Lennox International LII · USD

3. Reportable Business Segments: Description of SegmentsWe operate in two reportable business segments of the HVACR industry. Our segments are organized primarily by the nature of the products and services we provide. The following table describes each segment:SegmentProducts or ServicesMarkets ServedGeographic AreasHome Comfort SolutionsFurnaces, air conditioners, heat pumps, packaged heating and cooling systems, indoor air quality equipment, comfort control products, replacement parts and suppliesResidential Replacement;Residential New ConstructionUnited StatesCanadaBuilding Climate SolutionsUnitary heating and air conditioning equipment, applied systems, controls, installation and service of commercial heating and cooling equipment, variable refrigerant flow commercial products, curb, curb adapters, drop box diffusers, HVAC recycling and salvage service, condensing units, unit coolers, fluid coolers, air cooled condensers, air handlers, process chillers, controls, compressorized racks, replacement parts and suppliesLight Commercial; Food Preservation; Non-Food IndustryUnited StatesCanadaPrior to January 1, 2023, we operated in three reportable business segments. In November 2022, we announced the decision to explore strategic alternatives for our European commercial HVAC and refrigeration businesses. We continue to invest in our Heatcraft Worldwide Refrigeration business which is included in the Building Climate Solutions segment. The consolidation of our Heatcraft business within the Building Climate Solutions segment provides the opportunity to leverage synergies and create long-term growth opportunities by integrating entities with similar products, end consumers and financial performance metrics under the same management. The change in segment reporting better aligns with how the businesses are managed and evaluated given the change in portfolio. In the fourth quarter of 2023, we successfully completed the divestiture of our European operations, which until that time, were presented with the Corporate and Other segment. Segment DataWe use segment profit or loss as the primary measure of profitability to evaluate operating performance and to allocate capital resources. We define segment profit or loss as a segment’s income or loss from continuing operations before income taxes included in the accompanying Consolidated Statements of Operations, excluding certain items. The reconciliation in the table below details the items excluded.

8. Revenue Recognition: The following table disaggregates our revenue by business segment by geography to provide information as to the major sources of revenue. See Note 3 for additional description of our reportable business segments and the products and services being sold in each segment. For the Year Ended December 31, 2025Primary Geographic MarketsHome Comfort SolutionsBuilding Climate SolutionsCorporate and OtherConsolidatedUnited States$3,097.4 $1,724.5 $— $4,821.9 Canada246.0 127.4 — 373.4 Total$3,343.4 $1,851.9 $— $5,195.3 For the Year Ended December 31, 2024Primary Geographic MarketsHome Comfort SolutionsBuilding Climate SolutionsCorporate and OtherConsolidatedUnited States$3,346.0 $1,675.8 $— $5,021.8 Canada231.1 88.4 — 319.5 Total$3,577.1 $1,764.2 $— $5,341.3 For the Year Ended December 31, 2023Primary Geographic MarketsHome Comfort SolutionsBuilding Climate SolutionsCorporate and OtherConsolidatedUnited States$3,001.3 $1,415.6 $— $4,416.9 Canada221.6 95.8 — 317.4 International— — 247.6 247.6 Total$3,222.9 $1,511.4 $247.6 $4,981.9 For our businesses that provide services, revenue is recognized at the time services are completed. Our Building Climate Solutions segment also provides sales, installation, maintenance and repair services under fixed-price contracts. Revenue for services is recognized as the services are performed under the contract based on the relative fair value of the services provided. We allocate a portion of the revenue for extended labor warranty obligations and recognize the revenue over the term of the extended warranty. Revenue from extended warranties is insignificant. See Note 5 for more information on product warranties.Home Comfort Solutions - We manufacture and market 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 sold under various brand names and are sold either through direct sales to a network of independent installing dealers, including through our network of Lennox Stores or to independent distributors. In the fourth quarter of 2025, we acquired Sealed Unit Parts Buyer, Inc. (“Supco”), which sells HVAC parts and supplies with HVACR applications.

