JPMorgan Small/Mid Cap Conference Boston, MA – November 13 th, 2006.

JPMorgan Small/Mid Cap ConferenceBoston, MA – November 13th, 2006

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ResidentialHeating & Cooling

CommercialHeating & Cooling RefrigerationService Experts

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. For information concerning these risks and uncertainties, see Lennox

International’s publicly available filings with the Securities and Exchange Commission.

LII disclaims any intention or obligation to update or revise any forward-looking

statements, whether as a result of new information, future events or otherwise.

A reconciliation of information presented to U.S. Generally Accepted Accounting

Principles (GAAP) is posted on the company’s website at www.lennoxinternational.com.

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Investment Highlights Leading climate control solutions provider with 111-year history

of product innovation operating in over 100 countries

Positive operating earnings growth trend with expected FY 06 adjusted EPS up 15%+

A strong balance sheet with Debt : Capitalization of 13% provides a solid foundation for growth

Mitigating $60 mil in estimated commodities headwinds in 2006

Successful transition to 13 SEER resulting in product mix benefits

Exposure to residential new construction limited to an estimated 20% of total sales

4.7 million shares repurchased in first 9 months of 2006

Dividend increased 10% in December 2005

CEO succession plan for smooth transition

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14%

19%

18%

49%

62%

5%

18%

15%

Packaged Rooftop Units, Split Systems

Cold Storage Applications, Primarily for Food Preservation

HVAC Equipment Sales, Installation, Maintenance,

and Service

Central Air Conditioning, Furnaces, Heat Pumps, IAQ Equipment, Fireplaces

RefrigerationService ExpertsResidentialHeating & Cooling

Focused on Four Related BusinessesSTRONG BRANDS SOLD THROUGH MULTI-CHANNEL DISTRIBUTION

Revenue Segment Profit

Notes: Data is TTM to 09/30/06; segment profit is before unallocated corporate expense; residential is net of eliminations

CommercialHeating & Cooling

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35%

65%

Business Mix

Customer

Residential

Commercial

Source: Company estimates

8%

87%

Americas

Europe

Asia Pacific

Geography

Replacement

New Construction

End Market

5%

6



Manufacturing Footprint27 PLANTS IN 11 COUNTRIES

Residential Heating & CoolingCommercial Heating & CoolingRefrigerationJoint Ventures

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HVACR Market Fundamentals

Maturing markets with mid-single digit growth

Increasing shift in end markets from new constructionto replacement

Economic conditions, new construction, and weather drive demand

Regulatory environment impacts product offering

Strong competitive environment with some pricing power

Value in brands and established distribution relationships

8



LII’s Historical GrowthSALES IN $ MILLIONS

0

500

1000

1500

2000

2500

3000

3500

4000

1985

1987

1989

1991

1993

1995

1997

1999

2001

2003

2005

Note - 2004 sales from continuing operations

Armstrong

Refrigeration

International

Service Experts

“Clearing the decks”

A new era of growth

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Growth & Profit Improvement Initiatives Residential Heating & Cooling

Continue to invest in product leadership Increase sales in under-penetrated sunbelt markets

Commercial Heating & Cooling Solidify new construction position Penetrate replacement market opportunities

Service Experts Protection plans to strengthen relationship with homeowners Customer contact center to improve conversion rates Field automation to improve efficiency

Refrigeration Extend successful domestic business model into developing markets Leverage internal and external intellectual property to drive innovation Explore acquisitions to enhance capabilities and extend product reach

Acquisitions provide upside Strategic acquisitions Strong balance sheet Disciplined acquisition

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0

1,000,000

2,000,000

3,000,000

4,000,000

5,000,000

6,000,000

7,000,000

8,000,000

9,000,000

19

80

19

85

19

90

19

95

20

00

20

05

Air Conditioners & Heat Pumps

Gas Furnaces

RNC Starts

Replacements Drive Residential Growth NORTH AMERICA RESIDENTIAL UNIT SHIPMENTS VS HOUSING STARTS

Source: ARI, GAMA, HRAI, NAHB, CMHC



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Multi-Channel Distribution

OEM Distributor Dealer Home Owner

BY REVENUE BY UNIT

Generating $1.5 billion* Delivering 2.8M units*

1-Step 1-Step2-Step 2-Step

* 2005 company data



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Product InnovationXC21 … The world’s first central air conditioner rated at 20+ SEER

HSX15 … The quietest central air conditioning system

G61V … The quietest gas furnace

SignatureStat … Humidity and temperature control in one device

PureAir … Cleans the air in your home better than any other single system

Humiditrol … Whole home dehumidification system

Approximately 30% of 2005 manufacturing equipment revenue came from products introduced in the past 3 years



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LII Market ShareGROWTH OPPORTUNITY IN LARGE AND GROWING SUNBELT MARKETS

