chunk) [Item 3. Quantitative and Qualitative Disclosures About Market Risk](index=38&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) Refers to the Annual Report for market risk details, noting no material changes since year-end - The company's exposure to market risk has **not changed materially** since December 31, 2019[153](index=153&type=chunk) [Item 4. Controls and Procedures](index=38&type=section&id=Item%204.%20Controls%20and%20Procedures) Confirms the effectiveness of disclosure controls and reports no material changes in internal controls - Disclosure controls and procedures were **effective** as of March 31, 2020, providing reasonable assurance that required information is reported timely[154](index=154&type=chunk) - There were **no material changes** in internal control over financial reporting during the first quarter of 2020[155](index=155&type=chunk) [Part II - Other Information](index=38&type=section&id=Part%20II%20Other%20Information) Contains disclosures on legal proceedings, risk factors, stock repurchases, and other required information [Item 1. Legal Proceedings](index=38&type=section&id=Item%201.%20Legal%20Proceedings) States that ongoing legal matters are not expected to have a material adverse effect on the company - The company is involved in various claims and lawsuits, but management believes they will **not have a material adverse effect** on financial condition, results of operations, or cash flows[156](index=156&type=chunk) [Item 1A. Risk Factors](index=38&type=section&id=Item%201A.%20Risk%20Factors) Highlights the COVID-19 pandemic as a significant additional risk factor impacting the business - The **COVID-19 pandemic** is an additional risk factor, with an unpredictable magnitude of impact on business operations, financial condition, and liquidity[157](index=157&type=chunk) - Government decrees in response to COVID-19 have caused **supply chain disruptions**, higher absenteeism, and short-term manufacturing facility suspensions[158](index=158&type=chunk)[159](index=159&type=chunk) - There have been **no other material changes** to the risk factors disclosed in the Annual Report on Form 10-K for the year ended December 31, 2019[160](index=160&type=chunk) [Item 2. Unregistered Sales of Equity Securities and Use of Proceeds](index=39&type=section&id=Item%202.%20Unregistered%20Sales%20of%20Equity%20Securities%20and%20Use%20of%20Proceeds) Details common stock repurchases during the quarter and the remaining authorization for buybacks - Total shares purchased include **25,598 shares** surrendered by employees to satisfy tax-withholding obligations[161](index=161&type=chunk) Share Repurchase Activity (Q1 2020) | Period | Total Shares Purchased | Average Price Paid per Share | Shares Purchased As Part of Publicly Announced Plans | Approximate Dollar Value of Shares that may yet be Purchased (in millions) | | :-------------------------- | :--------------------- | :--------------------------- | :------------------------------------------------- | :----------------------------------------------------------------------- | | January 1 through February 1 | 190 | $245.45 | — | $546.0 | | February 1 through February 23 | 353,346 | $242.5 | 351,763 | $446.0 | | February 23 through March 31 | 84,507 | $233.9 | 60,682 | $446.0 | | Total | 438,043 | N/A | 412,445 | N/A | [Item 6. Exhibits](index=40&type=section&id=Item%206.%20Exhibits) Lists all exhibits filed with the Form 10-Q, including corporate documents and officer certifications - Exhibits include the Restated Certificate of Incorporation, Amended and Restated Bylaws, Specimen Stock Certificate, various Indentures, and Certifications (31.1, 31.2, 32.1)[163](index=163&type=chunk) - **XBRL-related documents** (Instance Document, Schema, Calculation Linkbase, Label Linkbase, Presentation Linkbase, Definition Linkbase) are also filed[163](index=163&type=chunk) [SIGNATURE](index=41&type=section&id=SIGNATURE) Contains the formal signature block for the Quarterly Report on Form 10-Q, executed by the CFO - The report was signed by **Joseph W. Reitmeier, Chief Financial Officer**, on April 20, 2020[166](index=166&type=chunk)

Investor Presentation February 2020 FORWARD-LOOKING STATEMENTS This presentation 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 that could cause actual results to differ materially from such statements. Such risks and uncertainties include, but are not limited to, the impact of higher raw material prices, the impact of new or increased trade tariffs, LII's ability to implement pr ...

UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 Form 10-K ☒ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the fiscal year ended December 31, 2019 OR Securities Registered Pursuant to Section 12(b) of the Act: | Title of each class | Trading Symbol(s) | Name of each exchange on which registered | | --- | --- | --- | | Common stock, $0.01 par value per share | LII | New York Stock Exchange | ☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) ...