Leases We lease certain real and personal property under non-cancelable leases. Approximately 81% of our right-of-use assets and lease liabilities relate to our leases of real estate with the remaining amounts relating to our leases of IT equipment, fleet vehicles and manufacturing and distribution equipment.The components of lease expense were as follows (in millions):For the Years Ended December 31,202520242023Finance lease cost:Amortization of right-of-use assets$19.3 $15.4 $14.5 Interest on lease liabilities2.9 2.7 1.7 Operating lease cost96.1 83.3 74.1 Short-term lease cost6.4 5.0 5.3 Variable lease cost31.0 27.6 26.8 Total lease cost$155.7 $134.0 $122.4 Other informationCash paid for amounts included in the measurement of lease liabilities:Operating cash flows from operating leases$90.6 $76.6 $70.5 Financing cash flows from finance leases$21.8 $17.3 $15.8 Right-of-use assets obtained in exchange for new finance lease liabilities$36.2 $26.1 $21.3 Right-of-use assets obtained in exchange for new operating lease liabilities$107.7 $177.1 $56.4 As of December 31,20252024Finance lease right-of-use assets(1)$62.1 $48.1 Operating lease right-of-use assets$356.3 $327.2 Finance lease liability, current(2)$18.3 $14.9 Finance lease liability, non-current(3)$50.6 $39.5 Operating lease liability, current$88.9 $73.4 Operating lease liability, non-current$293.4 $267.6 Weighted-average remaining lease term – finance leases3.3 years3.3 yearsWeighted-average remaining lease term – operating leases5.6 years5.5 yearsWeighted-average discount rate – finance leases4.70 %4.73 %Weighted-average discount rate – operating leases4.76 %4.67 %(1) Recorded in Property, plant and equipment in Consolidated Balance Sheets(2) Recorded in Current maturities of long-term debt in Consolidated Balance Sheets(3) Recorded in Long-term debt in Consolidated Balance SheetsFuture annual minimum lease payments and finance lease commitments as of December 31, 2025 were as follows (in millions). Operating LeasesFinance Leases2026$98.9 $21.1 202780.8 17.0 202868.7 13.2 202958.1 19.9 203040.7 3.1 Thereafter83.0 — Total minimum lease payments$430.2 $74.3 Less imputed interest(47.9)(5.4)Present value of minimum payments$382.3 $68.9 As of December 31, 2025, the Company has an additional operating lease commitment of $63.5 million for a distribution facility that has not yet commenced and is not included in the amounts in the table above.

12. Income Taxes: Our provision for income taxes consisted of the following (in millions):For the Years Ended December 31,20252024As Adjusted2023As AdjustedCurrent:Federal$109.0 $159.2 $132.1 State34.9 33.7 26.6 Foreign27.0 20.0 14.5 Total current170.9 212.9 173.2 Deferred:Federal23.2 (19.6)(22.2)State(3.5)(4.0)(4.9)Foreign0.4 (1.0)1.6 Total deferred20.1 (24.6)(25.5)Total provision for income taxes$191.0 $188.3 $147.7 Income before income taxes was comprised of the following (in millions):For the Years Ended December 31,20252024As Adjusted2023As AdjustedDomestic$584.9 $625.8 $472.8 Foreign411.9 373.6 266.1 Total$996.8 $999.4 $738.9 The difference between the income tax provision computed at the statutory federal income tax rate and the financial statement Provision for income taxes is summarized as follows (in millions):For the Years Ended December 31,2024As Adjusted2023As AdjustedProvision at the U.S. statutory rate of 21% $209.9 $155.2 Increase (reduction) in tax expense resulting from:State income tax, net of federal income tax benefit23.2 16.4 Tax credits, net of unrecognized tax benefits(5.3)(3.4)Change in unrecognized tax benefits0.5 0.4 Change in valuation allowance— 0.1 Foreign taxes at rates other than U.S. statutory rate(61.1)(40.3)Deemed inclusions7.6 6.1 Global intangible low-taxed income20.8 17.5 Change in rates from the Tax Act & other law changes— 0.2 Excess tax benefits from stock-based compensation(8.0)(5.2)Miscellaneous other0.7 0.7 Total provision for income taxes$188.3 $147.7 For the Year Ended December 31, 2025AmountPercentUS federal statutory tax rate 209.3 21.0 %State and local income taxes, net of federal income tax effect(1)24.8 2.5 Foreign tax effectsMexicoStatutory tax rate difference between Mexico and United States15.2 1.5 Nontaxable income(42.3)(4.1) Other3.1 0.3 Other foreign jurisdictions7.4 0.7 Effects of changes in tax laws or rates enacted in the current period— — Effect of cross-border tax laws Global intangible low-taxed income14.0 1.4 Other4.3 0.5 Tax credits(3.0)(0.3)Changes in valuation allowances (0.6)(0.1)Nontaxable or nondeductible itemsNontaxable income(41.1)(4.1)Other(0.5)(0.1)Changes in unrecognized tax benefits0.4 — Effective tax rate$191.0 19.2 %(1) State taxes in California, Florida, Illinois, New Jersey, Pennsylvania, and Minnesota made up the majority (greater than 50%) of the tax effect in this category.