At or above average market share

Lower than average market share

Sunbelt Market Focus



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Sunbelt Opportunity

Top 5 states represent 40% of all shipments

Sunbelt states represent 60% of all shipments

Growth in sunbelt outpacing others

0

250,000

500,000

750,000

1,000,000

1,250,000

1,500,000

1,750,000

2,000,000

TX FL CA GA IL

2005 U.S. Industry Shipments

Source: ARI, GAMA



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The State of the RNC Industry

0

500,000

1,000,000

1,500,000

2,000,000

2,500,000

1990 1992 1994 1996 1998 2000 2002 2004 2006 2008 2010

Sources: NAHB, single and multi-family

Units

New Construction Market Forecast Remains Above Robust Years New Construction Market Forecast Remains Above Robust Years



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Strong Position with 17 of Top 20 BuildersLENNOX SHARE % : █ 1-33% █ 34-66% █ 67-100%

Source: 2005 GIANTS Listing, Builder Magazine

Builder ’05 Closings

DR Horton 51,383

Pulte 45,630

Lennar 36,204

Centex 37,822

KB 31,646

Beazer 16,417

Hovnanian 17,783

Ryland 16,673

MDC 15,387

NVR 13,787

Builder ’05 Closings

Standard Pacific 11,694

TOUSA 9,435

Meritage 9,406

Toll Brothers 8,769

Shea Homes 6,901

Weyerhaeuser 5,274

Morrison 4,422

M/I Homes 4,303

David Weekley 3,952

Taylor Woodrow 3,635



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2003 2004 2005 2006 Est

Replacement

New Construction

Total Market

Commercial End Market MixINCREASING MORE PROFITABLE REPLACEMENT SALES

LennoxReplacement Sales Growth

Source: Industry data and company estimates

36% CAGR



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Commercial Regional Distribution CentersINCREASE PENETRATION IN REPLACEMENT MARKET

24 - 48 Hour Response24 - 48 Hour Response



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16%19%

27%

12%

12%

14%

Commercial Market SegmentationNEW CONSTRUCTION (Square Footage)

Source: 2Q06 Dodge Analytics & company estimates

Retail

Parking Garage/Auto Svc

Education

Commercial Warehouses

Office and Bank

Other



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14%

12%

12%

27%

19%16%

A Strong Base in RetailNEW CONSTRUCTION (Square Footage)

Retail


Education


Office and Bank

Other

Strengthen PositionStrengthen Position




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16% 19%

27%

12%

12%

14%

New Segment OpportunitiesNEW CONSTRUCTION (Square Footage)

Retail


Education


Office and Bank

Other

New Focus/New ProductsNew Focus/New Products




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Continuous Improvements at Service Experts

Over 78% of sales focused on more profitable and stable service/replacement opportunities

Common IT system, financial controls,and regional accounting centers deployed

Inventory Management & Replenishment programreducing working capital requirements to <8% of sales

49 graduates of GM Fast Track development program adding bench strength

Home Health Report Card - IAQ revenue growing over 40% in 2006

Continued roll-out of common branding & Standards of Excellence

Profitable IBS commercial business model growing over 20% CAGR since 2000

Over 85% of service technicians are NATE certified



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RenewalsRenewals

Demand Service OPPORTUNITY

Demand Service OPPORTUNITY

Replacement SalesReplacement Sales Accessories/IAQSales

Accessories/IAQSales

Protection Plans

Protection Plans

Tune-Ups TRUST

Tune-Ups TRUST

Protection Plan ProgramsONLY 1 IN 20 HOMEOWNERS HAS A SERVICE AGREEMENT

Closing Rate More Than Double for Protection Plan Customers

Closing Rate More Than Double for Protection Plan Customers



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Customer Contact CenterCurrent situation: First contact is with a local Customer Service Representative

High CSR turnover (45%) Little or no marketing intelligence collected on customers Inability to consistently implement sales and marketing initiatives

Future situation:Consolidate calls into two outsourced locations to exclusively support Service Experts

Inbound calls Receive, handle or route all customer/prospect calls Warm transfer to local center

Outbound calls Customer satisfaction survey Maintenance appointment setting Telemarketing

Net Result is Low Call Conversion Rates (52%) Net Result is Low Call Conversion Rates (52%)



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Improve Technician Efficiency Project “FAST” (Field Automation for Service Technicians)

Deploy mobile wireless solution to improve the efficiency (cost reduction) and effectiveness (revenue increase) of field technicians

Strengthen Service Experts control environment

Key Functionality Early phases

– Electronic service work orders– Driving directions (with GPS)– Interactive time stamps and enhanced paging– Up-sell prompts – Credit card, check, cash transactions with signature capture

Future phases– Full integration with business system– Immediate revenue recognition– Inventory management system with bar-coding– Equipment diagnostics



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Demand Enablers

ConversionRate

Improvement

10%

20%

30%

Service Revenue

Opportunity

$18m

$36m

$54m

Additional Calls Per Tech

2/week

3/week

4/week

Service Revenue

Opportunity

$24m

$36m

$48m

Customer Contact Center Driving Demand

Customer Contact Center Driving Demand

Field Application for Service Technicians

Exploiting Demand Efficiently

Field Application for Service Technicians

Exploiting Demand Efficiently

Creating a World Class Service OrganizationCreating a World Class Service Organization



