Lennox International (LII) 10-K risk factor changes: FY2019 vs FY2018

[removed: Forward-Looking Statements][added: Forward-Looking Statements]

[removed: Risk Factors][added: Risk Factors]

If any of the following risks or those disclosed in our other SEC filings [removed: actually] occurs, our business, financial condition or results of operations could be materially adversely affected.

[removed: We] [added: We] May Not be Able to Compete Favorably in the Competitive HVACR [removed: Business.][added: Business.]

Current and future competitive pressures may cause us to reduce our prices or lose market share, or could negatively affect our cash flow, all of which could have [removed: an] [added: a material] adverse effect on our results of operations.

[removed: Our] [added: Our] Financial Performance Is Affected by the Conditions of the U.S. Construction [removed: Industry.][added: Industry.]

[removed: Although the industry has improved over the last several years, our] [added: Our] sales may not [removed: continue to improve] [added: improve,] or [removed: such] improvement may be limited or lower than expected.

[removed: Cooler] [added: Cooler] than Normal Summers and Warmer than Normal Winters May Depress Our [removed: Sales.][added: Sales.]

[removed: Changes] [added: Changes] in Legislation or Government Regulations or Policies [removed: Can] [added: Could] Have [removed: a Significant Impact] [added: an Adverse Effect] on Our Results of [removed: Operations.][added: Operations.]

The sales, gross margins and profitability for each of our segments could be directly impacted by changes in [removed: legislation, trade agreements or government regulations, such as the changes to taxes,] tariffs and trade agreements.

[removed: Changes] [added: Specifically, changes] in environmental and energy efficiency standards and regulations, such as the recent amendments to the Montreal Protocol to phase down the use of hydrofluorocarbons, may particularly have a significant impact on the types of products that we are allowed to develop and sell, and the types of products that are developed and sold by our competitors.

Future legislation or regulations, including environmental matters, product certification, product liability, [removed: tariffs, duties,] taxes, tax incentives and other matters, may impact the results of each of our operating segments and our consolidated results.

[removed: Global] [added: Global] General Business, Economic and Market Conditions Could Adversely Affect Our Financial Performance and Limit our Access to the Capital [removed: Markets.][added: Markets.]

[removed: Our] [added: Our] International Operations Subject Us to Risks Including Foreign Currency Fluctuations, Regulations and Other [removed: Risks.][added: Risks.]

Conflicts, wars, natural [removed: disasters] [added: disasters, infectious disease outbreaks] or terrorist acts could also cause significant damage or disruption to our operations, employees, facilities, systems, suppliers, [added: supply chain,] distributors, resellers or customers in the United States and internationally for extended periods of time and could also affect demand for our products.

Net sales outside of the United States comprised [removed: 15.7%] [added: 13.2%] of our net sales in [removed: 2018.][added: 2019.]

[removed: Our] [added: Our] Ability to Meet Customer Demand may be Limited by Our Single-Location Production Facilities, Reliance on Certain Key Suppliers and Unanticipated Significant Shifts in Customer [removed: Demand.][added: Demand.]

Our inability to meet our customers’ demand for our products could have a material adverse [removed: impact] [added: effect] on our business, financial condition and results of operations.

[removed: Price] [added: Price] Volatility for Commodities and Components We Purchase or Significant Supply Interruptions Could Have an Adverse Effect on Our Cash Flow or Results of [removed: Operations.][added: Operations.]

[removed: Alternatively, if we increase our] prices in response to increases in the prices or quantities of raw materials or components or if we encounter significant supply interruptions, our competitive position could be adversely affected, which may result in depressed sales and profitability.

[removed: We] [added: We] May Incur Substantial Costs as a Result of Claims Which Could Have an Adverse Effect on Our Results of [removed: Operations.][added: Operations.]

For certain limited products, we provided lifetime [removed: warranties for heat exchangers.][added: warranties.]

[removed: If] [added: If] We Cannot Successfully Execute our Business Strategy, Our Results of Operations Could be Adversely [removed: Impacted][added: Impacted]

[added: For example, we are continuing to reorganize our North] American distribution network in order to better serve our customers’ needs by deploying parts and equipment inventory closer to them and are expanding our sourcing activities outside of the U.S. We also continue to rationalize and reorganize various support and administrative functions in order to reduce ongoing selling and administrative expenses.

[removed: We] [added: We] May Not be Able to Successfully Integrate and Operate Businesses that We May Acquire nor Realize the Anticipated Benefits of Strategic Relationships We May [removed: Form.][added: Form.]

[removed: If we are unable to] successfully do those things, we may not realize the anticipated benefits associated with such transactions, which could adversely affect our business and results of operations.

[removed: Because] [added: Because] a Significant Percentage of Our Workforce is Unionized in Certain Manufacturing Facilities, We Face Risks of Work Stoppages and Other Labor Relations [removed: Problems.][added: Problems.]

As of February [removed: 6, 2019,] [added: 7, 2020,] approximately [removed: 28%] [added: 27%] of our workforce, including international locations, was unionized.

The results of future negotiations with these unions and the effects of any production interruptions or labor stoppages could have [removed: an] [added: a material] adverse effect on our results of operations.

[removed: We] [added: We] are Subject to Litigation and Tax, Environmental and Other Regulations that Could Have an Adverse Effect on Our Results of [removed: Operations.][added: Operations.]

[removed: Any] [added: Any] Future Determination that a Significant Impairment of the Value of Our Goodwill Intangible Asset Occurred Could Have [removed: a Material] [added: an] Adverse Effect on Our Results of [removed: Operations.][added: Operations.]

As of December 31, [removed: 2018,] [added: 2019,] we had goodwill of [removed: $186.6] [added: $186.5] million on our Consolidated Balance Sheet.

[removed: Volatility] [added: Volatility] in Capital Markets Could Necessitate Increased Cash Contributions by Us to Our Pension Plans to Maintain Required Levels of [removed: Funding.][added: Funding.]

The amount of contributions we may be required to make to our pension plans in the future is uncertain and could be significant, which may have a material [removed: impact] [added: adverse effect] on our results of operations.

[removed: Security] [added: Security] Breaches and Other Disruptions or Misuse of Information Systems We Rely Upon Could Affect Our Ability to Conduct Our Business [removed: Effectively.][added: Effectively.]

We also outsource various information systems, including data management, to [removed: third party] [added: third-party] service providers.

Despite our security measures as well as those of our business partners and third-party service providers, the information systems we rely upon may be vulnerable to interruption or damage from computer hackings, computer viruses, worms or other destructive or disruptive software, process breakdowns, [added: denial of service attacks, malicious social engineering or other malicious activities, or any combination thereof.]

[removed: Our] [added: Our] Results of Operations May Suffer if We Cannot Continue to License or Enforce the Intellectual Property Rights on Which Our Businesses Depend or if Third Parties Assert That We Violate Their Intellectual Property [removed: Rights.][added: Rights.]

The sales, gross margins and profitability for each of our segments could be directly impacted by changes in legislation or government regulations or policies.

Changes in U.S. Trade Policy, Including the Imposition of Tariffs and the Resulting Consequences, Could Have an Adverse Effect on our Results of Operations.

The U.S. government has made changes in U.S. trade policy over the past several years.

These changes include renegotiating and terminating certain existing bilateral or multi-lateral trade agreements, such as the North American Free Trade Agreement, and initiating tariffs on certain foreign goods from a variety of countries and regions, most notably China.

These changes in U.S. trade policy have resulted in, and may continue to result in, one or more foreign governments adopting responsive trade policies that make it more difficult or costly for us to do business in or import our products or components from those countries.

We cannot predict the extent to which the U.S. or other countries will impose new or additional quotas, duties, tariffs, taxes or other similar restrictions upon the import or export of our products in the future, nor can we predict future trade policy or the terms of any renegotiated trade agreements and their impact on our business.

The continuing adoption or expansion of trade restrictions, the occurrence of a trade war, or other governmental action related to tariffs or trade agreements or policies has the potential to adversely impact demand for our products, our costs, our customers, our suppliers, and the U.S. economy, which in turn could have a material adverse effect on our business, operating results and financial condition.

For example, in December 2019, a strain of coronavirus surfaced in Wuhan, China.

Lennox has two small offices in Shanghai and Shenzhen, China with 30 employees devoted to supply chain, engineering, and trade compliance matters.

We also source components from approximately 24 suppliers located throughout China.

At the time of this filing, the outbreak has been largely concentrated in China, although cases have been confirmed in other countries.

The extent to which the coronavirus impacts our results will depend on future developments, which are highly uncertain and unpredictable, including new information concerning the severity of the coronavirus and the actions to contain or treat its impact, among others.

We experienced such an event in July 2018, when our manufacturing facility in Marshalltown, Iowa was severely damaged by a tornado.

See Item 7.

“Management’s Discussion and Analysis of Financial Condition and Results of Operations - Business Overview - Marshalltown Tornado.”

Some of these third-party suppliers are located outside of the United States.

Alternatively, if we increase our

Attempts have been made to attack our information systems, but no material harm has resulted.

If we are unable to

For example, we are continuing to reorganize our North

denial of service attacks, malicious social engineering or other malicious activities, or any combination thereof.

