LENNOX INTERNATIONAL INC

Previous wording

Results for the second quarter of 2025 were primarily driven by overall year-over-year net sales and profit increases. Net sales increased 3% and segment profit increased $27 million for our Home Comfort Solutions segment. Net sales increased 5% and segment profit increased $9 million for our Building Climate Solutions segment. Segment loss decreased $0.3 million for our Corporate and Other segment.

Current wording

Results for the third quarter of 2025 were mixed as our Home Comfort Solutions segment faced volume headwinds driven by market softness. Overall our net sales decreased 5% to $1.4 billion and our segment profit increased 2% to $310 million. For our Home Comfort Solutions segment, net sales decreased 12% and segment profit decreased $24 million. For our Building Climate Solutions segment, net sales increased 10% and segment profit increased $28 million. Segment loss decreased $2.4 million for our Corporate and Other segment.

Previous wording

•Net sales of $1,501 million in the second quarter of 2025 reflected a 3% increase as compared to the same period in 2024.

Current wording

•Net sales of $1,427 million in the third quarter of 2025 reflected a 5% decrease as compared to the same period in 2024.

Previous wording

•Operating income in the second quarter of 2025 increased $34 million to $354 million as favorable mix and price were partially offset by lower sales volumes, higher product costs, primarily related to inflationary impacts, including tariffs, and higher freight and distribution costs.

Current wording

•Operating income in the third quarter of 2025 increased $7 million to $310 million as favorable mix and price were partially offset by lower sales volumes, higher product costs, primarily related to inflationary pressures, including tariffs, and higher freight and distribution costs.

Previous wording

•Net income for the second quarter of 2025 was $278 million.

Current wording

•Net income for the third quarter of 2025 was $246 million.

Previous wording

•Diluted earnings per share was $7.82 per share in the second quarter of 2025 as compared to $6.87 per share in the same period in 2024.

Current wording

•Diluted earnings per share was $6.98 per share in the third quarter of 2025 as compared to $6.68 per share in the same period in 2024.

Previous wording

•For the six months ended June 30, 2025, we returned $82 million to shareholders through dividend payments and repurchased $295.4 million of common stock through our share repurchase program.

Current wording

•For the nine months ended September 30, 2025, we returned $127 million to shareholders through dividend payments and repurchased $332 million of common stock through our share repurchase program.

Previous wording

On July 4, 2025, the “One Big Beautiful Bill Act” was signed into law, which includes significant changes to federal tax law and other regulatory provisions that may impact the Company. We are currently evaluating the provisions of the new law and the potential effects on our financial position, results of operations, and cash flows.

Current wording

On July 4, 2025, the “One Big Beautiful Bill Act” was signed into law, which includes significant changes to federal tax law and other regulatory provisions that may impact the Company. Based on an initial analysis of the relevant provisions, the impacts to our effective tax rate are immaterial, but several timing provisions are expected to result in material 2025 cash tax savings.

Previous wording

Net sales for the second quarter of 2025 increased 3% as compared to the same period in 2024 primarily due to a 11% increase in mix and price, which was partially offset by a 8% decrease in sales volumes.

Current wording

Net sales for the third quarter of 2025 decreased 5% as compared to the same period in 2024 primarily due to a 16% decrease in sales volumes, which was partially offset by an 11% increase in mix and pricing.

Previous wording

Gross profit margins in the second quarter of 2025 increased 120 basis points ("bps") to 34.8% as compared to 33.6% in the same period in 2024. Gross margins increased 350 bps from favorable mix and price, which were partially offset by 130 bps from higher freight and distribution costs and 100 bps from higher product costs, primarily related to inflationary impacts, including tariffs.

Current wording

Gross profit margins in the third quarter of 2025 increased 20 basis points ("bps") to 32.8% as compared to 32.6% in the same period in 2024. Gross margins increased 350 bps from favorable mix and pricing, which were partially offset by 200 bps from higher product costs, primarily related to inflationary pressures, including tariffs, and 130 bps from higher freight and distribution costs.

