About Lennox International

Lennox International Inc. (Lennox) operates as a global leader in energy-efficient climate-control solutions. The company designs, manufactures, and markets a broad range of products for the heating, ventilation, air conditioning and refrigeration (‘HVACR’) markets. The company’s products and services are sold through multiple distribution channels under various brand names. The company operates through Home Comfort Solutions and Building Climate Solutions business segments. In November 2022, the company announced the decision to explore strategic alternatives for the company’s European commercial heating, ventiliation and air conditioning (‘HVAC’) and refrigeration businesses, which represent approximately 5% of the company’s annual revenues. Beginning in 2023, the company’s Heatcraft Worldwide Refrigeration business became part of the Building Climate Solutions segment and the European portfolio is presented with Corporate and Other. As the company has managed the businesses in this manner beginning in 2023, the company has presented the financial results of the revised segments beginning in 2023. In the fourth quarter of 2023, the company successfully completed the divestiture of its European operations. Products and Services Home Comfort Solutions Heating & Cooling Products The company manufactures and markets a broad range of furnaces, air conditioners, heat pumps, packaged heating and cooling systems, equipment and accessories to improve indoor air quality, comfort control products, replacement parts and supplies and related products for both the residential replacement and new construction markets in North America. These products are available in a variety of designs and efficiency levels and at a range of price points, and are intended to provide a complete line of home comfort systems. By maintaining a broad product line marketed under multiple brand names, the company can address different market segments and penetrate multiple distribution channels. The ‘Lennox’ business and brands (‘Dave Lennox Signature Collection,’ ‘Elite Series,’ ‘Merit Series,’ ‘iComfort,’ ‘ComfortSense’ and ‘Healthy Climate Solutions’) are sold directly to independent installing dealers, making the company one of the largest wholesale distributors of residential heating, ventilation, and air conditioning products in North America. The company continues to invest in its network of Lennox Stores across the United States and Canada. These stores provide an easy access solution for contractors and independent dealers to obtain universal service and replacement parts, supplies, convenience items, tools, Lennox equipment and OEM parts. The Allied Air Enterprise business and brands (‘Armstrong Air’, ‘AirEase,’ ‘Concord,’ ‘Ducane,’ ‘Allied,’ and ‘MagicPak’) include a full line of heating, ventilation and air conditioning products and are sold through independent wholesale distributors in the U.S. and Canada. The Allied Air Enterprise business also sells a full line of heating, ventilation and cooling equipment through private label brands. The Advanced Distributor Products (‘ADP’) business and brand (‘ADP Advanced Distributor Products’) sells evaporator coils, air handlers and unit heaters to independent HVAC wholesale distributors across the U.S. and Canada. Building Climate Solutions Heating and Cooling Products In North America, the company manufactures and sells unitary heating and cooling equipment used in light commercial applications, such as low-rise office buildings, restaurants, retail centers, distribution, churches and schools. The company’s product offerings for these applications include rooftop units ranging from 2 to 30 tons of cooling capacity and split system/air handler combinations, which range from 1.5 to 20 tons of cooling capacity. These products are distributed primarily through commercial contractors and directly to national account customers. In 2021, the company launched the Lennox Model L rooftop unit featuring the industry leading CORE control system and advanced variable-speed technology to maximize rebates and energy savings. In late 2022, the company introduced the Enlight rooftop unit, which features a high efficiency heat pump line that is positioned to help the company’s customers reach their environmental and sustainability goals. In 2023, the company successfully updated its line of commercial HVAC equipment to comply with the latest energy conservation standard from the U.S. Department of Energy. National Account Services National Account Service (‘NAS’) provides installation, service and preventive maintenance for commercial HVAC national account customers in the United States and Canada. AES On October 25, 2023, the company announced the acquisition of substantially all of the assets of AES Industries, Inc. and AES Mechanical Service Group, Inc. (collectively, ‘AES’) to the Building Climate Solutions segment. AES is a company dedicated to service and sustainability in the light commercial markets across North America. AES manufactures curb, curb adapters, drop box diffusers and also offers HVAC recycling and salvage service, as well as focusing on multi-facility HVAC replacement for expired mechanical assets. Refrigeration Products The company manufactures and markets equipment for the commercial refrigeration markets under the Heatcraft Worldwide Refrigeration name. The company sells these products to distributors, installing contractors, engineering design firms, original equipment manufacturers and end-users. The company’s global manufacturing, distribution, sales and marketing footprint serves customers in approximately 100 countries worldwide. The company’s commercial refrigeration products for the North American market include condensing units, unit coolers, fluid coolers, air-cooled condensers, air handlers and refrigeration rack systems. These products preserve food and other perishables in supermarkets, convenience stores, restaurants, warehouses and distribution centers. In addition, the company’s products are used to cool a wide variety of industrial processes, including