These information systems have been, and will likely continue to be, subject to attack.

The following discussion should be read in conjunction with the other sections of this report, including the [removed: consolidated financial statements] [added: Consolidated Financial Statements] and related [removed: notes contained] [added: Notes to the Consolidated Financial Statements] in Item [removed: 8] [added: 8, “Other Financial Statement Details,”] of this Annual Report on Form 10-K.

[removed: Business Overview][added: Business Overview]

For more detailed information regarding our reportable segments, see Note [removed: 20] [added: 3] in the Notes to the Consolidated Financial Statements.

On July 19, [removed: 2018] [added: 2018,] our manufacturing facility in Marshalltown, Iowa was damaged by a tornado.

[removed: We are working] [added: Insurance covered the repair or replacement of our assets that suffered damage or loss and, in 2018 and 2019, we worked] closely with our insurance carriers and claims adjusters to ascertain the [removed: full] amount of insurance recoveries due to us as a result of the damage and loss we suffered.

Our insurance policies also [removed: provide] [added: provided] business interruption coverage, including lost profits, and reimbursement for other expenses and costs that [removed: have been] [added: were] incurred relating to the damages and losses suffered.

For the year ended December 31, [removed: 2018] [added: 2019,] we incurred expenses of [removed: $86.0] [added: $64] million related to damages caused by the tornado, which included [removed: the write-off of damaged property, equipment] [added: site clean-up] and [removed: inventory,] [added: demolition, factory inefficiencies,] freight to move product to other [removed: warehouses and] [added: warehouses,] professional [removed: fees to secure] [added: fees,] and [removed: maintain the site.][added: sales and marketing promotional costs.]

[removed: We have received] [added: The settlement allowed for total cumulative] insurance recoveries of [removed: $124.3] [added: $367.5 million, of which $243] million [added: was received] for the year ended December 31, [removed: 2018.][added: 2019.]

[removed: We have allocated the first $96.9 million of insurance recoveries to cover our expenses and rebuilding costs incurred to date which is] [added: These amounts are] included in Gain from insurance recoveries, net of losses incurred in the Consolidated Statements of Operations.

[removed: Financial Highlights][added: Financial Highlights]

| • | Net income in [removed: 2018] [added: 2019] increased to [removed: $359] [added: $409] million from [removed: $306] [added: $359] million in [removed: 2017.] [added: 2018.] |

| • | Diluted earnings per share from continuing operations were [removed: $8.77] [added: $10.38] per share in [removed: 2018] [added: 2019] compared to [removed: $7.17] [added: $8.77] per share in [removed: 2017.] [added: 2018.] |

| • | We generated [removed: $496] [added: $396] million of cash flow from operating activities in [removed: 2018] [added: 2019] compared to [removed: $325] [added: $496] million in [removed: 2017.] [added: 2018.] The [removed: increase] [added: decrease] was primarily due to [removed: a decrease in working capital and] an increase in [removed: net income.] [added: working capital.] |

| • | In [removed: 2018,] [added: 2019,] we returned [removed: $94] [added: $111] million to shareholders through dividend payments and we used [removed: $450] [added: $400] million to purchase [removed: 2.3] [added: 1.5] million shares of stock under our Share Repurchase Plans. We also received [removed: $115] [added: $44] million in net proceeds from the sale of our [removed: businesses in Australia, Asia and South America along with the sale of the related property.] [added: Kysor Warren business.] |

[removed: Overview] [added: Overview] of [removed: Results][added: Results]

Despite the impact of the tornado at our Marshalltown [removed: facility] [added: facility,] the Residential Heating & Cooling segment performed well in [removed: 2018,] [added: 2019,] with a [removed: 4.0%] [added: 3%] increase in net sales and a [removed: $26] [added: $65] million increase in segment profit compared to [removed: 2017,] [added: 2018,] including the insurance proceeds received for lost profits in [removed: 2018.][added: 2019.]

Our Commercial Heating & Cooling segment also performed well in [removed: 2018] [added: 2019] with a [removed: 7.2%] [added: 5%] increase in net sales and [removed: a $2] [added: an $8] million increase in segment profit compared to [removed: 2017.][added: 2018.]

This segment’s results were driven by [removed: volume] [added: higher volumes] and price [added: and mix] gains.

Sales in our Refrigeration segment decreased [removed: 15%] [added: 25%] and segment profit decreased $7 million compared to [removed: 2017] [added: 2018] mostly due to the sale of our Australia, [removed: Asia and] [added: Asia,] South [removed: America] [added: America, and Kysor Warren] businesses.

On a consolidated basis, our gross profit margins decreased to [removed: 28.6%] [added: 28.4%] in [removed: 2018] [added: 2019] due primarily to unfavorable commodities, factory [removed: inefficiencies due to disruption caused by the tornado at our Marshalltown facility,] [added: inefficiencies,] and higher freight and distribution costs.

These declines were partially offset by favorable price and [removed: mix and] [added: mix,] sourcing and engineering-led cost reductions across our [removed: business.][added: business, and the divestiture of our Kysor Warren business which had lower margins.]

[removed: Results] [added: Results] of [removed: Operations][added: Operations]

| | [removed: For] [added: For] the Years Ended December [removed: 31,] [added: 31,] | | | | | | | | | | | | | | | | | | | |

| | [removed: 2018 | | | | | | | 2017 | | | | | |] [added: 2018] | [removed: 2016] | | | [added: 2017] | | |

| | [removed: Dollars] [added: Dollars] | | | | [removed: Percent] [added: Percent] | | | [removed: Dollars] [added: Dollars] | | | | [removed: Percent] [added: Percent] | | | [removed: Dollars] [added: Dollars] | | | | [removed: Percent] [added: Percent] | |

| Net sales | $ | [removed: 3,883.9] [added: 3,807.2] | | | 100.0 | % | | $ | [removed: 3,839.6] [added: 3,883.9] | | | 100.0 | % | | $ | [removed: 3,641.6] [added: 3,839.6] | | | 100.0 | % |

| Cost of goods sold | [removed: 2,772.7] [added: 2,727.4] | | | | [removed: 71.4] [added: 71.6] | % | | [removed: 2,714.4] [added: 2,772.7] | | | | [removed: 70.7] [added: 71.4] | % | | [removed: 2,565.1] [added: 2,714.4] | | | | [removed: 70.4] [added: 70.7] | % |

| Gross profit | [removed: 1,111.2] [added: 1,079.8] | | | | [removed: 28.6] [added: 28.4] | % | | [removed: 1,125.2] [added: 1,111.2] | | | | [removed: 29.3] [added: 28.6] | % | | [removed: 1,076.5] [added: 1,125.2] | | | | [removed: 29.6] [added: 29.3] | % |

| Selling, general and administrative expenses | [removed: 608.2] [added: 585.9] | | | | [removed: 15.7] [added: 15.4] | % | | [removed: 637.7] [added: 608.2] | | | | [removed: 16.6] [added: 15.7] | % | | [removed: 621.0] [added: 637.7] | | | | [removed: 17.1] [added: 16.6] | % |

| Losses (gains) and other expenses, net | [removed: 13.4] [added: 8.3] | | | | [removed: 0.3] [added: 0.2] | % | | [removed: 7.1] [added: 13.4] | | | | [removed: 0.2] [added: 0.3] | % | | [removed: 11.3] [added: 7.1] | | | | [removed: 0.3] [added: 0.2] | % |

| Restructuring charges | [removed: 3.0] [added: 10.3] | | | | [removed: 0.1] [added: 0.3] | % | | [removed: 3.2] [added: 3.0] | | | | 0.1 | % | | [removed: 1.8] [added: 3.2] | | | | [removed: —] [added: 0.1] | % |

| Loss (gain), net on sale of businesses and related property | [removed: 27.0] [added: 10.6] | | | | [removed: 0.7] [added: 0.3] | % | | [removed: 1.1] [added: 27.0] | | | | [removed: —] [added: 0.7] | % | | [removed: —] [added: 1.1] | | | | — | % |

| Gain from insurance recoveries, net of losses incurred | [removed: (10.9] [added: (178.8] | | ) | | [removed: (0.3] [added: (4.7] | )% | | [removed: —] [added: (38.3] | | [added: )] | | [removed: —] [added: (1.0] | [removed: %] [added: )%] | | — | | | | — | % |

[removed: | Pension settlement | 0.4 | | | | — | % | | — | | | | — | % | | 31.4 | | | | 0.9 | % |][added: *Pension Settlement*]

| Income from equity method investments | [removed: (12.0] [added: (13.4] | | ) | | [removed: (0.3] [added: (0.4] | )% | | [removed: (18.4] [added: (12.0] | | ) | | [removed: (0.5] [added: (0.3] | )% | | (18.4 | | ) | | (0.5 | )% |

| Operating income | $ | [removed: 509.5] [added: 656.9] | | | [removed: 13.1] [added: 17.3] | % | | $ | [removed: 494.5] [added: 509.9] | | | [removed: 12.9] [added: 13.1] | % | | $ | [removed: 429.4] [added: 494.5] | | | [removed: 11.8] [added: 12.9] | % |

| Loss from discontinued operations | [removed: (1.3] [added: (0.1] | | ) | | — | % | | [removed: (1.4] [added: (1.3] | | ) | | — | % | | [removed: (0.8] [added: (1.4] | | ) | | — | % |

| Net income | $ | [removed: 359.0] [added: 408.7] | | | [removed: 9.2] [added: 10.7] | % | | $ | [removed: 305.7] [added: 359.0] | | | [removed: 8.0] [added: 9.2] | % | | $ | [removed: 277.8] [added: 305.7] | | | [removed: 7.6] [added: 8.0] | % |

[removed: | Net Sales by Geographic Market: | | | | | | | | | | | | | | | | | | | | |][added: *Net Sales*]

[removed: Year] [added: Year] Ended December 31, [removed: 2018] [added: 2019] Compared to Year Ended December 31, 2018 - Consolidated [removed: Results][added: Results]

*Marshalltown Tornado*

In December 2019, we reached a final settlement with our insurance carriers for the losses we suffered from the tornado.

