LENNOX INTERNATIONAL INC

Previous wording

This Quarterly Report on Form 10-Q contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended, that are based on information currently available to management as well as management’s assumptions and beliefs as of the date such statements were made. All statements, other than statements of historical fact, included in this Quarterly Report on Form 10-Q constitute forward-looking statements, including but not limited to statements identified by forward-looking terminology, such as the words “may,” “will,” “should,” “plan,” “anticipate,” “believe,” “intend,” “estimate,” and “expect” and similar expressions. Such statements reflect our current views with respect to future events, based on what we believe are reasonable assumptions; however, such statements are subject to certain risks and uncertainties.

Current wording

This Quarterly Report on Form 10-Q contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934 (the "Exchange Act"), as amended, that are based on information currently available to management as well as management’s assumptions and beliefs as of the date such statements were made. All statements, other than statements of historical fact, included in this Quarterly Report on Form 10-Q constitute forward-looking statements, including but not limited to statements identified by forward-looking terminology, such as the words “may,” “will,” “should,” “plan,” “anticipate,” “believe,” “intend,” “estimate,” and “expect” and similar expressions. Such statements reflect our current views with respect to future events, based on what we believe are reasonable assumptions; however, such statements are subject to certain risks and uncertainties.

Previous wording

We operate in two reportable business segments of the HVACR industry, Home Comfort Solutions and Building Climate Solutions. In addition to the two major business segments, Corporate and Other is also reported as a segment. For more detailed information regarding our reportable segments, see Note 2 in the Notes to the Consolidated Financial Statements.

Current wording

We operate in two reportable business segments of the HVACR industry, Home Comfort Solutions and Building Climate Solutions. For more detailed information regarding our reportable segments, see Note 2 in the Notes to the Consolidated Financial Statements.

Previous 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.

Current wording

Results for the first quarter of 2026 were mixed as our Home Comfort Solutions segment faced volume headwinds driven by market softness. Overall our net sales increased 6% and our segment profit was relatively flat as compared to prior year. For our Home Comfort Solutions segment, net sales decreased 10% and segment profit decreased $37 million. For our Building Climate Solutions segment, net sales increased 38% and segment profit increased $37 million.

Previous 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.

Current wording

•Net sales of $1,135 million in the first quarter of 2026 reflected a 6% increase as compared to the same period in 2025.

Previous 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.

Current wording

•Operating income in the first quarter of 2026 decreased $5 million to $163 million as lower sales volumes and higher product costs were partially offset by favorable mix and price.

Previous wording

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

Current wording

•Net income for the first quarter of 2026 was $117 million.

Previous 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.

Current wording

•Diluted earnings per share was $3.35 per share in the first quarter of 2026 as compared to $3.63 per share in the same period in 2025.

Previous 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.

Current wording

•For the three months ended March 31, 2026, we returned $45 million to shareholders through dividend payments and repurchased $20 million of common stock through our share repurchase program.

Previous 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.

Current wording

Net sales for the first quarter of 2026 increased 6% as compared to the same period in 2025 primarily due to a 9% increase from favorable mix and price and a 5% increase in sales volumes from completed acquisitions, which were partially offset by an 8% decrease in sales volumes.

Previous 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.

Current wording

Gross profit margins in the first quarter of 2026 decreased 90 basis points ("bps") to 30.9% as compared to 31.8% in the same period in 2025. Gross margins decreased 300 bps from higher product costs, primarily related to inflationary impacts and factory under absorption, and 40 bps from higher freight and distribution inflation and investments, which were partially offset by 250 bps from favorable mix and price.

Previous 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.

Current wording

Selling, general and administrative expenses ("SG&A") increased $14 million to $185 million in the first quarter of 2026 as compared to $171 million in the same period in 2025, primarily attributable to higher discretionary and employee-related costs and the acquisition of Duro Dyne and Supco in the fourth quarter of 2025.

Previous wording

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

Current wording

Losses (gains) and other expenses, net for the first quarter of 2026 and 2025 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 third 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 de minimis in the first quarter of 2026, consistent with 2025.