Lennox International Inc. (NYSE:LII) Q4 2019 Earnings Conference Call February 4, 2020 9:30 AM ET Company Representatives Todd Bluedorn - Chairman, Chief Executive Officer Joe Reitmeier - Chief Financial Officer Steve Harrison - Vice President of Investor Relations Conference Call Participants Deepa Raghavan - Wells Fargo Julian Mitchell - Barclays Jeff Hammond - KeyBanc Capital Markets Nigel Coe - Wolfe Research Nicole DeBlase - Deutsche Bank Robert Barry - Buckingham Research Pat Baumann - JP Morgan John ...

Credit Suisse 7th Annual Industrials Conference December 2019 FORWARD-LOOKING STATEMENTS Statements in this presentation that are not historical statements, including statements regarding the 2019 full-year outlook, expected consolidated and segment financial results for 2019, and the financial and operational impact of the tornado damage to LII's manufacturing facility in Marshalltown, Iowa, are forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. These for ...

Baird Global Industrial Conference November 2019 FORWARD-LOOKING STATEMENTS Statements in this presentation that are not historical statements, including statements regarding the 2019 full-year outlook, expected consolidated and segment financial results for 2019, and the financial and operational impact of the tornado damage to LII's manufacturing facility in Marshalltown, Iowa, are forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. These forward-looking ...