We allocated the first $64 million of insurance recoveries received in 2019 to cover our expenses, we allocated $80 million for capital expenditures related to rebuilding costs, and the remaining $99 million of insurance recoveries represents amounts for lost profits.

| • | Net sales decreased $77 million, or 2.0%, to $3,807 million in 2019 from $3,884 million in 2018. Sales growth in our Residential Heating & Cooling and Commercial Heating & Cooling segments was offset by a sales decline in our Refrigeration segment due to the sale of our Australia, Asia, and South America businesses in 2018, and the sale of our Kysor Warren business in the first quarter of 2019. |

| • | Operating income in 2019 was $657 million compared to $510 million in 2018. The increase was primarily due to increased sales in our Residential Heating & Cooling and Commercial Heating & Cooling segments, sourcing and engineering-led cost reductions, and a larger gain from insurance proceeds received related to the Marshalltown tornado. |

Net sales decreased 2.0% in 2019 compared to 2018, driven by a 5% decline related to the divestitures of our Australia, Asia, South America, and Kysor Warren businesses, partially offset by 1% volume growth and 2% from favorable price and mix combined.

SG&A expenses decreased by $22 million in 2019 compared to 2018.

SG&A decreased primarily due to the sale of our divested Australia, Asia, South America, and Kysor Warren businesses.

| | 2019 | | | | 2018 | | |

| Other operating (gains) losses | (1.7 | | ) | | — | | |

| Losses (gains) and other expenses, net | $ | 8.3 | | | $ | 13.4 | |

The special legal contingency charges in 2019 relate to outstanding legal settlements.

Restructuring charges were $10.3 million in 2019 compared to $3.0 million in 2018.

The charges in 2019 related primarily to activities in the Residential Heating & Cooling segment to close certain Lennox Stores and reduce management and support staff, and activities in the Commercial Heating & Cooling segments to re-align resources and its product portfolio.

*Asset Impairments*

We did not have any impairments of assets related to continuing operations in 2019 or 2018.

In the second and fourth quarters of 2019, we entered into agreements to purchase group annuity contracts and transfer certain pension assets and related pension benefit obligations to Pacific Life Insurance Company.

We recognized $99.2 million of pension settlement charges related to these transactions.

Refer to Note 11 in the Notes to the Consolidated Financial Statements for more information on pensions and employee benefit plans.

Income from equity method investments was $13 million in 2019 compared to $12 million in 2018.

The increase is due to improved operating performance at the joint ventures.

The 2019 and 2018 effective tax rates differ from the statutory rate of 21% primarily due to state and foreign taxes.

There were no significant losses from discontinued operations in 2019.

| | 2019 | | | | 2018 | | | | Difference | | | | % Change | |

| Net sales | $ | 2,291.1 | | | $ | 2,225.0 | | | $ | 66.1 | | | 3.0 | % |

| Profit | $ | 464.6 | | | $ | 399.4 | | | $ | 65.2 | | | 16.3 | % |

| % of net sales | 20.3 | | % | | 18.0 | | % | | | | | | | |

Segment profit in 2019 increased $65 million compared to 2018 due to an incremental $72 million of insurance proceeds for lost profits related to the Marshalltown tornado, $53 million of favorable price, $14 million of sourcing and engineer-led cost reductions, $8 million of lower warranty costs, and $2 million of higher sales volume.

million of unfavorable mix, $10 million of higher other product costs, $6 million of higher commodities, and $1 million of unfavorable foreign exchange rates.

| | For the Years Ended December 31, | | | | | | | | | | | | | |

| | 2019 | | | | 2018 | | | | Difference | | | | % Change | |

| Net sales | $ | 947.4 | | | $ | 900.7 | | | $ | 46.7 | | | 5.2 | % |

| Profit | $ | 165.4 | | | $ | 157.5 | | | $ | 7.9 | | | 5.0 | % |

Sales volume increased 2% and price and mix combined increased 3%.

| | For the Years Ended December 31, | | | | | | | | | | | | | |

| | 2019 | | | | 2018 | | | | Difference | | | | % Change | |

| Net sales | $ | 568.7 | | | $ | 758.2 | | | $ | (189.5 | ) | | (25.0 | )% |

| Profit | $ | 61.3 | | | $ | 68.1 | | | $ | (6.8 | ) | | (10.0 | )% |

| % of net sales | 10.8 | | % | | 9.0 | | % | | | | | | | |

Net sales decreased 25% in 2019 compared to 2018.

Insurance covers the repair or replacement of our assets that suffered damage or loss.

The remaining $27.4 million of insurance recoveries represents amounts for lost profits and is shown in Insurance proceeds for lost profits in the Consolidated Statements of Operations.

In 2019, we expect to receive approximately $83 million of insurance proceeds related to lost profits and $149 million of insurance proceeds to fund the reconstruction of the facility and as reimbursement for other losses and expenses expected to be incurred.

As part of our recovery efforts, we have shifted production of certain products that were previously only produced at our Marshalltown facility to our other facilities.

We believe this provides increased manufacturing flexibility.

| | |

| --- | --- |

| • | Net sales increased $44 million, or 1.2%, to $3,884 million in 2018 from $3,840 million in 2017. |

| • | Operating income in 2018 was $510 million compared to $495 million in 2017. The increase was primarily due to increased sales, reductions in SG&A expenses, and insurance proceeds received for third-quarter lost profits, partially offset by lower gross profit. |

| | | | | | | | | | | | | | | | | | | | | |

| --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- |

| Insurance proceeds for lost profits | (27.4 | | ) | | (0.7 | )% | | — | | | | — | % | | — | | | | — | % |

The following table provides net sales by geographic market (dollars in millions):

| U.S. | $ | 3,275.9 | | | 84.3 | % | | $ | 3,128.7 | | | 81.5 | % | | $ | 2,966.8 | | | 81.5 | % |

| Canada | 254.8 | | | | 6.6 | | | 237.8 | | | | 6.2 | | | 218.8 | | | | 6.0 | |

| International | 353.2 | | | | 9.1 | | | 473.1 | | | | 12.3 | | | 456.0 | | | | 12.5 | |

| Total net sales | $ | 3,883.9 | | | 100.0 | % | | $ | 3,839.6 | | | 100.0 | % | | $ | 3,641.6 | | | 100.0 | % |

| Net sales | $ | 1,043.5 | | | $ | 973.8 | | | $ | 69.7 | | | 7.2 | % |

| Profit | $ | 159.5 | | | $ | 157.3 | | | $ | 2.2 | | | 1.4 | % |

| Net sales | $ | 615.4 | | | $ | 725.4 | | | $ | (110.0 | ) | | (15.2 | )% |

| Profit | $ | 66.1 | | | $ | 72.6 | | | $ | (6.5 | ) | | (9.0 | )% |

| % of net sales | 10.7 | | % | | 10.0 | | % | | | | | | | |

Net sales increased 5.4% in 2017 compared to 2016, primarily driven by volume increases.

Changes in foreign currency exchange rates and the effects of price and mix also had positive impacts on net sales.

SG&A expenses increased by $17 million in 2017 compared to 2016.

SG&A increased due to general wage inflation, increased healthcare costs and increased investment in information technology and research and development partially offset by decreases in incentive compensation.

| | 2017 | | | | 2016 | | |

| Contractor tax payments | 0.1 | | | | 0.6 | | |

The special legal contingency charges increased primarily due to costs associated with the matter reported to the Securities and Exchange Commission and Department of Justice.

The contractor tax payments relate to a charge for underpaid contractor taxes at one of our non-U.S. subsidiaries.

Restructuring charges were $3.2 million in 2017 compared to $1.8 million in 2016.

In 2016 our unfunded pension liability declined by $33 million to $89 million as the favorable impact of our $50 million discretionary contribution was partially offset by lower discount rates across all plans.

In addition, we recorded a pension settlement charge of $31 million in the fourth quarter of 2016.

Income from equity method investments was $18 million in 2017 compared to $18 million in 2016 due to flat earnings from our joint ventures.

The 2017 effective tax rate was negatively impacted by recent changes in U.S. tax legislation that reduced the value of our deferred tax assets by $31.8 million, partially offset by the benefit from the impact of excess tax benefits of $23.6 million.

