Lennox International Annual Report 2021 Form 10-K (NYSE:LII) Published: February 16th, 2021 PDF generated by stocklight.com UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 Form 10-K ☒ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the fiscal year ended December 31, 2020 OR ☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from _____to ______ Commission File Number 001-15149 LENNOX INTERNATIONAL INC. (Exact name of Registrant as specified in its charter) Delaware 42-0991521 (State or other jurisdiction of incorporation or organization) (I.R.S. Employer Identification Number) 2140 Lake Park Blvd. Richardson, Texas 75080 (Address of principal executive offices, including zip code) (Registrant’s telephone number, including area code): (972) 497-5000 Securities Registered Pursuant to Section 12(b) of the Act: Title of each class Trading Symbol(s) Name of each exchange on which registered Common stock, $0.01 par value per share LII New York Stock Exchange Securities Registered Pursuant to Section 12(g) of the Act: None Indicate by checkmark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes [X] No [ ] Indicate by checkmark if the registrant is not required to file reports pursuant to Section 13 or 15(d) of the Exchange Act. Yes [ ] No [X] Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Exchange Act during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the last 90 days. Yes [X] No [ ] Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes [X] No [ ] Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act. Large Accelerated Filer [X] Accelerated Filer [ ] Non-Accelerated Filer [ ] Smaller Reporting Company ☐ Emerging Growth Company ☐ If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. [ ] Indicate by check mark whether the registrant has filed a report on and attestation to its management’s assessment of the effectiveness of its internal control over financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered public accounting firm that prepared or issued its audit report Yes ☒ No ☐ Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).Yes ☐ No x As of June 30, 2020, the aggregate market value of the common stock held by non-affiliates of the registrant was approximately $8.9 billion based on the closing price of the registrant’s common stock on the New York Stock Exchange. As of February 5, 2021, there were 37,733,565 shares of the registrant’s common stock outstanding. DOCUMENTS INCORPORATED BY REFERENCE Portions of the registrant’s 2020 Definitive Proxy Statement to be filed with the Securities and Exchange Commission in connection with the registrant’s 2020 Annual Meeting of Stockholders to be held on May 20, 2021 are incorporated by reference into Part III of this report. LENNOX INTERNATIONAL INC. FORM 10-K For the Fiscal Year Ended December 31, 2020 INDEX Page PART I ITEM 1. Business 1 ITEM 1A. Risk Factors 8 ITEM 1B. Unresolved Staff Comments 14 ITEM 2. Properties 15 ITEM 3. Legal Proceedings 15 ITEM 4. Mine Safety Disclosures 16 PART II ITEM 5. Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities 16 ITEM 6. Selected Financial Data 17 ITEM 7. Management's Discussion and Analysis of Financial Condition and Results of Operations 17 ITEM 7A. Quantitative and Qualitative Disclosures about Market Risk 32 ITEM 8. Financial Statements and Supplementary Data 33 ITEM 9. Changes in and Disagreements With Accountants on Accounting and Financial Disclosure 82 ITEM 9A. Controls and Procedures 82 ITEM 9B. Other Information 82 PART III ITEM 10. Directors, Executive Officers and Corporate Governance 82 ITEM 11. Executive Compensation 82 ITEM 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters 82 ITEM 13. Certain Relationships and Related Transactions, and Director Independence 83 ITEM 14. Principal Accounting Fees and Services 83 PART IV ITEM 15. Exhibits and Financial Statement Schedules 83 ITEM 16. Form 10-K Summary 86 SIGNATURES 87 SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS AND RESERVES 88 PART I Item 1. Business References in this Annual Report on Form 10-K to “we,” “our,” “us,” “LII” or the “Company” refer to Lennox International Inc. and its subsidiaries, unless the context requires otherwise. The Company We are a leading global provider of climate control solutions. We design, manufacture and market a broad range of products for the heating, ventilation, air conditioning and refrigeration (“HVACR”) markets. We have leveraged our expertise to become an industry leader known for innovation, quality and reliability. Our products and services are sold through multiple distribution channels under various brand names. The Company was founded in 1895, in Marshalltown, Iowa, by Dave Lennox, the owner of a machine repair business for railroads. He designed and patented a riveted steel coal- fired furnace, which led to numerous advancements in heating, cooling and climate control solutions. Shown in the table below are our three business segments, the key products, services and well-known product and brand names within each segment and net sales in 2020 by segment. Segment financial data for 2020, 2019 and 2018, including financial information about foreign and domestic operations, is included in Note 3 of the Notes to our Consolidated Financial Statements in “Item 8. Financial Statements and Supplementary Data” and is incorporated herein by reference. 2020 Net Sales (in Segment Products & Services Product and Brand Names millions) Residential Heating & Furnaces, air conditioners, heat pumps, Lennox, Dave Lennox Signature Collection, $ 2,361.5 Cooling packaged heating and cooling systems, indoor Armstrong Air, Ducane, Air-Ease, Concord, air quality equipment, comfort control products, MAGICPAK, ADP Advanced Distributor Products, replacement parts and supplies Allied, Elite Series, Merit Series, Comfort Sync, Humiditrol, Healthy Climate, Healthy Solutions, iComfort and Lennox Stores Commercial Heating & Unitary heating and air conditioning equipment, Lennox, Allied Commercial, Magic-Pak, Raider, 800.9 Cooling applied systems, controls, installation and Landmark, Prodigy, Strategos, Energence, Lennox service of commercial heating and cooling VRF and Lennox National Account Services equipment, variable refrigerant flow commercial products Refrigeration Condensing units, unit coolers, fluid coolers, air Heatcraft Worldwide Refrigeration, Lennox (Europe 471.7 cooled condensers, air handlers, process HVAC), Bohn, Larkin, Climate Control, Chandler chillers, controls, compressorized racks. Refrigeration, Friga-Bohn, HK Refrigeration, Hyfra, IntelliGen and Interlink Total $ 3,634.1 Products and Services Residential Heating & Cooling Heating & Cooling Products. 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 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. We believe that by maintaining a broad product line marketed under multiple brand names, we can address different market segments and penetrate multiple distribution channels. The “Lennox” brands are sold directly to a network of approximately 9,000 independent installing dealers, making us one of the largest wholesale distributors of residential heating and air conditioning products in North America. The Allied Air Enterprise brands (“Armstrong Air,” “Air-Ease,” “Concord,” “Ducane,” and “Magic-Pak”) include a full line of heating and air conditioning products and are sold through independent distributors in North America. We continue to invest in our network of 220 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. Our Advanced Distributor Products (“ADP”) operation builds evaporator coils and air handlers under the “ADP Advanced Distributor Products” brand and also builds evaporator coils