15. Stock-Based Compensation: Stock-based compensation expense was included in Selling, general and administrative expenses in the accompanying Consolidated Statements of Operations as follows (in millions): For the Years Ended December 31,202520242023Compensation expense$28.4 $28.5 $30.1 Incentive PlanUnder the Lennox International Inc. 2019 Equity and Incentive Compensation Plan, we are authorized to issue awards for 1.7 million shares of common stock. The plan provides for various long-term incentive awards, including performance share units, restricted stock units and stock appreciation rights. A description of these long-term incentive awards and related activity within each award category is provided below. As of December 31, 2025, there were 1.6 million shares available for future issuance.Historically our annual equity awards were granted in December. In 2023, we made the decision to move the annual grant for 2023 to February 2024. Thus, there were no equity grants in 2023. We also made the decision to award the Board of Directors fully vested shares on an annual basis. As a result, approximately $1.1 million and $1.3 million of compensation expense was recognized in 2025 for the 2025 director grant and in 2024 for the 2024 director grant, respectively.Performance Share UnitsPerformance share units are granted to certain employees at the discretion of the Board of Directors with a three-year performance period beginning January 1st of each year. Upon meeting the performance and vesting criteria, performance share units are converted to an equal number of shares of our common stock. Performance share units vest if, at the end of the three-year performance period, at least the threshold performance level has been attained. To the extent that the payout level attained is less than 100%, the difference between 100% and the units earned and distributed will be forfeited. Eligible participants may also earn additional units of our common stock, which would increase the potential payout up to 200% of the units granted, depending on LII’s performance over the three-year performance period.Performance share units are classified as equity awards. Compensation expense is recognized on an earnings curve over the period and is based on the expected number of units to be earned and the fair value of the stock at the date of grant.

17. Acquisitions:Duro Dyne and SupcoIn October 2025, we acquired 100% of the outstanding shares of common stock in Duro Dyne and Supco, a robust portfolio of HVAC parts and supplies that complement our existing residential and commercial offerings. Excluding cash received at the closing, the total cash consideration paid was $545.0 million, which was primarily funded by cash and borrowings under our financing arrangements. The purchase price was allocated to the assets acquired and liabilities assumed based on management’s estimate of their respective fair values at the date of acquisition. Goodwill was calculated as the excess of the consideration transferred over the net assets recognized and represents the estimated future economic benefits arising from other assets acquired that could not be individually identified and separately recognized. The factors contributing to the recognition of goodwill were the assembled workforce and strategic benefits that are expected to be realized from the acquisition. The purchase price allocation is preliminary and subject to revision as additional information about the fair value of assets acquired and liabilities assumed becomes available. Under the terms of the purchase agreement, a final working capital adjustment is due in the first quarter of 2026. The preliminary allocation of the purchase price as of the acquisition date was as follows:(Amounts in millions)AmountTotal consideration paid$551.3 Cash and cash equivalents6.3 Accounts receivable, net22.9 Inventory, net67.4 Other current assets0.5 Property, plant and equipment18.3 Right-of-use assets from operating leases29.8 Other assets, net1.2 Intangible assets acquired235.0 Accounts payable(9.7)Accrued expenses(9.3)Current operating lease liabilities(2.9)Long-term operating lease liabilities(26.3)Other liabilities(59.1)Total net assets acquired$274.1 Goodwill as of acquisition date$277.2 The purchase price allocation includes $235 million of acquired identifiable intangible assets, all of which have finite lives. The fair value of the identifiable intangible assets has been estimated using the income approach through a discounted cash flow analysis. The determination of the useful lives is based upon various industry studies, historical acquisition experience, and economic factors. The amounts allocated to intangible assets are as follows:(Amounts in millions)Gross Carrying AmountUseful LifeAmortization MethodCustomer relationships$180.