The 2016 effective tax rate was not impacted by either U.S. tax rate changes or the impact of excess tax benefits.

| Net sales | $ | 2,140.4 | | | $ | 2,000.8 | | | $ | 139.6 | | | 7.0 | % |

| Profit | $ | 373.9 | | | $ | 348.8 | | | $ | 25.1 | | | 7.2 | % |

Sales volume increased by 7% primarily due to market growth.

Segment profit in 2017 increased $25 million due to $39 million from higher sales volume, $21 million from sourcing and engineering-led cost reductions, $15 million from favorable price, $5 million from favorable foreign currency, $2 million from lower warranty expense, and $1 million from higher income from equity method investments.

[removed: The Company][added: The Company]

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 [removed: 2018] [added: 2019] by segment.

Segment financial data for [removed: 2018, 2017] [added: 2019, 2018] and [removed: 2016,] [added: 2017,] including financial information about foreign and domestic operations, is included in Note [removed: 20] [added: 3] of the Notes to our Consolidated Financial Statements in “Item 8.

| [removed: Segment] [added: Segment] | | [removed: Products] [added: Products] & [removed: Services] [added: Services] | | [removed: Product] [added: Product] and Brand [removed: Names] [added: Names] | | [removed: 2018 Net] [added: 2019 Net] Sales (in [removed: millions)] [added: millions)] | | |

| Residential Heating & Cooling | | Furnaces, air conditioners, heat pumps, packaged heating and cooling systems, indoor air quality equipment, comfort control products, replacement parts and supplies | | Lennox, Dave Lennox [removed: Signature,] [added: Signature Collection,] Armstrong Air, Ducane, [removed: Aire-Flo,] Air-Ease, Concord, Magic-Pak, ADP Advanced Distributor Products, [added: Allied, Healthy Climate, Elite Series, Merit Series, Comfort Sync,] iComfort and Lennox [removed: PartsPlus] [added: Stores] | | $ | [removed: 2,225.0] [added: 2,291.1] | |

| Commercial Heating & Cooling | | Unitary heating and air conditioning equipment, applied systems, controls, installation and service of commercial heating and cooling equipment, variable refrigerant flow commercial products | | Lennox, Allied Commercial, Magic-Pak, Raider, Landmark, Prodigy, Strategos, Energence, Lennox VRF and Lennox National Account Services | | [removed: 1,043.5] [added: 947.4] | | |

| Refrigeration | | Condensing units, unit coolers, fluid coolers, air cooled condensers, air handlers, process chillers, controls, compressorized [removed: racks, supermarket display cases and systems] [added: racks.] | | Heatcraft Worldwide Refrigeration, [added: Lennox (Europe HVAC),] Bohn, Larkin, Climate Control, Chandler Refrigeration, [removed: Kysor/Warren,] Friga-Bohn, HK Refrigeration, [removed: Hyfra, Kirby] [added: Hyfra] and Interlink | | [removed: 615.4] [added: 568.7] | | |

[removed: Products] [added: Products] and [removed: Services][added: Services]

[removed: Residential] [added: *Residential] Heating & [removed: Cooling][added: Cooling*]

[removed: Heating] [added: *Heating] & Cooling [removed: Products.][added: Products*.]

The “Lennox” [removed: and “Aire-Flo”] brands are sold directly to a network of approximately 7,000 independent installing dealers, making us one of the largest wholesale distributors of residential heating and air conditioning products in North America.

We [removed: are continuing] [added: continue] to [removed: grow] [added: invest in] our network of [removed: 240] [added: 221] Lennox [removed: PartsPlus stores] [added: Stores] across the United States and Canada.

ADP sells [removed: its own ADP branded] [added: ADP-branded] evaporator coils to over 450 HVAC wholesale distributors across North America.

[removed: Commercial] [added: *Commercial] Heating & [removed: Cooling][added: Cooling*]

[removed: National] [added: *National] Account [removed: Services.][added: Services*.]

In Europe, we manufacture and sell unitary [added: HVAC] products, which range from 2 to 70 tons of cooling capacity, and applied systems with up to 200 tons of cooling capacity.

[removed: Refrigeration][added: *Refrigeration*]

Our global manufacturing, distribution, sales and marketing footprint serves customers in over [removed: 103] [added: 113] countries worldwide.

Our commercial refrigeration products for the North American market include condensing units, unit coolers, fluid coolers, air-cooled condensers, air [removed: handlers, display cases] [added: handlers] and refrigeration rack systems.

[removed: In international markets, we] [added: We also] manufacture and market refrigeration products including condensing units, unit coolers, air-cooled condensers, fluid coolers, compressor racks and industrial process chillers.

[removed: Business Strategy][added: Business Strategy]

Our business strategy is to sustain and expand our premium market position [removed: as well as offer] [added: by offering] a full spectrum of products to meet our customers’ needs.

[added: *Innovative Product and System Solutions.*] In all of our markets, we are building on our heritage of innovation by developing residential, commercial and refrigeration products that give families and business owners more precise control over more aspects of their indoor environments, while significantly lowering their energy costs.

[added: *Manufacturing and Sourcing Excellence.*] We maintain our commitment to manufacturing and sourcing excellence by [removed: driving low-cost assembly through rationalization of our facilities and product lines,] maximizing factory [removed: efficiencies,] [added: efficiencies] and leveraging our purchasing power and sourcing initiatives to expand the use of lower-cost components that meet our high-quality requirements.

[added: *Distribution Excellence.*] By investing resources in expanding our distribution network, we are making products available to our customers in a timely, cost-efficient manner.

[added: *Expense Reduction.*] Through our cost management initiatives, we are optimizing operating, manufacturing and administrative costs.

[removed: Marketing] [added: Marketing] and [removed: Distribution][added: Distribution]

We distribute our “Lennox” [removed: and “Aire-Flo”] brands in a company-owned process directly to independent dealers that install these heating and cooling products.

We also sell our products directly to customers through our Lennox [removed: PartsPlus stores.][added: Stores.]

[removed: Manufacturing][added: Manufacturing]

[removed: Strategic Sourcing][added: Strategic Sourcing]

Compressors, motors and controls constitute our most significant component purchases, while steel, copper and aluminum [added: account for the bulk of our raw material purchases.]

We own [removed: an] [added: a minority] equity interest in a joint venture that manufactures compressors.

This joint venture [removed: provide] [added: provides] us with compressors for our residential and commercial heating and cooling and refrigeration businesses.

[removed: Research] [added: Research] and Development and [removed: Technology][added: Technology]

We leverage intellectual property and innovative designs across our [removed: businesses.]

[removed: Seasonality][added: Seasonality]

[removed: Our] [added: HVAC] markets are driven by seasonal weather patterns.

[removed: Patents] [added: Patents] and [removed: Trademarks][added: Trademarks]

[removed: Competition][added: Competition]

| | | | | Total | | $ | 3,807.2 | |

*North America*.

*North America*.

In the first quarter of 2019, we completed the sale of our Kysor Warren business.

*International*.

businesses.

*Remediation Activity*.

Information about our Executive Officers

He previously served as Vice President and General Manager, Lennox North America Commercial Equipment business since 2016; Vice President, Worldwide Sourcing from 2011 to 2016; and Director of Business Development from 2010 to 2011.

Prior to joining the Company, Mr. Zimmer was Director, Capacity Planning & Operations Strategy at Dr. Pepper Snapple.

He began his professional career with McKinsey & Company in 2006.

Mr. Zimmer holds a bachelor of science degree in systems engineering from the United States Military Academy, served as a Captain in the United States Army and received an MBA from the Harvard Business School.

| | | | | Total | | $ | 3,883.9 | |

North America.

Europe.

In addition to providing complete refrigeration systems and display cases, we also provide turnkey installations for our supermarket customers in Mexico.

International.

During 2018, we completed the sale of our Australia, Asia and South America businesses.

Innovative Product and System Solutions.

Manufacturing and Sourcing Excellence.

Distribution Excellence.

Expense Reduction.

account for the bulk of our raw material purchases.

Energy Efficiency.

Refrigerants.

Remediation Activity.

European WEEE and RoHS Compliance.

You can also read and copy any document that we file, including this Annual Report on Form 10-K, at the Securities and Exchange Commission’s Public Reference Room at 100 F Street, N.E., Washington, D.C. 20549.

Call the Securities and Exchange Commission at 1-800-SEC-0330 for information on the operation of the Public Reference Room.

Executive Officers of the Company

industrial, municipal and commercial settings.

Terry L.

Since May 2007, he had served as Vice President and General Manager, North America Commercial.

He had previously served as Vice President, Marketing and Product Management, LII Worldwide Heating & Cooling and as Vice President, Marketing and Product Management for Lennox Industries.

Before joining LII in 2001, Mr. Johnston worked for 20 years at GE in a variety of product management and sales and marketing roles.

He is on the Board of Directors of CSW Industrials, Inc., a diversified industrial growth company with businesses in industrial products, sealants and adhesives and specialty chemicals segments.

He holds a bachelor of science in marketing from the University of Arkansas.

It is management’s opinion that none of these claims or lawsuits will have a material adverse effect, individually or in the aggregate, on our financial position, results of operations or [removed: cash flows.]

For more information, see Note [removed: 11] [added: 5] in the Notes to the Consolidated Financial Statements.

cash flows.

