LENNOX INTERNATIONAL INC
For the period ended Mar 31, 2025. Filed Apr 23, 2025.
View on SEC.govAbout this filing
A company's report for each of its first three quarters. The financial statements are not audited. It shows how the business has moved since the last annual report, and what management says changed.
Mar 31, 2025 · Filed Apr 23, 2025
LII$341.97-2.0%Stored close · as of Nov 6, 2026
What changed in Management’s Discussion and Analysis?
Read the current filingPrevious report: 10-Q
Period ended 2024-09-30; filed 2024-10-23.
0001628280-24-043392
Item 2. Management's Discussion and Analysis of Financial Condition and Results of OperationsCurrent report: 10-Q
Period ended 2025-03-31; filed 2025-04-23.
0001069202-25-000017
Item 2. Management's Discussion and Analysis of Financial Condition and Results of OperationsThe baseline is this issuer’s latest earlier reporting period of the same form that was filed before the current report. A previous 10-Q is a different quarter, not a year-over-year comparison. Amendments are excluded.
Compared 102 previous paragraphs and 72 current paragraphs.
41 unchanged; 23 reworded; 8 added; 32 removed; 6 previous and 0 current paragraphs rearranged.
Tables are not compared: 13 previous and 7 current tables excluded. Dates, whitespace, punctuation and numbering changes are ignored; changes to financial figures remain significant.
A changed paragraph is not evidence that risk increased or decreased. An unchanged paragraph does not establish that risk stayed the same.
Added paragraphs (8)
Current report
For 2025, we expect additional pricing gains to overcome tariffs while preserving profit margins and offsetting the impact of potential volume declines.
Current report
Selling, general and administrative expenses ("SG&A") remained flat at $171 million in the first quarter of 2025 as compared to the same period in 2024.
Current report
Investments over which we do not exercise control but have significant influence are accounted for using the equity method of accounting. Income from equity method investments was $1 million in the first quarter of 2025 consistent with 2024.
Current report
Net sales increased 7% in the first quarter of 2025 as compared to the same period in 2024 due to favorable price and mix.
Current report
Segment profit in the first quarter of 2025 increased $5 million as compared to the same period in 2024 primarily due to $31 million from favorable price and mix, which was partially offset by $15 million from higher product and other material costs, including tariffs, and $11 million from higher freight and distribution costs and other miscellaneous items.
Current report
Net sales decreased 6% in the first quarter of 2025 as compared to the same period in 2024 primarily due to lower sales volumes of 9% which was partially offset by favorable price and mix of 3%.
Current report
Segment profit in the first quarter of 2025 decreased $25 million as compared to the same period in 2024 primarily due to $12 million from lower sales volumes, $14 million from higher costs related to the new factory ramp up, manufacturing inefficiencies at existing facilities, and the impact of tariffs, and $8 million in investments in emergency replacement sales force and other miscellaneous items, which were partially offset by $9 million from favorable price and mix.
Current report
Segment loss decreased $9 million in the first quarter of 2025 as compared to the same period in 2024 due to a $7 million reduction in SG&A costs and $2 million from miscellaneous and other items.
Removed paragraphs (32)
Previous report
Net sales for the third quarter of 2024 increased 10% as compared to the same period in 2023. This was primarily due to higher sales volumes of 9%, favorable price and mix of 4%, and an increase in sales volumes of 2% from our AES acquisition, which were partially offset by a 5% reduction in sales due to the fourth quarter 2023 sale of our European businesses.
Previous report
Selling, general and administrative expenses ("SG&A") increased $6 million to $184 million in the third quarter of 2024 as compared to $179 million in the same period in 2023 primarily due to higher employee related costs including increased incentive compensation, which was partially offset by a $14 million reduction in SG&A expenses from our 2023 divestiture of our European businesses. SG&A decreased 80 bps to 12.3%.
Previous report
We participate in two joint ventures that are engaged in the manufacture and sale of compressors, unit coolers, and condensing units. We exert significant influence over these affiliates based upon our ownership, but do not control them due to venture partner participation. Accordingly, these joint ventures are accounted for under the equity method and their financial position and results of operations are not consolidated. We recognized income from equity method investments of $2 million in the third quarter of 2024 and $4 million in the third quarter of 2023.
Previous report
Net sales increased 15% in the third quarter of 2024 as compared to the same period in 2023 primarily due to higher sales volumes of 11% and favorable price and mix of 4%.