[Part I - Financial Information](index=3&type=section&id=Part%20I%20Financial%20Information) [Item 1. Financial Statements](index=3&type=section&id=Item%201.%20Financial%20Statements) The unaudited consolidated financial statements for the period ended September 30, 2019, show a slight increase in total assets to $2,214.8 million, driven by higher current assets and the adoption of new lease accounting standards (ASC 842) Consolidated Balance Sheet Highlights (in millions) | Account | Sep 30, 2019 (Unaudited) | Dec 31, 2018 | | :--- | :--- | :--- | | **Total Current Assets** | $1,317.3 | $1,089.4 | | **Total Assets** | $2,214.8 | $1,817.2 | | **Total Current Liabilities** | $1,109.9 | $1,008.5 | | **Total Liabilities** | $2,492.1 | $1,966.8 | | **Total Stockholders' Deficit** | $(277.3) | $(149.6) | Consolidated Statements of Operations Highlights (in millions, except per share data) | Metric | Q3 2019 | Q3 2018 | YTD 2019 | YTD 2018 | | :--- | :--- | :--- | :--- | :--- | | Net Sales | $1,032.9 | $1,030.2 | $2,922.2 | $3,040.4 | | Gross Profit | $298.3 | $301.9 | $831.9 | $886.6 | | Operating Income | $156.8 | $145.2 | $465.3 | $393.3 | | Net Income | $114.7 | $108.0 | $294.7 | $283.4 | | Diluted EPS | $2.94 | $2.65 | $7.46 | $6.86 | Consolidated Statements of Cash Flows Highlights (Nine Months Ended Sep 30, in millions) | Cash Flow Activity | 2019 | 2018 | | :--- | :--- | :--- | | Net cash provided by operating activities | $124.5 | $231.3 | | Net cash (used in) provided by investing activities | $(23.1) | $59.3 | | Net cash used in financing activities | $(102.8) | $(316.6) | - In Q1 2019, the company sold its Kysor Warren business, resulting in a net loss of **$9.1 million**, which included **$49.0 million** in cash proceeds against **$50.5 million** in net assets sold and other costs[99](index=99&type=chunk) - In Q2 2019, the company transferred **$100.0 million** of pension plan assets and **$105.6 million** of related obligations, recognizing a **$60.6 million** pension settlement charge[88](index=88&type=chunk) - The company repurchased **1.5 million shares** for **$400.0 million** in the first nine months of 2019 under its share repurchase plans. As of September 30, 2019, **$46 million** remained available for future repurchases[92](index=92&type=chunk)[93](index=93&type=chunk) - A subsequent event in October 2019 involved another pension settlement, transferring **$75.0 million** in assets and **$77.9 million** in obligations, with an expected pre-tax loss of **$38.5 million** in Q4 2019[140](index=140&type=chunk) [Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations](index=41&type=section&id=Item%202.%20Management%27s%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) Management attributes Q3 2019 performance to sales and profit growth in the Residential and Commercial Heating & Cooling segments, offset by a decline in the Refrigeration segment due to recent divestitures Q3 2019 vs Q3 2018 Consolidated Results (in millions) | Metric | Q3 2019 | Q3 2018 | % Change | | :--- | :--- | :--- | :--- | | Net Sales | $1,032.9 | $1,030.2 | 0.3% | | Gross Profit | $298.3 | $301.9 | (1.2)% | | Operating Income | $156.8 | $145.2 | 8.0% | YTD 2019 vs YTD 2018 Consolidated Results (in millions) | Metric | YTD 2019 | YTD 2018 | % Change | | :--- | :--- | :--- | :--- | | Net Sales | $2,922.2 | $3,040.4 | (3.9)% | | Gross Profit | $831.9 | $886.6 | (6.2)% | | Operating Income | $465.3 | $393.3 | 18.3% | - The Residential Heating & Cooling segment saw a **7% net sales increase** in Q3 2019, driven by **6% higher volume** and **1% favorable price/mix**. Segment profit rose **11.9% to $126.5 million**, significantly boosted by **$16 million** in insurance proceeds for lost profits related to the Marshalltown tornado[162](index=162&type=chunk)[163](index=163&type=chunk) - The Commercial Heating & Cooling segment's net sales grew **7%** in Q3 2019, from **4% higher volume** and **3% favorable price/mix**. Segment profit increased **5.1% to $47.1 million**[165](index=165&type=chunk)[166](index=166&type=chunk) - The Refrigeration segment's net sales decreased **28%** in Q3 2019, primarily due to a **27% impact** from the divestiture of the Kysor Warren and South America businesses. Segment profit fell **20.5% to $19.8 million**[167](index=167&type=chunk)[168](index=168&type=chunk) - Cash from operating activities decreased to **$124.5 million** for YTD 2019 from **$231.3 million** in YTD 2018, mainly due to the timing of working capital payments and the supply disruption in 2018 caused by the tornado[190](index=190&type=chunk) - Total debt increased to **$1,451.1 million** as of Sep 30, 2019, from **$1,041.3 million** at year-end 2018, primarily due to increased borrowings on the domestic credit facility to support share repurchases and other financing activities[76](index=76&type=chunk)[192](index=192&type=chunk) [Item 3. Quantitative and Qualitative Disclosures About Market Risk](index=51&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) The company's exposure to market risk, including risks related to commodity prices, interest rates, and foreign currency exchange rates, has not materially changed since the disclosures provided in its Annual Report on Form 10-K for the fiscal year ended December 31, 2018 - There have been no material changes in the company's market risk exposure since December 31, 2018[202](index=202&type=chunk) [Item 4. Controls and Procedures](index=51&type=section&id=Item%204.%20Controls%20and%20Procedures) Management, including the CEO and CFO, evaluated the company's disclosure controls and procedures and concluded they were effective as of September 30, 2019 - The CEO and CFO concluded that disclosure controls and procedures were effective as of September 30, 2019[203](index=203&type=chunk) - New controls and an IT system were implemented in Q1 2019 to adopt the new lease accounting standard, ASC 842[204](index=204&type=chunk) [Part II - Other Information](index=52&type=section&id=Part%20II%20Other%20Information) [Item 1. Legal Proceedings](index=52&type=section&id=Item%201.%20Legal%20Proceedings) The company is involved in various claims and lawsuits incidental to its business operations, with management believing none will have a material adverse effect on financial position or results - Management believes that ongoing claims and lawsuits will not have a material adverse effect on the company's financial condition or results[206](index=206&type=chunk) [Item 1A. Risk Factors](index=52&type=section&id=Item%201A.%20Risk%20Factors) There have been no material changes to the company's risk factors from those disclosed in its Annual Report on Form 10-K for the year ended December 31, 2018 - No material changes have occurred in the company's risk factors since the 2018 Form 10-K filing[207](index=207&type=chunk) [Item 2. Unregistered Sales of Equity Securities and Use of Proceeds](index=52&type=section&id=Item%202.%20Unregistered%20Sales%20of%20Equity%20Securities%20and%20Use%20of%20Proceeds) During the third quarter of 2019, the company repurchased a total of 529,538 shares of its common stock, with **$45.8 million** remaining available for future repurchases Q3 2019 Share Repurchases | Period | Total Shares Purchased | Average Price Paid per Share | Shares Purchased Under Plan | Remaining Authorization (in millions) | | :--- | :--- | :--- | :--- | :--- | | July 1 - Sep 30 | 529,538 | - | 520,375 | $45.8 | - The total share repurchases for the first three quarters of 2019 amounted to **$400 million** ($100M in Q1, $150M in Q2, $150M in Q3)[209](index=209&type=chunk) [Item 6. Exhibits](index=53&type=section&id=Item%206.%20Exhibits) This section lists all exhibits filed with the Form 10-Q, including corporate governance documents, debt indentures, and officer certifications - Filed exhibits include corporate governance documents, debt indentures, officer certifications (31.1, 31.2, 32.1), and XBRL data files[211](index=211&type=chunk)[212](index=212&type=chunk)