Previous wording

Selling, general and administrative expenses ("SG&A") increased $4 million to $173 million in the second quarter of 2025 as compared to $169 million in the same period in 2024, primarily due to higher employee-related costs partially offset by decreased professional fees.

Current wording

Selling, general and administrative expenses ("SG&A") decreased $22 million to $162 million in the third quarter of 2025 as compared to $184 million in the same period in 2024, primarily due to lower incentive compensation related costs.

Previous wording

(Gains) losses and other expenses, net for the second quarter of 2025 and 2024 included the following (in millions):

Current wording

(Gains) losses and other expenses, net for the third quarter of 2025 and 2024 included the following (in millions):

Previous wording

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 $2 million in the second quarter of 2025 consistent with 2024.

Current wording

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 $2 million in the third quarter of 2025, consistent with 2024.

Previous wording

Our effective tax rate was 19.5% for the second quarter of 2025 as compared to 19.9% in the same period in 2024. The decrease in rate is primarily due to higher income in low tax jurisdictions.

Current wording

Our effective tax rate was 17.7% for the third quarter of 2025 as compared to 18.7% in the same period in 2024. The decrease in rate is primarily due to higher income in low tax jurisdictions.

Previous wording

Second Quarter of 2025 Compared to Second Quarter of 2024 - Results by Segment

Current wording

Third Quarter of 2025 Compared to Third Quarter of 2024 - Results by Segment

Previous wording

The following table presents our Home Comfort Solutions segment's net sales and profit for the second quarter of 2025 and 2024 (dollars in millions):

Current wording

The following table presents our Home Comfort Solutions segment's net sales and profit for the third 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 second quarter of 2025 and 2024 (dollars in millions):

Current wording

The following table presents our Building Climate Solutions segment's net sales and profit for the third quarter of 2025 and 2024 (dollars in millions):

Previous wording

Segment profit in the second quarter of 2025 increased $9 million as compared to the same period in 2024 primarily due to $31 million in favorable mix and price and $6 million in higher factory efficiencies, which were partially offset by $11 million in higher product costs, primarily related to inflationary impacts, including tariffs, $11 million in increases in distribution and selling as well as other inflationary impacts, and $6 million in decreased sales volumes.

Current wording

Segment profit in the third quarter of 2025 increased $28 million as compared to the same period in 2024 primarily due to $33 million in favorable mix and pricing and a $1 million increase in sales volumes, which were partially offset by $4 million in higher product costs, primarily related to inflationary pressures, including tariffs, and $2 million from investments in distribution and selling as well as other inflationary pressures.

Previous wording

The following table presents our Corporate and Other segment's net sales and loss for the second quarter of 2025 and 2024 (dollars in millions):

Current wording

The following table presents our Corporate and Other segment's net sales and loss for the third quarter of 2025 and 2024 (dollars in millions):

Previous wording

Net sales remained flat for the six months ended June 30, 2025 as compared to the same period in 2024 primarily due to a 6% increase in mix and price, which was offset by a 6% decrease in sales volumes.

Current wording

Net sales remained relatively flat for the nine months ended September 30, 2025 as compared to the same period in 2024, as a 9% increase in mix and pricing was offset by a 9% decrease in sales volumes.

Previous wording

Gross profit margins for the six months ended June 30, 2025 decreased 10 bps to 33.1% as compared to 33.2% in the same period in 2024. Gross margins decreased 170 bps from higher product costs, primarily related to inflationary impacts, including tariffs, and 120 bps from higher freight and distribution costs, which were partially offset by 280 bps from favorable mix and price.

Current wording

Gross profit margins for the nine months ended September 30, 2025 increased 10 bps to 33.0% as compared to 32.9% in the same period in 2024. Gross margins increased 310 bps from favorable mix and pricing, which were partially offset by 180 bps from higher product costs, primarily related to inflationary pressures, including tariffs, and 120 bps from higher freight and distribution costs.