Previous report
Segment profit in the third quarter of 2024 increased by $45 million as compared to the same period in 2023, primarily due to $35 million from higher sales volumes, and $33 million from favorable price and mix, which were partially offset by $8 million from higher SG&A costs, $7 million in higher costs primarily driven by the upcoming regulatory transition and rising commodity prices, and $8 million from miscellaneous other items.
Previous report
Segment profit in the third quarter of 2024 increased $9 million as compared to the same period in 2023 primarily due to $10 million from favorable price and mix, $8 million from higher sales volumes, $4 million from our acquisition of AES, and $3 million from miscellaneous other items, which were partially offset by $10 million in higher factory inefficiencies, including costs related to the ramp up of our new factory in Mexico, and $6 million in increased SG&A expenses.
Previous report
Net sales decreased $65 million and segment loss increased $6 million in the third quarter of 2024 as compared to the same period in 2023. Our European businesses, which were sold in 2023, generated $65 million in net sales and $4 million in segment profit in the third quarter of 2023. Excluding our European businesses, Corporate and Other costs increased $2 million in the third quarter of 2024 as compared to the same period in 2023 primarily due to higher employee related costs.
Previous report
Year-to-Date through September 30, 2024 Compared to Year-to-Date through September 30, 2023 - Consolidated Results
Previous report
Net Sales
Previous report
Net sales increased 4% for the nine months ended September 30, 2024 as compared to the same period in 2023. This was primarily due to higher sales volumes of 5%, favorable price and mix of 3%, and an increase in sales volumes of 1% from our AES acquisition, which were partially offset by a 5% reduction in sales due to the fourth quarter 2023 sale of our European businesses.
Previous report
Gross Profit
Previous report
Gross profit margins for the nine months ended September 30, 2024 increased 170 bps to 32.9% as compared to 31.2% in the same period in 2023. Gross margins increased 270 bps from higher price and favorable mix, which was partially offset by 50 bps from higher material and product costs, including LIFO, and 50 bps from higher freight and distribution costs.
Previous report
Selling, General and Administrative Expenses
Previous report
SG&A decreased $4 million to $524 million for the nine months ended September 30, 2024 as compared to $528 million in the same period in 2023 primarily due to a $45 million reduction in SG&A expenses from our 2023 divestiture of our European businesses, which was partially offset by higher employee-related costs including increased incentive compensation. As a percentage of net sales, SG&A decreased 70 bps to 13.1% from 13.8%.
Previous report
Income from Equity Method Investments
Previous report
Income from equity method investments decreased slightly to $6 million for the nine months ended September 30, 2024 as compared to $8 million in the same period in 2023.
Previous report
Interest Expense, net
Previous report
Interest expense, net decreased $7 million for the nine months ended September 30, 2024 to $33 million as compared to $40 million in the same period in 2023 primarily due to lower borrowings.
Previous report
Income Taxes
Previous report
Our effective tax rate was 19.3% for the nine months ended September 30, 2024 as compared to 21.0% in the same period in 2023. The decrease in rate was primarily due to a discrete adjustment in the third quarter of 2023 related to the 2023 European divestiture.
Previous report
Year-to-Date through September 30, 2024 Compared to Year-to-Date through September 30, 2023 - Results by Segment
Previous report
Home Comfort Solutions
Previous report
Net sales increased 7% for the nine months ended September 30, 2024 as compared to the same period in 2023. This was primarily due to higher sales volumes of 4% and favorable price and mix of 3%.
Previous report
Segment profit for the first nine months of 2024 increased $72 million as compared to the same period in 2023 primarily due to $95 million from favorable price and mix, and $33 million from higher sales volumes, which were partially offset by $23 million from higher SG&A costs, $19 million from higher freight and distribution costs, $5 million in higher costs primarily driven by the upcoming regulatory transition and rising commodity prices, and $9 million from miscellaneous other items.
Previous report
Building Climate Solutions
Previous report
Net sales increased 17% for the nine months ended September 30, 2024 as compared to the same period in 2023. This was primarily due to higher sales volumes of 8%, favorable price and mix of 3%, and a 6% increase in sales volumes from our AES acquisition.
Previous report
Segment profit for the first nine months of 2024 increased $48 million as compared to the same period in 2023 primarily due to $32 million from higher price and mix, $28 million from higher sales volumes, $13 million from our acquisition of AES, and $2 million from miscellaneous other items, which were partially offset by $17 million from higher factory inefficiencies, which includes costs related to the ramp up of our new facility in Mexico, and $10 million from higher SG&A costs.