[removed: UNITED] [added: UNITED] STATES SECURITIES AND EXCHANGE [removed: COMMISSION][added: COMMISSION]

[removed: Form 10-K][added: Form 10-K]

[removed: ANNUAL] [added: | ☒ | ANNUAL] REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF [removed: 1934][added: 1934 |]

[removed: For] [added: For] the fiscal year [removed: ended December] [added: ended December] 31, [removed: 2018][added: 2019]

[removed: LENNOX] [added: LENNOX] INTERNATIONAL [removed: INC.][added: INC.]

| [removed: Delaware] [added: Delaware] | [removed: 42-0991521] [added: 42-0991521] |

[removed: Richardson, Texas 75080][added: 2140 Lake Park Blvd. Richardson, Texas 75080]

(Registrant’s telephone number, including area code): [removed: (972) 497-5000][added: (972) 497-5000]

| [removed: Title] [added: Title] of each [removed: class] [added: class] | [removed: Name] [added: Trading Symbol(s) | Name] of each exchange on which [removed: registered] [added: registered] |

| [removed: Common Stock, $.01] [added: Common stock, $0.01] par value per [removed: share] [added: share] | [removed: New] [added: LII | New] York Stock [removed: Exchange] [added: Exchange] |

Securities Registered Pursuant to Section 12(g) of the Act: [removed: None][added: None]

Indicate by check mark whether the registrant has submitted electronically [removed: and posted on its corporate Web site, if any,] every Interactive Data File required to be submitted [removed: and posted] pursuant to Rule 405 of Regulation [removed: S-T(§232.405] [added: S-T (§232.405] of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit [removed: and post] such files).

Indicate by check mark whether the registrant is a [removed: large accelerated filer, an accelerated filer or a non-accelerated filer (see definition of “accelerated filer” and “large accelerated filer”] [added: shell company (as defined] in Rule 12b-2 of the Exchange [removed: Act).][added: Act).Yes ☐ No x]

| Non-Accelerated Filer | \[ \] | | Smaller Reporting Company | [removed: \[ \]] [added: ☐] |

| | | | Emerging [removed: growth company] [added: Growth Company] | [removed: \[ \]] [added: ☐] |

As of June 30, [removed: 2018,] [added: 2019,] the aggregate market value of the common stock held by non-affiliates of the registrant was approximately [removed: $8] [added: $11] billion based on the closing price of the registrant’s common stock on the New York Stock Exchange.

As of February [removed: 8, 2019,] [added: 7, 2020,] there were [removed: 39,872,002] [added: 38,598,884] shares of the registrant’s common stock outstanding.

[removed: DOCUMENTS] [added: DOCUMENTS] INCORPORATED BY [removed: REFERENCE][added: REFERENCE]

Portions of the registrant’s 2019 Definitive Proxy Statement to be filed with the Securities and Exchange Commission in connection with the registrant’s 2019 Annual Meeting of Stockholders to be held on May [removed: 23, 2019] [added: 21, 2020] are incorporated by reference into Part III of this report.

[removed: INDEX][added: INDEX]

| | | [removed: Page] [added: Page] |

| [removed: PART I] [added: PART I] | | |

| ITEM 1. | [removed: [Business](#sCC1ECBFC55F45A879422E547F4E9270B)] [added: [Business](#s0F37DB45E8E25A6CB5BDD9CBB5DA0768)] | [removed: [1](#sCC1ECBFC55F45A879422E547F4E9270B)] [added: [1](#s0F37DB45E8E25A6CB5BDD9CBB5DA0768)] |

| ITEM 1A. | [Risk [removed: Factors](#sF936E883B6695D8A8711DEFDC541138B)] [added: Factors](#s63C715D0029D5A9F8F029F97AD0EA500)] | [removed: [8](#sF936E883B6695D8A8711DEFDC541138B)] [added: [8](#s63C715D0029D5A9F8F029F97AD0EA500)] |

| ITEM 1B. | [Unresolved Staff [removed: Comments](#s1D59009475DE53319B9C57861E2FF5FB)] [added: Comments](#sA74E136626585F1E92D52A28FE02DE18)] | [removed: [12](#s1D59009475DE53319B9C57861E2FF5FB)] [added: [12](#sA74E136626585F1E92D52A28FE02DE18)] |

| ITEM 2. | [removed: [Properties](#s2FB3B6A21B9D5F26ADAFE3B98E74768A)] [added: [Properties](#s7CFF76570963523EA863EDDFAA9ACF63)] | [removed: [13](#s2FB3B6A21B9D5F26ADAFE3B98E74768A)] [added: [13](#s7CFF76570963523EA863EDDFAA9ACF63)] |

| ITEM 3. | [Legal [removed: Proceedings](#sF220B98F4FA05CEB92AED7F11B6DEB11)] [added: Proceedings](#sC5DC4FA5BF0550FBBFFED739C378444C)] | [removed: [14](#sF220B98F4FA05CEB92AED7F11B6DEB11)] [added: [13](#sC5DC4FA5BF0550FBBFFED739C378444C)] |

| ITEM 4. | [Mine Safety [removed: Disclosures](#s7413A4204D795DD6B1F9A0A4F0F9175A)] [added: Disclosures](#sD5AFC8643B465CA3ABBAFBE28126130E)] | [removed: [14](#s7413A4204D795DD6B1F9A0A4F0F9175A)] [added: [14](#sD5AFC8643B465CA3ABBAFBE28126130E)] |

| [removed: PART II] [added: PART II] | | |

| ITEM 5. | [Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity [removed: Securities](#s179FAB63D7C95885B299764F8A118423)] [added: Securities](#s4DC3BDFC6ED2586BA441499BA4E21196)] | [removed: [14](#s179FAB63D7C95885B299764F8A118423)] [added: [14](#s4DC3BDFC6ED2586BA441499BA4E21196)] |

| ITEM 6. | [Selected Financial [removed: Data](#sEEB9B724ED075A45BCFA6F45A5E644E3)] [added: Data](#s3C549911DCA5541EBCA60C53C456938D)] | [removed: [16](#sEEB9B724ED075A45BCFA6F45A5E644E3)] [added: [15](#s3C549911DCA5541EBCA60C53C456938D)] |

| ITEM 7. | [Management's Discussion and Analysis of Financial Condition and Results of [removed: Operations](#s5D8A09D50A0B595E9B7DED4E3BC45034)] [added: Operations](#s9507DF6131D25BBF90CF61A500D5A6D1)] | [removed: [16](#s5D8A09D50A0B595E9B7DED4E3BC45034)] [added: [16](#s9507DF6131D25BBF90CF61A500D5A6D1)] |

| ITEM 7A. | [Quantitative and Qualitative Disclosures about Market [removed: Risk](#sF1B2E739A71B5AD6B0F27AEDB023019F)] [added: Risk](#s4DDDBF8C1D53506FA3B849D8BC35F2B3)] | [removed: [30](#sF1B2E739A71B5AD6B0F27AEDB023019F)] [added: [29](#s4DDDBF8C1D53506FA3B849D8BC35F2B3)] |

| ITEM 8. | [Financial Statements and Supplementary [removed: Data](#sE0C8D755F9425918AE7FDAEF7C021FCD)] [added: Data](#s2EB24A5D616756838856C74B00264FE6)] | [removed: [31](#sE0C8D755F9425918AE7FDAEF7C021FCD)] [added: [30](#s2EB24A5D616756838856C74B00264FE6)] |

| ITEM 9. | [Changes in and Disagreements With Accountants on Accounting and Financial [removed: Disclosure](#s8A1F79FF8C2453318105022FBFAD235C)] [added: Disclosure](#s0E0C62EB6CFC5867A2B9BB3D79ECED80)] | [removed: [90](#s8A1F79FF8C2453318105022FBFAD235C)] [added: [87](#s0E0C62EB6CFC5867A2B9BB3D79ECED80)] |

| ITEM 9A. | [Controls and [removed: Procedures](#s204528A620D95328AF487D5EB777F345)] [added: Procedures](#s0EEF77FA19A754619354D8B5F9656A85)] | [removed: [90](#s204528A620D95328AF487D5EB777F345)] [added: [87](#s0EEF77FA19A754619354D8B5F9656A85)] |

| ITEM 9B. | [Other [removed: Information](#sB482A5F59C275BC3AFF8808EC3E44E68)] [added: Information](#sE44EC321E82855A8A91D3930EB6BE97A)] | [removed: [90](#sB482A5F59C275BC3AFF8808EC3E44E68)] [added: [87](#sE44EC321E82855A8A91D3930EB6BE97A)] |

| [removed: PART III] [added: PART III] | | |

| ITEM 10. | [Directors, Executive Officers and Corporate [removed: Governance](#s2E1C92E253885D77A5843B0CC35DAA8F)] [added: Governance](#sA0F59F66E4735705A6AF320A7EE24949)] | [removed: [90](#s2E1C92E253885D77A5843B0CC35DAA8F)] [added: [87](#sA0F59F66E4735705A6AF320A7EE24949)] |

| ITEM 11. | [Executive [removed: Compensation](#s7FE778A5685B51D9AD2424AB36BA5618)] [added: Compensation](#s8C2ADA24A53354259F90259C7664F8A5)] | [removed: [91](#s7FE778A5685B51D9AD2424AB36BA5618)] [added: [87](#s8C2ADA24A53354259F90259C7664F8A5)] |

OR

| ☐ | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |

For the transition period from _____to ______

| | |

| --- | --- |

| | |

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.