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Worldwide Product Segments$17.5 BILLION TOTAL MARKET

($ BILLIONS)

$1.2 Walk-in Coolers

$2.9 Refrigerated Cases/Display

$3.1 Transport Refrigeration

$2.3Industrial/Ammonia

$2.1Self Contained/Reach-In

$1.9 Vending Ice Machines

$0.8 Specialty Chillers

$1.0Non-Food Ultra Low Temp

$2.2Commercial Systems

$2.2Commercial Systems

Sources: Fredonia, Census Bureau, Frost and Sullivan, company estimates



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Organic RoadmapSTRATEGIC DRIVERS

Pro

du

c tL

ead

ers

hip

Product Development Strategy

• 3 year roadmap• Stage Gate®• Open innovation• Brand strategy

Plan development and execution

>8% revenue growth/year

2004 2005 2006 2007 2008

Customer Interface Strategy

• Service alignment• Customer segmentation


Manufacturing Excellence Strategy

• Low-cost product platforms• Open innovation

Cu

s to

mer

Inti

ma

cyO

per

atio

na l

Exc

elle

nce

Unparalleled customer service

>15% cost reduction




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Developing MarketsSTRATEGIC DRIVERS

Represent approximately 20-25% of global refrigeration market today Developing refrigeration

infrastructure Development of retail food channels Average per capita spend ~10% of

developed markets

Emerging economies and infrastructure offer attractive market growth rates China ~12-14% India ~12-14% Southeast Asia ~ 9-11% South America ~6-9%

Source: McKinsey report, internal estimates



1999 2006

16% CAGR

-$4

-$2

$0

$2

$4

$6

$8

$10

$12

$14

1999 2006

10%+

REVENUE EBIT

Heatcraft Model in Place in Brazil

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Potential Adjacent Markets Common customer base and channels

Leverage technology and manufacturing processes

Supporting services and technology

Expands our influence to key end use sectors

Expands available market

Food Retail Food Production Food Service



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$2.2 Commercial Systems

$9.5Expanded MarketOpportunity

$9.5Expanded MarketOpportunity

Sources Fredonia, Census Bureau, Frost and Sullivan, company estimates

$1.2 Walk-in Coolers

$2.9 Refrigerated Cases/Display

$3.1 Transport Refrigeration

$2.3Industrial/Ammonia

$2.1Self Contained/Reach-In

$1.9 Vending Ice Machines

$0.8 Specialty Chillers

$1.0Non-Food Ultra Low Temp

Worldwide Product Segments$17.5 BILLION TOTAL MARKET

($ BILLIONS)



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Financial Overview

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5 Years of Sales & Profit Growth$ MILLIONS EXCEPT PER SHARE DATA

* Exclusive of restructuring, non-recurring items, non-operating gains/losses and goodwill impairment charges

0

1000

2000

3000

4000

20

02

20

03

20

04

20

05

20

06

est

Adjusted Income From Continuing Operations*

0

50

100

150

200

20

02

20

03

20

04

20

05

20

06

est

0

0.5

1

1.5

2

2.5

2002

2003

2004

2005

2006

est

Sales Adjusted EPS*

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Solid First 9 Months Performance$ MILLIONS EXCEPT PER SHARE AND RATIO DATA

2006 2005 % Chg

Sales $ 2,808.7 $ 2,495.6 +13%

Net Income 120.6 108.9

Discontinued Operations #… ---- 1.3 (Gains), losses & other expenses # * 3.1 (15.9) Restructuring charge #… 8.5 1.6

Tax items…… (8.8) ----Cumulative effect of accounting change # … ---- (0.2)

Adjusted Income from Continuing Operations $123.4 $95.7 +29%

Diluted EPS, as adjusted 1.65 1.37 +20%

Total Debt at 09/30 $120.0 $236.1 -49%

Debt : Cap at 09/30 13% 27%

* Net of realized gains on settled futures contracts # Net of income tax

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A Stronger Balance Sheet

Reduced Total Debt by $570 Million in Past 5 YearsReduced Total Debt by $570 Million in Past 5 Years

* As of September 30, 2006

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Financial ObjectivesFULL-YEAR 2006 GUIDANCE (provided 10/26/06)

GAAP EPS of $2.00 to $2.10; adjusted EPS exceeding this range

Revenue growth of approximately 10%

Capital expenditures of approximately $70 million

LONG-TERM

Annual revenue growth of 6 to 8% plus acquisition activity

10% segment profit margin…a minimum of 50 bps improvement per year

ROIC = 5% greater than cost of capital

Debt : Capitalization below 40%

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JPMorgan Small/Mid Cap Conference Boston, MA – November 13 th, 2006.

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Transcript of JPMorgan Small/Mid Cap Conference Boston, MA – November 13 th, 2006.