Previous report
Corporate and Other
Previous report
Net sales decreased $192 million and segment loss increased $11 million during the nine months ended September 30,2024 as compared to the same period in 2023. Our European businesses, which were sold in 2023, generated net sales of $192 million and a profit of $6 million in the nine months ended September 30, 2023. Excluding our European businesses, Corporate and Other costs increased $5 million in the first nine months of 2024 as compared to the same period in 2023 primarily due to higher incentive compensation and other employee costs and wage inflation.
Previous report
Guarantees Related to Our Debt Obligations
Previous report
Our senior unsecured notes were issued by Lennox International Inc. ("Parent") and are unconditionally guaranteed by the Guarantor Subsidiaries. The Guarantor Subsidiaries are 100% owned and consolidated, all guarantees are full and unconditional, and all guarantees are joint and several.
Previous report
The following combined Parent and Guarantor Subsidiaries financial information is presented as of September 30, 2024 and December 31, 2023 and for the three and nine months ended September 30, 2024 (in millions):
Reworded paragraphs (23)
Previous wording
The principal elements of cost of goods sold are components, raw materials, factory overhead, labor, estimated costs of warranty expense, and freight and distribution costs. The principal raw materials used in our manufacturing processes are steel, aluminum and copper. In recent years, pricing volatility for these commodities and related components has impacted us and the HVACR industry in general. We seek to mitigate the impact of certain commodity price volatility through a combination of pricing actions, vendor contracts, improved production efficiency, and cost reduction initiatives. We also partially mitigate volatility in the prices of these commodities by entering into futures contracts and fixed forward contracts.
Current wording
The principal elements of cost of goods sold are components, raw materials, factory overhead, labor, estimated costs of warranty expense, and freight and distribution costs. The principal raw materials used in our manufacturing processes are steel, aluminum and copper. In recent years, pricing volatility for these commodities and related components has impacted us and the HVACR industry in general. We seek to mitigate the impact of certain commodity price volatility and tariffs through a combination of pricing actions, vendor contracts, improved production efficiency, and cost reduction initiatives. We also partially mitigate volatility in the prices of these commodities by entering into futures contracts and fixed forward contracts.
Previous wording
Results for the third quarter of 2024 were driven by overall year-over-year sales and profit increases. Net sales increased 15% and segment profit increased $45 million for our Home Comfort Solutions segment. Net sales increased 15% and segment profit increased $9 million for our Building Climate Solutions segment. Net sales decreased $65 million and segment loss increased $6 million for our Corporate and Other segment. Our European businesses were sold in the fourth quarter of 2023 and generated $65 million in net sales with segment profit of $4 million in the third quarter of 2023.
Current wording
Results for the first quarter of 2025 were driven by overall year-over-year sales increases while operating income decreased. Net sales increased 7% and segment profit increased $5 million for our Home Comfort Solutions segment. Net sales decreased 6% and segment profit decreased $25 million for our Building Climate Solutions segment. Segment loss decreased $9 million for our Corporate and Other segment.
Previous wording
•Net sales of $1,498 million in the third quarter of 2024 reflected a 10% increase as compared to the same period in 2023.
Current wording
•Net sales of $1,073 million in the first quarter of 2025 reflected a 2% increase as compared to the same period in 2024.
Previous wording
•Operating income in the third quarter of 2024 increased $117 million to $303 million primarily driven by favorable price and mix and higher sales volumes.
Current wording
•Operating income in the first quarter of 2025 decreased $11 million to $156 million as higher material costs, primarily related to tariff impacts and factory inefficiencies, and lower sales volumes were partially offset by favorable price and mix.
Previous wording
•Net income for the third quarter of 2024 was $239 million.
Current wording
•Net income for the first quarter of 2025 was $120 million.
Previous wording
•Diluted earnings per share was $6.68 per share in the third quarter of 2024 as compared to $3.65 per share in the same period in 2023.
Current wording
•Diluted earnings per share was $3.37 per share in the first quarter of 2025 as compared to $3.47 per share in the same period in 2024.
Previous wording
•For the nine months ended September 30, 2024, we returned $119 million to shareholders through dividend payments.
Current wording
•For the three months ended March 31, 2025, we returned $41 million to shareholders through dividend payments.
Previous wording
Net sales increased 15% in the third quarter of 2024 as compared to the same period in 2023 primarily due to higher sales volumes of 7%, favorable price and mix of 2%, and a 6% increase in sales volumes from our AES acquisition.
Current wording
Net sales for the first quarter of 2025 increased 2% as compared to the same period in 2024 primarily due to a 6% increase in price and mix, which was partially offset by a 4% decrease in sales volumes.
