LENNOX INTERNATIONAL INC

Lennox International Inc. is a global leader in energy-efficient climate-control solutions, designing, manufacturing, and marketing a broad range of products for the heating, ventilation, air conditioning and refrigeration (HVACR) markets. The Company was founded in 1895 and has leveraged its expertise to become an industry leader known for innovation, quality, and reliability. The HVACR industry is driven by seasonal weather patterns, with cooling equipment representing a substantial portion of the annual market, and the industry generally ships roughly twice as many units during June as it does in December. The U.S. Department of Energy has numerous active energy conservation rulemakings that impact residential and commercial heating, air conditioning, and refrigeration equipment, and the transition to refrigerants with a global warming potential of 700 or less for most commercial and residential HVAC products became effective January 1, 2025.

Substantially all markets in which Lennox participates are competitive, with the most significant competitive factors being product availability, reliability, energy efficiency, product performance, service, and price. In the Home Comfort Solutions segment, significant competitors include Carrier Global Corporation, Trane Technologies plc, Paloma Industries, Inc., The Bosch Group, Daikin Industries, Ltd., and Madison Industries. In the Building Climate Solutions segment, competitors for heating and cooling products include Carrier Global Corporation, Trane Technologies plc, Paloma Industries, Inc., CSW Industrials, Inc., Daikin Industries, Ltd., and AAON, Inc., while for refrigeration products, competitors include Hussmann Corporation, Paloma Industries, Inc., Emerson Electric Co., Carrier Global Corporation, GEA Group, Alfa Laval, Guntner GmbH, Kelvion - Profroid, Panasonic Corp., Technotrans, and Deltatherm. Lennox believes its success is rooted in a three-phase self-help transformation plan that continues to guide its progress, focusing on differentiated growth, resilient profit margins, and execution management.

Lennox generates revenue by designing, manufacturing, and marketing a broad range of products for the HVACR markets, sold through multiple distribution channels under various brand names. The Company utilizes multiple channels of distribution and offers different brands at various price points to better penetrate the HVACR markets, with products and services sold through a combination of direct sales, distributors, and company-owned parts and supplies stores. The North American residential heating and cooling market provides an example of the competitive strength of its marketing and distribution strategy, using three distinct distribution approaches: the company-owned distribution system, the independent distribution system, and direct sales to end-users. The Company's direct-to-dealer network creates a large installed base of HVACR equipment and creates opportunities for longer term service, monitoring, solutions, and retrofit revenue.

The Home Comfort Solutions segment manufactures and markets a broad range of heat pumps, furnaces, air conditioners, packaged heating and cooling systems, equipment and accessories to improve indoor air quality, comfort control products, replacement parts and supplies for both the residential replacement and new construction markets in North America. The segment's product and brand names include Lennox, Dave Lennox Signature Collection, Armstrong Air, Ducane, AirEase, Concord, MagicPak, ADP Advanced Distributor Products, Allied, Supco, LINEBACKER, Elite Series, Merit Series, Comfort Sync, Healthy Climate, Healthy Climate Solutions, iComfort, ComfortSense, and Lennox Stores. In 2025, the Home Comfort Solutions segment generated net sales of $3,343.4 million ¹. The segment operates a network of Lennox Stores across the U.S. and Canada, and the Allied Air Enterprise business sells a full line of heating, ventilation and cooling products through independent wholesale distributors in the U.S. and Canada, as well as through private label brands.

The Building Climate Solutions segment manufactures and sells unitary heating and air conditioning equipment, applied systems, controls, installation and service of commercial heating and cooling equipment, variable refrigerant flow commercial products, curb, curb adapters, drop box diffusers, HVAC recycling and salvage service, condensing units, unit coolers, fluid coolers, air cooled condensers, air handlers, process chillers, controls, compressorized racks, replacement parts and supplies. The segment's product and brand names include Lennox, Model L, CORE, Enlight, Xion, Energence, Prodigy, Strategos, Raider, Lennox VRF, Lennox National Account Services, Allied Commercial, Elite, Duro Dyne, Dyna-Tite, DuroZone, AES Industries, AES Mechanical, AES Recycle, Heatcraft Worldwide Refrigeration, Bohn, MAGNA, Larkin, Climate Control, Chandler Refrigeration, IntelliGen, and Interlink. In 2025, the Building Climate Solutions segment generated net sales of $1,851.9 million ². The segment also includes National Account Services, which provides installation, service and preventive maintenance for commercial HVAC national account customers in the U.S. and Canada, and AES, which manufactures curbs, curb adapters, drop box diffusers and offers HVAC recycling and salvage services.

In October 2025, Lennox completed the acquisition of Duro Dyne Buyer, Inc. and Sealed Unit Parts Buyer, Inc. (Duro Dyne and Supco), which manufacture and sell a robust portfolio of HVAC parts and supplies that complement existing residential and commercial offerings. Duro Dyne is reported in the Building Climate Solutions segment, and Supco is reported in the Home Comfort Solutions segment. In October 2023, the Company completed the acquisition of AES Industries, Inc. and AES Mechanical Service Group, Inc., which is included in the Building Climate Solutions segment. In the fourth quarter of 2023, Lennox successfully completed the divestiture of its European operations. In May 2025, the Board of Directors authorized an incremental $1.0 billion ³ share repurchase authorization, bringing the total authorized under the Share Repurchase Plans to $5 billion ⁴. During 2025, the Company repurchased $482.3 million ⁵ of common stock as part of its Share Repurchase Plans and returned $173.0 million ⁶ to shareholders through dividend payments. On May 22, 2025, the Board of Directors approved a 13% ⁷ increase in the quarterly dividend on common stock from $1.15 to $1.30 per share.