Previous wording

Interest expense, net increased to $10 million in the third quarter of 2025 from $9 million in the same period in 2024 primarily due to increased borrowings on our commercial paper facility partially offset by the decrease in interest associated with the senior unsecured notes that were repaid on August 1, 2025.

Current wording

Interest expense, net increased to $15 million in the first quarter of 2026 from $6 million in the same period in 2025 primarily due to increased borrowings on our commercial paper facility and our term loan agreement entered into in October of 2025.

Previous 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.

Current wording

Our effective tax rate was 20.2% for the first quarter of 2026 as compared to 19.4% in the same period in 2025. The increase in rate is primarily due to income in higher tax jurisdictions.

Previous wording

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

Current wording

First Quarter of 2026 Compared to First Quarter of 2025 - Results by Segment

Previous 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):

Current wording

The following table presents our Home Comfort Solutions segment's net sales and profit for the first quarter of 2026 and 2025 (dollars in millions):

Previous 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.

Current wording

Net sales decreased 10% in the first quarter of 2026 as compared to the same period in 2025 primarily due to a 21% decrease in sales volumes, which was partially offset by a 9% increase from favorable mix and price and a 2% increase in sales volumes from completed acquisitions.

Previous 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):

Current wording

The following table presents our Building Climate Solutions segment's net sales and profit for the first quarter of 2026 and 2025 (dollars in millions):

Previous wording

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

Current wording

The following table summarizes our cash flow activity for the three months ended March 31, 2026 and 2025 (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, 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 (Used In) Operating Activities - The change in net cash provided by operating activities for the three months ended March 31, 2026 compared to the net cash used in operating activities for the same period in 2025 is primarily due to favorable working capital changes.

Previous 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.

Current wording

Net Cash Used In Investing Activities -Capital expenditures were $56 million for the three months ended March 31, 2026 compared to $26 million in the same period of 2025. The increase in capital expenditures was primarily related to land and building purchases.

Previous 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.

Current wording

Net Cash Provided By (Used In) Financing Activities -Net cash provided by financing activities for the three months ended March 31, 2026 increased to $57 million as compared to $141 million used in during the same period of 2025. The change was primarily due to changes in net borrowings and repayments of long-term debt and repurchases of common stock through our share repurchase program. We repurchased $20 million of shares for the three months ended March 31, 2026 and returned $45 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 (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.

Current wording

We utilize a commercial paper program (the "Program") 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 $361.0 million CP Notes outstanding under the Program as of March 31, 2026.

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 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.

Current wording

On May 9, 2025, we entered into an Amendment and Restatement Agreement (the "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 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 Credit Agreement. The Credit Agreement also extended the maturity date of the revolving commitments from July 2026 to May 2030. We had no outstanding borrowings and no amounts committed to standby letters of credit as of March 31, 2026. Subject to covenant limitations, $639.0 million was available for future borrowings after taking into consideration outstanding borrowings under our Program. Availability under the Credit Agreement is reduced by borrowings under the Program. The Credit Agreement includes a subfacility for swingline loans up to $65.0 million. Maturity of the Credit Agreement may be extended by the lenders pursuant to two one-year extension options that we may request under the Credit Agreement.

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 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.

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 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 decreased to 49% at September 30, 2025, as compared to 57% at 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 increased to 56% at March 31, 2026, as compared to 54% at December 31, 2025.

Previous 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.

Current wording

We believe our cash and cash equivalents of $48.2 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. Included in our cash and cash equivalents of $48.2 million as of March 31, 2026 was $19.3 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.

Previous wording

The following combined Parent and Guarantor Subsidiaries financial information is presented as of September 30, 2025 and December 31, 2024 and for the nine months ended September 30, 2025 (in millions):

Current wording

The following combined Parent and Guarantor Subsidiaries financial information is presented as of March 31, 2026 and December 31, 2025 and for the three months ended March 31, 2026 (in millions):