Previous wording

Losses (gains) and other expenses, net for the six months ended June 30, 2025 and 2024 included the following (in millions):

Current wording

(Gains) losses and other expenses, net for the nine months ended September 30, 2025 and 2024 included the following (in millions):

Previous wording

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 decreased slightly to $3 million for the six months ended June 30, 2025 as compared to $4 million in the same period in 2024.

Current wording

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 remained flat at $6 million for the nine months ended September 30, 2025 as compared to the same period in 2024.

Previous wording

Our effective tax rate was 19.4% for the six months ended June 30, 2025 as compared to 19.7% in the same period in 2024. The decrease in rate was primarily due to higher income in low tax jurisdictions.

Current wording

Our effective tax rate was 18.7% for the nine months ended September 30, 2025 as compared to 19.3% in the same period in 2024. The decrease in rate was primarily due to higher income in low tax jurisdictions.

Previous wording

The following table presents our Home Comfort Solutions segment's net sales and profit for the six months ended June 30, 2025 and 2024 (dollars in millions):

Current wording

The following table presents our Home Comfort Solutions segment's net sales and profit for the nine months ended September 30, 2025 and 2024 (dollars in millions):

Previous wording

The following table presents our Building Climate Solutions segment's net sales and profit for the six months ended June 30, 2025 and 2024 (dollars in millions):

Current wording

The following table presents our Building Climate Solutions segment's net sales and profit for the nine months ended September 30, 2025 and 2024 (dollars in millions):

Previous wording

Net sales increased 4% for the six months ended June 30, 2025 as compared to the same period in 2024 primarily due to a 10% increase in mix and price, which was partially offset by a 6% decrease in sales volumes.

Current wording

Net sales increased 4% for the nine months ended September 30, 2025 as compared to the same period in 2024 primarily due to a 8% increase in mix and pricing, which was partially offset by a 4% decrease in sales volumes.

Previous wording

Segment profit for the first six months of 2025 decreased $16 million as compared to the same period in 2024 primarily due to $19 million from decreased sales volumes, $19 million from higher product costs, primarily related to inflationary impacts, including tariffs, and $18 million in increases in distribution and selling as well as other inflationary impacts, which were partially offset by $40 million from favorable mix and price.

Current wording

Segment profit for the first nine months of 2025 increased $12 million as compared to the same period in 2024 primarily due to $73 million from favorable mix and pricing, $5 million from factory efficiencies, and $1 million in lower miscellaneous costs, which were partially offset by $28 million from higher product costs, primarily related to inflationary pressures, including tariffs, $18 million from decreased sales volumes, $12 million in higher SG&A costs, and $9 million from investments in distribution and selling as well as other inflationary pressures.

Previous wording

The following table presents our Corporate and Other segment's net sales and loss for the six months ended June 30, 2025 and 2024 (dollars in millions):

Current wording

The following table presents our Corporate and Other segment's net sales and loss for the nine months ended September 30, 2025 and 2024 (dollars in millions):

Previous wording

The following table summarizes our cash flow activity for the six months ended June 30, 2025 and 2024 (in millions):

Current wording

The following table summarizes our cash flow activity for the nine months ended September 30, 2025 and 2024 (in millions):

Previous wording

Net Cash Provided By Operating Activities - The change in net cash provided by operating activities for the six months ended June 30, 2025 compared to the net cash provided by operating activities for the same period in 2024 primarily reflects less favorable changes in working capital.

Current wording

Net Cash Provided By Operating Activities - The change in net cash provided by operating activities for the nine months ended September 30, 2025 compared to the net cash provided by 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 $54 million for the six months ended June 30, 2025 compared to $62 million in the same period of 2024. The reduction in capital expenditures was primarily driven by the general expansion of manufacturing capacity and equipment of the Commercial factory in Mexico that was completed in 2024.

Current wording

Net Cash Used In Investing Activities -Capital expenditures were $90 million for the nine months ended September 30, 2025 compared to $103 million in the same period of 2024. The reduction in capital expenditures was primarily driven by the general expansion of manufacturing capacity and equipment of the Commercial factory in Mexico that was completed in 2024.