For the fiscal year ended December 31, 2025, Lennox reported net sales of $5,195.3 million ⁸, a decrease of 3% ⁹ compared to $5,341.3 million ¹⁰ in 2024. Net income was $805.8 million ¹¹ in 2025, compared to $811.1 million ¹² in 2024. Diluted earnings per share was $22.79 ¹³ in 2025, compared to $22.66 ¹⁴ in 2024. Operating income was $1,041.5 million ¹⁵ in 2025, compared to $1,040.4 million ¹⁶ in 2024. The Company generated $757.6 million ¹⁷ of cash flow from operating activities in 2025, compared to $945.7 million ¹⁸ in 2024. Gross profit margin for 2025 was 33.4% ¹⁹, an increase of 10 basis points compared to 33.3% ²⁰ in 2024.

Lennox is advancing its market position through a balanced approach that includes organic growth and selective strategic investments, with a focus on differentiated growth. The Company is investing in its sales force to expand customer touchpoints, enhancing the overall customer experience through digital innovations and output from its new commercial HVAC factory in Mexico. Additionally, the Company is focused on improving the fulfillment rate of HVAC equipment and driving higher attachment rates for parts and accessories. The Company is also investing in heat pump growth and enhancements to its distribution network, which further exemplifies its commitment to consistent management execution.

The Company is committed to sustaining resilient profit margins through pricing excellence, enhanced productivity from higher volumes, material cost reductions, and a favorable mix influenced by regulatory transitions. The Company is effectively managing pricing and costs to drive margin expansion and profitability. The Company's success is rooted in a three-phase self-help transformation plan that continues to guide its progress over the coming years, with a focus on resilient profit margins.

Lennox will leverage the Lennox Unified Management System to streamline its operations and set clear priorities. The Company is continuing to reorganize its North American distribution network in order to better serve customers' needs by deploying parts and equipment inventory closer to them. The Company operates manufacturing facilities in North America and utilizes the best available manufacturing techniques, including the use of lean manufacturing and principles of Six Sigma. Some facilities are impacted by seasonal production demand, and the Company manufactures a mix of heating, cooling and refrigeration products in those facilities to balance production and maintain a relatively stable labor force.

Research and development is a key pillar of Lennox's growth strategy, and the Company operates an engineering and technology organization that focuses on new technology invention, product development, product quality improvements and process enhancements. Capital expenditures were $118.8 million ²¹ in 2025, $163.6 million ²² in 2024, and $250.2 million ²³ in 2023. The Company expects capital expenditures of approximately $250 million ²⁴ in 2026 for general capital improvement projects. As of December 31, 2025, $1,009.6 million ²⁵ is available to repurchase shares under the Share Repurchase Plans. Dividend payments were $173.0 million ²⁶ in 2025 compared to $160.3 million ²⁷ in 2024.

The Company's financial performance is affected by the conditions and performance of the U.S. construction industry, with sales in the residential and commercial new construction markets correlating to the number of new homes and buildings built, which is influenced by cyclical factors such as interest rates, inflation, availability of financing, consumer spending habits and confidence, employment rates and other macroeconomic factors. Demand for the Company's products and services is seasonal and strongly affected by the weather, with cooler than normal summers depressing sales of replacement air conditioning and refrigeration products and services, and warmer than normal winters having the same effect on heating products and services. The Company depends on raw materials such as steel, copper and aluminum, and components purchased from third parties, and price volatility for these commodities or significant supply interruptions could have an adverse effect on cash flow or results of operations.

Changes in U.S. trade policy, including the imposition of tariffs and the resulting consequences, could have an adverse effect on the Company's results of operations. The U.S. presidential administration has imposed increased tariffs on imports from Canada and Mexico for goods not covered by the USMCA, and the USMCA is subject to review and renewal in 2026. The Company cannot predict the extent to which the U.S. or other countries will impose new or additional quotas, duties, tariffs, taxes, non-tariff barriers, or other similar restrictions upon the import or export of its products in the future. Changes in environmental and climate-related legislation, government regulations, or policies could also have an adverse effect on results of operations, including changes in energy efficiency standards and regulations targeting the global warming potential of refrigerants and hydrofluorocarbons.

Lennox faces significant competitive pressure in substantially all of its markets, where the most important factors are product availability, reliability, energy efficiency, product performance, service, and price, and some competitors may have greater financial resources. The Company's financial performance is highly dependent on the U.S. construction industry, which is influenced by cyclical factors such as interest rates, inflation, and consumer confidence, and on seasonal weather patterns, where cooler summers and warmer winters can depress sales. Price volatility for key raw materials like steel, copper, and aluminum, or significant supply interruptions from single-location production facilities or key suppliers, could materially increase costs or disrupt operations. The Company's product warranty liability was $167.2 million ²⁸ as of December 31, 2025, and warranty terms ranging from one to 20 years for certain components pose a risk if actual future costs exceed estimates. Changes in U.S. trade policy, including increased tariffs on imports from Canada and Mexico, and evolving environmental regulations regarding energy efficiency and refrigerants, could directly impact sales, gross margins, and profitability.

Management's message emphasizes a three-phase self-help transformation plan that continues to guide progress over the coming years, focusing on differentiated growth, resilient profit margins, and execution management. The strategic priorities for the period ahead include investing in the sales force to expand customer touchpoints, enhancing the customer experience through digital innovations and output from the new commercial HVAC factory in Mexico, and improving the fulfillment rate of HVAC equipment while driving higher attachment rates for parts and accessories. Management is also committed to sustaining resilient margins through pricing excellence, enhanced productivity from higher volumes, material cost reductions, and a favorable mix influenced by regulatory transitions, while leveraging the Lennox Unified Management System to streamline operations and set clear priorities.