LENNOX INTERNATIONAL INC.

FORM 10-K

For the Fiscal Year Ended December 31, 2019

| --- | --- | --- |

| | | |

| ITEM 16. | [Form 10-K Summary](#sd720f2c508934ad0a5da251cb1e47d5c) | [92](#sd720f2c508934ad0a5da251cb1e47d5c) |

| | | |

| | [SIGNATURES](#sC9CB87C0FCFC5D0EB35B3FA49A4C4797) | [93](#sC9CB87C0FCFC5D0EB35B3FA49A4C4797) |

10-K 1 lii-20181231x10k.htm 10-K

2140 Lake Park Blvd.

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K.

\[ \]

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).Yes \[ \] No\[X\]

| | [SIGNATURES](#s9062465AB48F5C648FAE7E88CDF48488) | [92](#s9062465AB48F5C648FAE7E88CDF48488) |

| | [INDEX TO EXHIBITS](#s084EF8FB236057839B265AB88DAD5355) | [95](#s084EF8FB236057839B265AB88DAD5355) |

The following chart lists our principal domestic and international manufacturing, distribution and office facilities as of December 31, [removed: 2018] [added: 2019] and indicates the business segment that uses such facilities, the approximate size of such facilities and whether such facilities are owned or leased.

| [removed: Location] [added: Location] | [removed: Segment] [added: Segment] | [removed: Type] [added: Type] or Use of [removed: Facility] [added: Facility] | [removed: Approx.] [added: Approx.] Sq. [removed: Ft. (In thousands)] [added: Ft. (In thousands)] | [removed: Owned/Leased] [added: Owned/Leased] |

| Grenada, MS | Residential Heating & Cooling | Manufacturing & Distribution | 395 | [added: Owned &] Leased |

| Romeoville, IL | Residential Heating & Cooling | Distribution [added: & Office] | [removed: 312] [added: 697] | Leased |

| [removed: Columbus, OH] [added: Blythewood, SC] | Residential Heating & Cooling | Distribution | [removed: 144] [added: 147] | Leased |

| [removed: Harahan, LA] [added: Grove City, OH] | Residential Heating & Cooling | Distribution | [removed: 83] [added: 279] | Leased |

| [removed: Kansas City, MI] [added: Houston, TX] | Residential [added: & Commercial] Heating & Cooling | Distribution | [removed: 59] [added: 204] | Leased |

| [removed: Denver, CO] [added: Calgary, Canada] | Residential [added: & Commercial] Heating & Cooling | Distribution | [removed: 49] [added: 145] | Leased |

| [removed: St. Louis, MO] [added: Jessup, PA] | [removed: Residential] [added: Commercial] Heating & Cooling | Distribution | [removed: 48] [added: 130] | Leased |

| Longvic, France | [removed: Commercial Heating & Cooling] [added: Refrigeration] | Manufacturing | 142 | Owned |

| Longvic, France | [removed: Commercial Heating & Cooling] [added: Refrigeration] | Distribution | 133 | Owned |

| Burgos, Spain | [removed: Commercial Heating & Cooling &] Refrigeration | Manufacturing | 140 | Owned |

| Mions, France | [removed: Commercial Heating & Cooling &] Refrigeration | Research & Development | 129 | Owned |

| Genas, France | [removed: Commercial Heating & Cooling &] Refrigeration | Manufacturing, Distribution & Offices | 111 | Owned |

In addition to the properties described above, we lease numerous facilities in the U.S. and worldwide for use as sales offices, service [removed: offices and] [added: offices,] district and regional [removed: warehouses.][added: warehouses, and Lennox Stores.]

| Salt Lake City,UT | Residential Heating & Cooling | Distribution | 45 | Leased |

| Minneapolis, MN | Residential Heating & Cooling | Distribution | 44 | Leased |

| Houston, TX | Residential & Commercial Heating & Cooling | Distribution | 216 | Leased |

| Calgary, Canada | Residential & Commercial Heating & Cooling | Distribution | 110 | Leased |

| Norcross, GA | Commercial Heating & Cooling | Distribution | 95 | Leased |

| Columbus, GA | Refrigeration | Manufacturing, Warehousing & Offices | 523 | Owned & Leased |

| Krunkel, Germany | Refrigeration | Manufacturing, Distribution & Offices | 43 | Owned |

[removed: PART II][added: PART II]

[removed: Market] [added: Market] Information for Common [removed: Stock][added: Stock]

[removed: Holders] [added: Holders] of Common [removed: Stock][added: Stock]

As of the close of business on February [removed: 8, 2019,] [added: 7, 2020,] approximately [removed: 621] [added: 594] holders of record held our common stock.

[removed: Comparison] [added: Comparison] of Total Stockholder [removed: Return][added: Return]

The graph assumes that $100 was invested on December 31, [removed: 2013,] [added: 2014,] with dividends reinvested.

[removed: ][added: ]

[removed: Our] [added: Our] Purchases of [removed: LII] [added: Company] Equity [removed: Securities][added: Securities]

Our Board of Directors has authorized a total of [removed: $2.5] [added: $3] billion [removed: towards the] [added: to] repurchase [removed: of] shares of our common stock (collectively referred to as the “Share Repurchase Plans”), including [removed: a] [added: an incremental] $500 million share repurchase authorization in [removed: March 2018.][added: December 2019.]

As of December 31, [removed: 2018, $446] [added: 2019, $546] million [removed: may be used] [added: is available] to repurchase shares under the Share Repurchase Plans.

In the fourth quarter of [removed: 2018,] [added: 2019,] we purchased shares of our common stock as follows:

| | [removed: Total] [added: Total] Shares [removed: Purchased (1)] [added: Purchased (1)] | | | [removed: Average] [added: Average] Price Paid per Share (including [removed: fees)] [added: fees)] | | | | [removed: Shares] [added: Shares] Purchased As Part of Publicly Announced [removed: Plans] [added: Plans] | | | [removed: Approximate] [added: Approximate] Dollar Value of Shares that may yet be Purchased Under the [removed: Plans (in millions) (2)] [added: Plans (in millions) (2)] | |

(1) Includes the surrender [removed: to LII] of [removed: 27,808] [added: 27,703] shares of common stock to [added: LII to] satisfy employee tax-withholding obligations in connection with the exercise of vested stock appreciation rights and the vesting of restricted stock units.

See Note [removed: 16] [added: 6] in the Notes to the Consolidated Financial Statements for further details.

| October 1 through October 31 | 6,012 | | | $ | 243.91 | | | — | | | 46.0 | |

| November 1 through November 30 | 3,910 | | | 251.04 | | | | — | | | 46.0 | |

| December 1 through December 31 | 17,781 | | | 260.39 | | | | — | | | 546.0 | |

| | 27,703 | | | | | | | — | | | | |

(2) After $100.0 million, $150.0 million and $150.0 million share repurchases from stock market transactions during the first, second and third quarters, respectively, which were executed pursuant to previously announced Share Repurchase Plans.

Dividends

During 2018 and 2017, we declared quarterly cash dividends as set forth below:

| | | | | | | | |

| --- | --- | --- | --- | --- | --- | --- | --- |

| | 2018 | | | | 2017 | | |

| First Quarter | $ | 0.51 | | | $ | 0.43 | |

| Second Quarter | 0.64 | | | | 0.51 | | |

| Third Quarter | 0.64 | | | | 0.51 | | |

| Fourth Quarter | 0.64 | | | | 0.51 | | |

| Fiscal Year | $ | 2.43 | | | $ | 1.96 | |

The amount and timing of dividend payments are determined by our Board of Directors and subject to certain restrictions under our domestic revolving credit facility.

| October 1 through October 31 | 74,796 | | | $ | 200.02 | | | 74,300 | | | 530.9 | |

| November 1 through November 30 | 423,374 | | | 204.95 | | | | 415,434 | | | 445.8 | |

| December 1 through December 31 | 19,372 | | | 210.37 | | | | — | | | 445.8 | |

| | 517,542 | | | | | | | 489,734 | | | | |

(2) After $150 million payment for Accelerated Share Repurchase Plan (ASR) executed in February 2018, $200.2 million share repurchase from open market transactions during the second quarter and $100 million share repurchase from open market transactions during the fourth quarter.

Final settlement of the ASR occurred in April 2018.

The ASR and the stock repurchase was executed pursuant to a previously announced repurchase plan.