Previous wording
Gross profit margins in the third quarter of 2024 increased 120 basis points ("bps") to 32.6% as compared to 31.4% in the same period in 2023. Gross margins increased 250 bps from favorable price and mix, which was partially offset by 70 bps from higher material and product costs, including LIFO, 40 bps from higher freight and distribution costs, and 20 bps from miscellaneous other items.
Current wording
Gross profit margins in the first quarter of 2025 decreased 190 basis points ("bps") to 30.6% as compared to 32.5% in the same period in 2024. Gross margins decreased 270 bps from higher product costs primarily related to tariff impacts and factory inefficiencies and 110 bps from higher freight and distribution costs, which were partially offset by 190 bps from favorable price and mix.
Previous wording
Losses (gains) and other expenses, net for the third quarter of 2024 and 2023 included the following (in millions):
Current wording
Losses (gains) and other expenses, net for the first quarter of 2025 and 2024 included the following (in millions):
Previous wording
Interest expense, net decreased to $9 million in the third quarter of 2024 from $11 million in the same period in 2023 due to lower borrowings.
Current wording
Interest expense, net decreased to $6 million in the first quarter of 2025 from $12 million in the same period in 2024 primarily due to lower borrowings.
Previous wording
Our effective tax rate was 18.7% for the third quarter of 2024 as compared to 25.6% in the same period in 2023. The decrease in rate is primarily due to a discrete adjustment in the third quarter of 2023 related to the 2023 European divestiture.
Current wording
Our effective tax rate was 18.9% for the first quarter of 2025 as compared to 19.4% in the same period in 2024. The decrease in rate is primarily due to income in low tax jurisdictions.
Previous wording
Third Quarter of 2024 Compared to Third Quarter of 2023 - Results by Segment
Current wording
First Quarter of 2025 Compared to First Quarter of 2024 - Results by Segment
Previous wording
The following table presents our Home Comfort Solutions segment's net sales and profit for the third quarter of 2024 and 2023 (dollars in millions):
Current wording
The following table presents our Home Comfort Solutions segment's net sales and profit for the first quarter of 2025 and 2024 (dollars in millions):
Previous wording
The following table presents our Building Climate Solutions segment's net sales and profit for the third quarter of 2024 and 2023 (dollars in millions):
Current wording
The following table presents our Building Climate Solutions segment's net sales and profit for the first quarter of 2025 and 2024 (dollars in millions):
Previous wording
The following table presents our Corporate and Other segment's net sales and loss for the third quarter of 2024 and 2023 (dollars in millions):
Current wording
The following table presents our Corporate and Other segment's net sales and loss for the first quarter of 2025 and 2024 (dollars in millions):
Previous wording
The following table summarizes our cash flow activity for the nine months ended September 30, 2024 and 2023 (in millions):
Current wording
The following table summarizes our cash flow activity for the three months ended March 31, 2025 and 2024 (in millions):
Previous wording
Net Cash Provided By Operating Activities - The change in net cash provided by operating activities for the nine months ended September 30, 2024 compared to the net cash provided by operating activities for the same period in 2023 primarily reflects changes in working capital and an increase in net income.
Current wording
Net Cash Used In Operating Activities - The change in net cash used in operating activities for the three months ended March 31, 2025 compared to the net cash used in operating activities for the same period in 2024 primarily reflects less favorable changes in working capital.
Previous wording
Net Cash Used In Investing Activities -Capital expenditures were $103 million for the nine months ended September 30, 2024 compared to $125 million in the same period of 2023. Capital expenditures in 2024 were related to our Commercial factory in Mexico, the general expansion of manufacturing capacity and equipment, and investments in systems and software to support the overall enterprise.
Current wording
Net Cash Used In Investing Activities -Capital expenditures were $26 million for the three months ended March 31, 2025 compared to $30 million in the same period of 2024. Reduction in capital expenditures was primarily driven by the general expansion of manufacturing capacity and equipment of the Commercial factory in Mexico in 2024.
Previous wording
Net Cash Used In Financing Activities -Net cash used in financing activities for the nine months ended September 30, 2024 increased to $327 million as compared to $216 million in the same period of 2023. The change was primarily due to changes in net borrowings and repayments of long-term debt and repurchase of common stock through our share repurchase program. We returned $119 million to shareholders through dividend payments for the nine months ended September 30, 2024 and $153 million in the same period of 2023.