Previous wording

Net Cash Used In Financing Activities -Net cash used in financing activities for the six months ended June 30, 2025 increased to $368 million as compared to $118 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 repurchased $295.4 million of shares for the six months ended June 30, 2025 and returned $82 million to shareholders through dividend payments.

Current wording

Net Cash Used In Financing Activities -Net cash used in financing activities for the nine months ended September 30, 2025 increased to $627 million as compared to $327 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 repurchased $332.3 million of shares for the nine months ended September 30, 2025 and returned $127 million to shareholders through dividend payments.

Previous wording

On October 25, 2023, we established a commercial paper program (the "Program"), as a replacement to our Asset Securitization Program which expired in November 2023, pursuant to which we may issue short-term, unsecured commercial paper notes under the exemption from registration contained in Section 4(a)(2) of the Securities Act of 1933, as amended. Amounts available under the Program may be borrowed, repaid, and re-borrowed from time to time, with the aggregate face or principal amount of the CP Notes outstanding under the Program at any time not to exceed $500.0 million. The CP Notes have maturities of up to 397 days from the date of issue and rank pari passu with all of our other unsecured and unsubordinated indebtedness. The net proceeds from issuances of the CP Notes are typically used for general corporate purposes. Our revolving credit facility serves as a liquidity backstop for the repayment of CP Notes outstanding under the Program. There are $29.0 million CP Notes outstanding under the Program as of June 30, 2025.

Current wording

On October 25, 2023, we established a commercial paper program (the "Program"), as a replacement to our Asset Securitization Program which expired in November 2023, pursuant to which we may issue short-term, unsecured commercial paper notes (the "CP Notes") under the exemption from registration contained in Section 4(a)(2) of the Securities Act of 1933, as amended. Amounts available under the Program may be borrowed, repaid, and re-borrowed from time to time, with the aggregate face or principal amount of the CP Notes outstanding under the Program at any time not to exceed $500.0 million. The CP Notes have maturities of up to 397 days from the date of issue and rank pari passu with all of our other unsecured and unsubordinated indebtedness. The net proceeds from issuances of the CP Notes are typically used for general corporate purposes. Our revolving credit facility serves as a liquidity backstop for the repayment of CP Notes outstanding under the Program. There are $157.0 million CP Notes outstanding under the Program as of September 30, 2025.

Previous wording

On May 9, 2025, we entered into an Amendment and Restatement Agreement ("Amended Credit Agreement") to our existing unsecured revolving credit facility with JPMorgan Chase Bank, N.A., as administrative agent, and the other lenders party thereto. The Amended Credit Agreement decreased our total revolving commitments from $1.1 billion to $1.0 billion with an option to increase the revolving commitments by up to $350 million at our request, subject to the terms and conditions of the Amended Credit Agreement. The Amended Credit Agreement also extended the maturity date of the revolving commitments from July 2026 to May 2030. We had no outstanding borrowings and $1.7 million committed to standby letters of credit as of June 30, 2025. Subject to covenant limitations, $969.3 million was available for future borrowings after taking into consideration outstanding borrowings under our Program. Availability under the Amended Credit Agreement is reduced by borrowings under the Program. The Amended Credit Agreement includes a subfacility for swingline loans up to $65.0 million. Maturity of the Amended Credit Agreement may be extended by the lenders pursuant to two one-year extension options that we may request under the Amended Credit Agreement.

Current wording

On May 9, 2025, we entered into an Amendment and Restatement Agreement ("Amended Credit Agreement") to our existing unsecured revolving credit facility with JPMorgan Chase Bank, N.A., as administrative agent, and the other lenders party thereto. The Amended Credit Agreement decreased our total revolving commitments from $1.1 billion to $1.0 billion with an option to increase the revolving commitments by up to $350 million at our request, subject to the terms and conditions of the Amended Credit Agreement. The Amended Credit Agreement also extended the maturity date of the revolving commitments from July 2026 to May 2030. We had no outstanding borrowings and $1.7 million committed to standby letters of credit as of September 30, 2025. Subject to covenant limitations, $841.3 million was available for future borrowings after taking into consideration outstanding borrowings under our Program. Availability under the Amended Credit Agreement is reduced by borrowings under the Program. The Amended Credit Agreement includes a subfacility for swingline loans up to $65.0 million. Maturity of the Amended Credit Agreement may be extended by the lenders pursuant to two one-year extension options that we may request under the Amended Credit Agreement.