We manage cybersecurity risk through three core teams: cybersecurity engineering, data privacy, and a security operation center. These teams are responsible for overseeing data safety during new system and infrastructure deployments, maintaining appropriate cybersecurity controls, and monitoring, documenting and investigating any anomalies affecting employees, suppliers, and customers. Our IT security controls are designed to align with the NIST (National Institute of Standards and Technology) standards and are tested on an ongoing basis. These controls and procedures include processes that oversee and identify cybersecurity risks associated with third-party service providers that we engage, as described below. For instance, we conduct risk and compliance assessments of third-party service providers that request access to our information assets. To support our internal risk management structure, we use third-party specialists to monitor for emerging threats, conduct vulnerability scans and analysis including simulated hacker attacks, and audit our cybersecurity framework. We also maintain an information security risk insurance policy in the event of a security breach. Our internal audit function also performs independent testing on aspects of the operations of our cybersecurity program and the supporting controls based upon its risk-based internal audit plan and reports the results of these audits in its periodic reports to the Audit Committee. Leadership receives training on how to respond to ransomware events and participates in breach simulations at least once a year. Additionally, employees throughout the organization support LII’s risk management efforts by participating in mandatory cybersecurity training at least once a year, ongoing awareness campaigns, and quarterly simulated phishing attempts. To our knowledge, LII’s business strategy, results of operations and financial condition have not been materially affected by risks from cybersecurity threats within the last three years, including as a result of previously identified cybersecurity incidents. However, we cannot provide assurance that they will not be materially affected in the future by such risks or any future material incidents. For more information on our cybersecurity related risks, see Item 1A, “Risk Factors.

GoodwillThe changes in the carrying amount of goodwill in 2025 and 2024, in total and by segment, are summarized in the table below (in millions): Segment:Balance at December 31, 2023 (1)Goodwill adjustment (2)Balance at December 31, 2024Goodwill from business acquisition (3)Balance at December 31, 2025Home Comfort Solutions$26.1 $— $26.1 $60.9 $87.0 Building Climate Solutions196.0 (2.1)193.9 216.3 410.2 Corporate and Other— — — — — $222.1 $(2.1)$220.0 $277.2 $497.2 (1) The goodwill balances in the table above are presented net of accumulated impairment charges of $37.3 million, all of which related to impairments in periods prior to 2023.(2) On October 25, 2023, we announced the acquisition of AES. In connection with this acquisition, $40.4 million of goodwill was recorded in 2023 and included in the Building Climate Solutions reporting unit. In the first and fourth quarters of 2024, we made adjustments to our purchase price allocation of AES that resulted in a $2.1 million reduction of goodwill. (3) On October 15, 2025, we announced the acquisition of Duro Dyne and Supco. In connection with this acquisition, $277.2 million of goodwill was recorded, of which $216.3 million was included in the Building Climate Solutions reporting unit and $60.9 million was included in the Home Comfort Solutions reporting unit. Duro Dyne is included in our Business Climate Solutions segment and Supco is included in our Home Comfort Solutions segment. See Note 17 for additional information on the Duro Dyne and Supco acquisition.A qualitative review of impairment indicators was performed in 2025 for the Home Comfort Solutions and Building Climate Solutions segments. No impairment charges were recorded in 2025, 2024 or 2023, except to the extent of respective goodwill impaired in connection with the disposition of our European operations.