The following table presents selected financial data for each of the five years ended December 31, [removed: 2018] [added: 2019] to [removed: 2014] [added: 2015] (in millions, except per share data):

| | [removed: For] [added: For] the Years Ended December [removed: 31,] [added: 31,] | | | | | | | | | | | | | | | | | | |

| | [removed: 2018] [added: 2019] | | | | [removed: 2017] [added: 2018] | | | | [removed: 2016] [added: 2017] | | | | [removed: 2015] [added: 2016] | | | | [removed: 2014] [added: 2015] | | |

| [removed: Statements] [added: Statements] of Operations [removed: Data:] [added: Data:] | | | | | | | | | | | | | | | | | | | |

| Net Sales | $ | [removed: 3,883.9] [added: 3,807.2] | | | $ | [removed: 3,839.6] [added: 3,883.9] | | | $ | [removed: 3,641.6] [added: 3,839.6] | | | $ | [removed: 3,467.4] [added: 3,641.6] | | | $ | [removed: 3,367.4] [added: 3,467.4] | |

| Operating Income | [removed: 509.5] [added: 656.9] | | | | [removed: 494.5] [added: 509.9] | | | | [removed: 429.4] [added: 494.5] | | | | [removed: 305.4] [added: 429.4] | | | | [removed: 334.7] [added: 305.4] | | |

| Income From Continuing Operations | [removed: 360.3] [added: 408.8] | | | | [removed: 307.1] [added: 360.3] | | | | [removed: 278.6] [added: 307.1] | | | | [removed: 187.2] [added: 278.6] | | | | [removed: 208.1] [added: 187.2] | | |

| Net Income | [removed: 359.0] [added: 408.7] | | | | [removed: 305.7] [added: 359.0] | | | | [removed: 277.8] [added: 305.7] | | | | [removed: 186.6] [added: 277.8] | | | | [removed: 205.8] [added: 186.6] | | |

| Basic Earnings Per Share From Continuing Operations | [removed: 8.87] [added: 10.49] | | | | [removed: 7.28] [added: 8.87] | | | | [removed: 6.41] [added: 7.28] | | | | [removed: 4.17] [added: 6.41] | | | | [removed: 4.35] [added: 4.17] | | |

| Diluted Earnings Per Share From Continuing Operations | [removed: 8.77] [added: 10.38] | | | | [removed: 7.17] [added: 8.77] | | | | [removed: 6.34] [added: 7.17] | | | | [removed: 4.11] [added: 6.34] | | | | [removed: 4.28] [added: 4.11] | | |

| Cash Dividends Declared Per Share | [removed: 2.43] [added: 2.95] | | | | [removed: 1.96] [added: 2.43] | | | | [removed: 1.65] [added: 1.96] | | | | [removed: 1.38] [added: 1.65] | | | | [removed: 1.14] [added: 1.38] | | |

| [removed: Other Data:] [added: Other Data:] | | | | | | | | | | | | | | | | | | | |

| Capital Expenditures | $ | [removed: 95.2] [added: 105.6] | | | $ | [removed: 98.3] [added: 95.2] | | | $ | [removed: 84.3] [added: 98.3] | | | $ | [removed: 69.9] [added: 84.3] | | | $ | [removed: 88.4] [added: 69.9] | |

| Research and Development Expenses | [removed: 72.2] [added: 69.9] | | | | [removed: 73.6] [added: 72.2] | | | | [removed: 64.6] [added: 73.6] | | | | [removed: 62.3] [added: 64.6] | | | | [removed: 60.7] [added: 62.3] | | |

| [removed: Balance] [added: Balance] Sheet Data at Period [removed: End:] [added: End:] | | | | | | | | | | | | | | | | | | | |

| Total Assets | $ | [removed: 1,817.2] [added: 2,034.9] | | | $ | [removed: 1,891.5] [added: 1,817.2] | | | $ | [removed: 1,760.3] [added: 1,891.5] | | | $ | [removed: 1,677.4] [added: 1,760.3] | | | $ | [removed: 1,764.3] [added: 1,677.4] | |

| Total Debt | [removed: 1,041.3] [added: 1,171.2] | | | | [removed: 1,004.0] [added: 1,041.3] | | | | [removed: 868.2] [added: 1,004.0] | | | | [removed: 741.1] [added: 868.2] | | | | [removed: 925.6] [added: 741.1] | | |

| Stockholders’ (Deficit) Equity | [removed: (149.6] [added: (170.2] | | ) | | [removed: 50.1] [added: (149.6] | | [added: )] | | [removed: 38.0] [added: 50.1] | | | | [removed: 101.6] [added: 38.0] | | | | [removed: 9.0] [added: 101.6] | | |

To understand the factors that may affect comparability, the financial data should be read in conjunction with Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” and the Consolidated Financial Statements and the related Notes to the Consolidated Financial Statements in Item 8, [removed: “Financial Statements and Supplementary Data,”] [added: “Other Financial Statement Details,”] of this [added: Annual Report on] Form 10-K.

[removed: MANAGEMENT’S] [added: MANAGEMENT’S] REPORT ON INTERNAL CONTROL OVER FINANCIAL [removed: REPORTING][added: REPORTING]

Management, including our Chief Executive Officer and Chief Financial Officer, has undertaken an assessment of the effectiveness of the Company’s internal control over financial reporting as of December 31, [removed: 2018,] [added: 2019,] based on criteria established in [removed: Internal] [added: *Internal] Control - Integrated [removed: Framework] [added: Framework*] (2013) by the Committee of Sponsoring Organizations of the Treadway Commission.

Based on this assessment, management concluded that as of December 31, [removed: 2018,] [added: 2019,] the Company’s internal control over financial reporting was effective.

KPMG LLP, the independent registered public accounting firm that audited the Company’s [removed: consolidated financial statements,] [added: Consolidated Financial Statements,] has issued an audit report including an opinion on the effectiveness of our internal control over financial reporting as of December 31, [removed: 2018,] [added: 2019,] a copy of which is included herein.

[removed: REPORT] [added: REPORT] OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING [removed: FIRM][added: FIRM]

[removed: Opinions] [added: *Opinions] on the Consolidated Financial Statements and Internal Control Over Financial [removed: Reporting][added: Reporting*]

We have audited the accompanying consolidated balance sheets of Lennox International Inc. and subsidiaries (the Company) as of December 31, [removed: 2018] [added: 2019] and [removed: 2017,] [added: 2018,] the related consolidated statements of operations, comprehensive (loss) income, stockholders’ (deficit) equity, and cash flows for each of the years in the three-year period ended December 31, [removed: 2018,] [added: 2019,] and the related notes and Schedule II - Valuation and Qualifying Accounts and Reserves (collectively, the consolidated financial statements).

We also have audited the Company’s internal control over financial reporting as of December 31, [removed: 2018,] [added: 2019,] based on criteria established in [removed: Internal] [added: *Internal] Control - Integrated [removed: Framework (2013)] [added: Framework* *(2013)*] issued by the Committee of Sponsoring Organizations of the Treadway Commission.

In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of the Company as of December 31, [removed: 2018] [added: 2019] and [removed: 2017,] [added: 2018,] and the results of its operations and its cash flows for each of the years in the three-year period ended December 31, [removed: 2018,] [added: 2019,] in conformity with U.S. generally accepted accounting principles.

Also in our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of December 31, [removed: 2018,] [added: 2019,] based on criteria established in [removed: Internal] [added: *Internal] Control - Integrated Framework [removed: (2013)] [added: (2013)*] issued by the Committee of Sponsoring Organizations of the Treadway Commission.

[removed: Change] [added: *Change] in Accounting [removed: Principle][added: Principles*]

As discussed in Note [removed: 2] [added: 9] to the consolidated financial statements, [removed: in 2018] the Company [removed: adopted] [added: has changed its method of accounting for revenue from contracts with customers as of January 1, 2018 due to the adoption of] Accounting Standards Update [added: (ASU)] No. 2014-09, [removed: Revenue] [added: *Revenue] from Contracts with Customers (Topic [removed: 606),] [added: 606)*,] as amended.

[removed: Basis] [added: *Basis] for [removed: Opinion][added: Opinions*]

[removed: Definition] [added: *Definition] and Limitations of Internal Control Over Financial [removed: Reporting][added: Reporting*]

| [removed: LENNOX] [added: LENNOX] INTERNATIONAL INC. AND [removed: SUBSIDIARIES CONSOLIDATED] [added: SUBSIDIARIES CONSOLIDATED] BALANCE [removed: SHEETS (In] [added: SHEETS (In] millions, except shares and par [removed: values)] [added: values)] | | | | | | | |

| | [removed: As] [added: As] of December [removed: 31,] [added: 31,] | | | | | | |

| | [removed: 2018] [added: 2019] | | | | [removed: 2017] [added: 2018] | | | [added: | 2017 | | |]

| [removed: ASSETS] [added: ASSETS] | | | | | | | |

| Cash and cash equivalents | $ | [removed: 46.3] [added: 37.3] | | | $ | [removed: 68.2] [added: 46.3] | |

| Accounts and notes receivable, net of allowances of [removed: $6.3] [added: $6.1] and [removed: $5.9] [added: $6.3] in [removed: 2018] [added: 2019] and [removed: 2017,] [added: 2018,] respectively | [removed: 472.7] [added: 477.8] | | | | [removed: 506.5] [added: 472.7] | | |

| Inventories, net | [removed: 509.8] [added: 544.1] | | | | [removed: 484.2] [added: 509.8] | | |

| Other assets | [removed: 60.6] [added: 58.8] | | | | [removed: 78.4] [added: 60.6] | | |

| Total current assets | [removed: 1,089.4] [added: 1,120.9] | | | | [removed: 1,137.3] [added: 1,089.4] | | |

| Property, plant and equipment, net of accumulated depreciation of [removed: $778.5] [added: $824.3] and [removed: $774.2] [added: $778.5] in [removed: 2018] [added: 2019] and [removed: 2017,] [added: 2018,] respectively | [removed: 408.3] [added: 445.4] | | | | [removed: 397.8] [added: 408.3] | | |

| Goodwill | [removed: 186.6] [added: 186.5] | | | | [removed: 200.5] [added: 186.6] | | |

| Deferred income taxes | [removed: 67.0] [added: 21.5] | | | | [removed: 94.4] [added: 67.0] | | |

| Other assets, net | [removed: 65.9] [added: 79.0] | | | | [removed: 61.5] [added: 65.9] | | |

| Total assets | $ | [added: 2,034.9 | | | $ |] 1,817.2 | | | $ | 1,891.5 | |

| [removed: LIABILITIES] [added: LIABILITIES] AND STOCKHOLDERS’ (DEFICIT) [removed: EQUITY] [added: EQUITY] | | | | | | | | [added: | | | | | | | | | | | |]