Previous wording

In September 2023, we issued $500.0 million of senior unsecured notes, which will mature in September 2028 (the "2028 Notes") with interest being paid semi-annually in March and September at 5.50%. We issued two series of senior unsecured notes on July 30, 2020 for $300.0 million each, which will mature on August 1, 2025 (the "2025 Notes") and August 1, 2027 (the "2027 Notes," and collectively with the 2025 Notes and the 2028 Notes, the "Notes") with interest being paid semi-annually in February and August at 1.35% and 1.70% respectively, per annum.

Current wording

In September 2023, we issued $500.0 million of senior unsecured notes, which will mature in September 2028 (the "2028 Notes") with interest being paid semi-annually in March and September at 5.50%. In July 2020, we issued $300.0 million of senior unsecured notes, which will mature on August 1, 2027 (the "2027 Notes," and collectively with the 2028 Notes, the "Notes") with interest being paid semi-annually in February and August at 1.70% per annum. On August 1, 2025, we repaid upon maturity $300.0 million of senior unsecured notes originally issued in 2020.

Previous wording

In the event of a credit rating downgrade below investment grade resulting from a change of control, holders of our senior unsecured notes will have the right to require us to repurchase all or a portion of the senior unsecured notes at a repurchase price equal to 101% of the principal amount of the notes, plus accrued and unpaid interest, if any. All the Notes are guaranteed, on a senior unsecured basis, by the Guarantor Subsidiaries. The indenture governing the Notes contains covenants that, among other things, limit our ability and the ability of the Guarantor Subsidiaries to: create or incur certain liens; enter into certain sale and leaseback transactions; and enter into certain mergers, consolidations and transfers of substantially all of our assets. The indenture also contains a cross default provision which is triggered if we default on other debt of at least $75.0 million in principal which is then accelerated, and such acceleration is not rescinded within 30 days of the notice date. As of June 30, 2025, we believe we were in compliance with all covenant requirements.

Current wording

In the event of a credit rating downgrade below investment grade resulting from a change of control, holders of our senior unsecured notes will have the right to require us to repurchase all or a portion of the senior unsecured notes at a repurchase price equal to 101% of the principal amount of the notes, plus accrued and unpaid interest, if any. All the Notes are guaranteed, on a senior unsecured basis, by certain of our subsidiaries that guarantee indebtedness under our Amended Credit Agreement (the "Guarantor Subsidiaries"). The indenture governing the Notes contains covenants that, among other things, limit our ability and the ability of the Guarantor Subsidiaries to: create or incur certain liens; enter into certain sale and leaseback transactions; and enter into certain mergers, consolidations and transfers of substantially all of our assets. The indenture also contains a cross default provision which is triggered if we default on other debt of at least $75.0 million in principal which is then accelerated, and such acceleration is not rescinded within 30 days of the notice date. We are currently in compliance with all covenant requirements.

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 remains unchanged at 57% as of June 30, 2025, as compared to December 31, 2024.

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 decreased to 49% at September 30, 2025, as compared to 57% at December 31, 2024.

Previous wording

As of June 30, 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.

Current wording

As of September 30, 2025, our senior credit ratings were Baa1 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.

Previous wording

We believe our cash and cash equivalents of $49.2 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 $49.2 million as of June 30, 2025 was $26.4 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 $52.9 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. In October 2025, we acquired Duro Dyne Buyer, Inc. and Sealed Unit Parts Buyer, Inc. for approximately $546.3 million and borrowed $300 million under a new term loan. For more information, see Note 13 in the Notes to the Consolidated Financial Statements. Included in our cash and cash equivalents of $52.9 million as of September 30, 2025 was $31.1 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.