Current wording
Net Cash (Used In) Provided By Financing Activities -Net cash used in financing activities for the three months ended March 31, 2025 increased to $141 million as compared to $42 million provided by in the same period of 2024. The change was primarily due to changes in net borrowings and repayments of long-term debt and repurchase of common stock through our share repurchase program. We returned $41 million to shareholders through dividend payments for the three months ended March 31, 2025 and $39 million in the same period of 2024.
Previous wording
We periodically review our capital structure to ensure the appropriate levels of leverage and liquidity. We may access the capital markets, as necessary, based on business needs and to take advantage of favorable interest rate environments or other market conditions. We also evaluate our debt-to-capital and debt-to-EBITDA ratios to determine, among other considerations, the appropriate targets for capital expenditures and share repurchases under our share repurchase programs. Our debt-to-total-capital ratio decreased to 60% as of September 30, 2024 from 82% as of December 31, 2023.
Current wording
We periodically review our capital structure to ensure the appropriate levels of leverage and liquidity. We may access the capital markets, as necessary, based on business needs and to take advantage of favorable interest rate environments or other market conditions. We also evaluate our debt-to-capital and debt-to-EBITDA ratios to determine, among other considerations, the appropriate targets for capital expenditures and share repurchases under our share repurchase programs. Our debt-to-total-capital ratio remains unchanged at 57% as of March 31, 2025, as compared to December 31, 2024.
Previous wording
As of September 30, 2024, our senior credit ratings were Baa2 with a stable outlook, and BBB with a stable outlook, by Moody's Investors Service, Inc. ("Moody's") and Standard & Poor's Rating Group ("S&P"), respectively. The security ratings are not a recommendation to buy, sell or hold securities and may be subject to revision or withdrawal at any time by the assigning rating agency. Each rating should be evaluated independently of any other rating. Our goal is to maintain investment grade ratings from Moody's and S&P to help ensure the capital markets remain available to us.
Current wording
As of March 31, 2025, our senior credit ratings were Baa2 with a POS outlook, and BBB with a stable outlook, by Moody's Investors Service, Inc. ("Moody's") and Standard & Poor's Rating Group ("S&P"), respectively. The security ratings are not a recommendation to buy, sell or hold securities and may be subject to revision or withdrawal at any time by the assigning rating agency. Each rating should be evaluated independently of any other rating. Our goal is to maintain investment grade ratings from Moody's and S&P to help ensure the capital markets remain available to us.
Previous wording
We believe our cash and cash equivalents of $243.1 million, future cash generated from operations and available borrowing capacity are sufficient to fund operations, planned capital expenditures, future contractual obligations, potential share repurchases and dividends, and other needs in the foreseeable future. Included in our cash and cash equivalents of $243.1 million as of September 30, 2024 was $25 million of cash held in foreign locations. Our cash held in foreign locations is used for investing and operating activities in those locations, and we generally do not have the need or intent to repatriate those funds to the United States. An actual repatriation in the future from our non-U.S. subsidiaries could be subject to foreign withholding taxes and U.S. state taxes.
Current wording
We believe our cash and cash equivalents of $217.2 million, future cash generated from operations and available borrowing capacity are sufficient to fund operations, planned capital expenditures, future contractual obligations, potential share repurchases and dividends, and other needs in the foreseeable future, including the maturity of $300.0 million senior unsecured notes on August 1, 2025. Included in our cash and cash equivalents of $217.2 million as of March 31, 2025 was $20 million of cash held in foreign locations. Our cash held in foreign locations is used for investing and operating activities in those locations, and we generally do not have the need or intent to repatriate those funds to the United States. An actual repatriation in the future from our non-U.S. subsidiaries could be subject to foreign withholding taxes and U.S. state taxes.
Rearranged previous paragraphs (6)
Previous report — wording carried elsewhere
The following table provides a summary of our financial results, including information presented as a percentage of net sales:
Previous report — wording carried elsewhere
Losses (gains) and Other Expenses, Net
Previous report — wording carried elsewhere
Losses (gains) and other expenses, net for the nine months ended September 30, 2024 and 2023 included the following (in millions):
Previous report — wording carried elsewhere
The following table presents our Home Comfort Solutions segment's net sales and profit for the nine months ended September 30, 2024 and 2023 (dollars in millions):
Previous report — wording carried elsewhere
The following table presents our Building Climate Solutions segment's net sales and profit for the nine months ended September 30, 2024 and 2023 (dollars in millions):
Previous report — wording carried elsewhere
The following table presents our Corporate and Other segment's net sales and loss for the nine months ended September 30, 2024 and 2023 (dollars in millions):