data centers, machine tooling, and other critical cooling applications. The company routinely provides application engineering for consulting engineers, contractors, store planners, end customers and others to support the sale of commercial refrigeration products. In addition, the company owns a 50% interest in a joint venture in Mexico that produces unit coolers, air-cooled condensers, condensing units, compressors and compressorized racks of the same design and quality as those manufactured by the company’s U.S. business. This joint venture product line is complemented with imports from the U.S., which are sold through the joint venture’s distribution network. Corporate and Other The Corporate and Other segment included the results of the company’s European operations. The company manufactured and sold unitary HVAC products, which ranged from 2 to 70 tons of cooling capacity, and applied systems with up to 200 tons of cooling capacity. The company’s European products consisted of small package units, rooftop units, chillers, air handlers and fan coils that served medium-rise commercial buildings, shopping malls, other retail and entertainment buildings, institutional applications and other field-engineered applications. The company manufactured heating and cooling products in several locations in Europe and marketed these products through both direct and indirect distribution channels. The company also manufactured and marketed refrigeration products including condensing units, unit coolers, air-cooled condensers, fluid coolers, compressor racks and industrial process chillers. The company had manufacturing locations in Germany, France and Spain. In the fourth quarter of 2023, the company successfully completed the divestiture of its European operations. Business Strategy Lennox offers a full spectrum of cooling, heating, indoor air quality and refrigeration products to meet the energy-efficient climate-control needs of residential and commercial customers across North America. The company is focused on expanding its market position primarily through organic growth. The company has implemented a self-help transformation plan, which has been steering the company’s success. The company is investing in its sales force to expand customer touchpoints, enhancing the overall customer experience through digital innovations and anticipating improved output from the company’s new commercial HVAC factory in Mexico. Additionally, the company intends to increase the attachment rate for parts and accessories, ensuring a holistic experience for the company’s customers. Research and development is a key pillar of the company’s growth strategy. Marketing and Distribution The company utilizes multiple channels of distribution and offer different brands at various price points in order to better penetrate the HVACR markets. The company’s products and services are sold through a combination of direct sales, distributors and company-owned parts and supplies stores. Dedicated sales forces and manufacturers’ representatives are deployed across the company’s business segments and brands in a manner designed to maximize the company’s ability to service each distribution channel. To optimize enterprise-wide effectiveness, the company has active cross-functional and cross-organizational teams coordinating approaches to pricing, product design, distribution and national account customers. The North American residential heating and cooling market provides an example of the competitive strength of the company’s marketing and distribution strategy. The company uses three distinct distribution approaches in this market: the company-owned distribution system, the independent distribution system and direct sales to end-users. The company distributes its ‘Lennox’ brands in a company-owned process directly to independent dealers that install these heating and cooling products. The company distributes its ‘Armstrong Air,’ ‘Ducane,’ ‘Air-Ease,’ ‘Concord,’ ‘MagicPak’ and ‘ADP Advanced Distributor Products’ brands through the traditional independent distribution process pursuant to which the company sells its products to distributors who, in turn, sell the products to installing contractors. The company also sells its products through its Lennox Stores. Strategic Sourcing The company partners with various suppliers to procure the raw materials and components used in the manufacturing of the company’s products. The company utilizes a central strategic sourcing group that consolidates purchases of certain materials, components and indirect items across business segments to maximize the company’s purchasing strength. The company’s strategic sourcing group is focused on selecting partners that offer a competitive total cost, industry leading quality, and consistent on time delivery. Compressors, motors and controls constitute the company’s most significant component purchases, while steel, copper and aluminum account for the bulk of the company’s raw material purchases. The company owns a minority equity interest in a joint venture that manufactures compressors for the company’s residential and commercial heating and cooling, and refrigeration businesses to help provide the necessary supply to meet customer needs. Seasonality The company’s sales and related segment profit tend to be seasonally higher in the second and third quarters of the year (year ended December 2023) because summer is the peak season for sales of air conditioning equipment and services in the U.S. and Canada. For the same reason, the company’s working capital needs are generally greater in the first and second quarters, and the company generally has higher operating cash inflows in the third and fourth quarters. Environmental Regulation The company is actively involved in the U.S. Department of Energy activities related to energy efficiency. The company is prepared to have compliant products in place in advance of the effective dates of all such regulations being considered by the U.S. Department of Energy. History Lennox International Inc. was founded in 1895. The company was incorporated in 1991.