[removed: | Short-term debt | $ | — | | | $ | 0.9 | |][added: Short-Term Debt]

| Current maturities of long-term debt | [removed: 300.8] [added: 321.9] | | | | [removed: 32.6] [added: 300.8] | | |

| Accounts payable | [removed: 433.3] [added: 372.4] | | | | [removed: 348.6] [added: 433.3] | | |

| Accrued expenses | [removed: 272.3] [added: 255.7] | | | | [removed: 270.3] [added: 272.3] | | |

| Income taxes payable | [removed: 2.1] [added: —] | | | | 2.1 | | |

| Total current liabilities | [removed: 1,008.5] [added: 1,002.7] | | | | [removed: 654.5] [added: 1,008.5] | | |

| Long-term debt | [removed: 740.5] [added: 849.3] | | | | [removed: 970.5] [added: 740.5] | | |

| Pensions | [removed: 82.8] [added: 87.4] | | | | [removed: 84.5] [added: 82.8] | | |

| Other liabilities | [removed: 135.0] [added: 134.7] | | | | [removed: 131.9] [added: 135.0] | | |

| Total liabilities | [removed: 1,966.8] [added: 2,205.1] | | | | [removed: 1,841.4] [added: 1,966.8] | | |

| Stockholders' [removed: (deficit) equity:] [added: deficit:] | | | | | | | |

As discussed in Note 2 to the consolidated financial statements, the Company has changed its method of accounting for leases as of January 1, 2019 due to the adoption of Accounting Standards Update (ASU) No. 2016-02, *Leases (Topic 842)*, as amended.

*Critical Audit Matter*

The critical audit matter communicated below is a matter arising from the current period audit of the consolidated financial statements that was communicated or required to be communicated to the audit committee and that: (1) relates to accounts or disclosures that are material to the consolidated financial statements and (2) involved our especially challenging, subjective, or complex judgment.

The communication of a critical audit matter does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to which it relates.

*Evaluation of the product warranty liability*

As discussed in Notes 2 and 5 to the consolidated financial statements, the Company provides a product warranty for certain of its products with the warranty period generally ranging from one to 20 years.

The product warranty liability is estimated by product category based on the estimated future costs to repair or replace the products under warranty.

The Company’s product warranty liability was $113 million as of December 31, 2019.

We identified the evaluation of the product warranty liability as a critical audit matter.

Assessing the assumptions used to estimate the product warranty liability, specifically, the estimated failure rates by product by year, and estimated cost per failure, involved subjective and complex auditor judgment.

The primary procedures we performed to address this critical audit matter included the following.

We tested certain internal controls over the Company’s estimate of the future failure rates by product category and controls to estimate the cost of failures by product category for products subject to warranty.

We assessed the estimated future failure rates by product category and the estimated cost per failure by product category used in the estimation of the product warranty liability by comparing them to the Company’s underlying historical data.

We tested a sample of the historical data used as the basis for these assumptions by comparing to the relevant underlying documentation.

February 18, 2020

| | 2019 | | | | 2018 | | |

| Short-term investments | 2.9 | | | | — | | |

| Right-of-use assets from operating leases | 181.6 | | | | — | | |

| Current operating lease liabilities | 52.7 | | | | — | | |

| Long-term operating lease liabilities | 131.0 | | | | — | | |

| Pension settlements | 99.2 | | | | 0.4 | | | | — | | |

| Provision for (benefit from) income taxes | — | | | | 2.1 | | | | (0.8 | | ) |

| Pension settlements | 99.2 | | | | 0.4 | | | | — | | |

| Cumulative effect adjustment upon adoption of new accounting standard (ASC 842) | | | | | | | | | | (0.3 | | ) | | | | | | | | | | | | | | | | | (0.3 | | ) |

| Balance as of December 31, 2019 | | $ | 0.9 | | | $ | 1,093.5 | | | $ | 2,148.7 | | | $ | (103.8 | ) | | 48.6 | | | $ | (3,309.5 | ) | | $ | — | | | $ | (170.2 | ) |

| Loss (gain), net on sale of businesses and related property | 10.6 | | | | 27.0 | | | | 1.1 | | |

| Leases, net | 2.1 | | | | — | | | | — | | |

| Purchases of short-term investments | (2.9 | | ) | | — | | | | — | | |

| Insurance recoveries received for property damage incurred from natural disaster | 79.6 | | | | 10.9 | | | | — | | |

| Short-term debt payments | (5.3 | | ) | | (40.3 | | ) | | (31.9 | | ) |

| Short-term debt proceeds | 5.3 | | | | 40.3 | | | | 30.4 | | |

1.

2.

Short-term investments include all investments, exclusive of cash equivalents, with a stated maturity date of one year or less from the balance sheet date and are expected to be used in current operations.

See Note 10 for additional information on our goodwill.

In assessing the fair

Volatile equity, foreign currency and commodity

This accounting standard requires lessees to recognize a lease liability and a right-of-use (“ROU”) asset on the balance sheet for operating leases.

Accounting for finance leases is substantially unchanged.

ASC 842 is effective for fiscal years beginning after December 15, 2018 and we adopted the standard effective January 1, 2019.

February 19, 2019

| --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- |

| | | | | | | | | | | | |

| Pension settlement | 0.4 | | | | — | | | | 31.4 | | |

| Income tax expense (benefit) | 2.1 | | | | (0.8 | | ) | | (0.5 | | ) |

| Cash dividends declared per share | $ | 2.43 | | | $ | 1.96 | | | $ | 1.65 | |

| Balance as of December 31, 2015 | | 0.9 | | | | 1,002.4 | | | | 1,146.7 | | | | (204.7 | | ) | | 42.5 | | | (1,844.1 | | ) | | 0.4 | | | | 101.6 | | |

| Change in fair value of available-for-sale marketable equity securities | | — | | | | — | | | | — | | | | (2.1 | | ) | | — | | | — | | | | — | | | | (2.1 | | ) |

| Additional investment in subsidiary | | — | | | | — | | | | — | | | | — | | | | — | | | — | | | | — | | | | — | | |

| Gain on sale of real estate | (23.8 | | ) | | — | | | | — | | |

| Short-term borrowings, net | — | | | | (1.5 | | ) | | (2.4 | | ) |

1.

2.

The annual goodwill impairment test was performed during the fourth quarter of 2018.

loss is recognized based on the excess of the carrying amount of the impaired assets over their fair value.

statement carrying amounts of existing assets and liabilities and their respective tax bases and operating loss and tax credit carry forwards.

Reclassifications

Certain amounts have been reclassified from the prior year presentation to conform to the current year presentation.

In August 2016, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2016-15, Classification of Certain Cash Receipts and Cash Payments.

The amendments in this ASU clarify the classification for eight different types of activities, including debt prepayment and extinguishment costs, proceeds from insurance claims and distributions from equity method investees.

For public business entities, the standard is effective for financial statements issued for fiscal years beginning after December 15, 2017.

We also adopted other new accounting standards during the first quarter of 2018.

The impact of these additional standards are discussed in their respective Notes to the Consolidated Financial Statements.

Recent Accounting Pronouncements

Lessees will need to recognize almost all leases on their balance sheet as a right-of-use asset and a lease liability.

We will adopt the standard using the prospective approach.

We have completed a qualitative and quantitative assessment of our lease portfolio and are in the process of finalizing the testing of our new lease accounting system and implementing new processes and controls to account for our leases in accordance with the new standard.

Upon adoption, we expect to record right-of-use assets and operating lease liabilities between $130 million and $160 million in our Consolidated Balance Sheet.

3.

We recognized the cumulative effect of initially applying the new revenue standard as an adjustment to the opening balance of retained earnings.

The comparative information has not been restated and continues to be reported under the accounting standards in effect for those periods.

We expect the impact of the adoption of the new standard to be immaterial to our net income on an ongoing basis.

The cumulative effect of the changes made to our consolidated January 1, 2018 balance sheet for the adoption of the new revenue standard was as follows (in millions):

| BALANCE SHEET | Balance at December 31, 2017 | | | | Adjustments Due to ASC 606 | | | | Balance at January 1, 2018 | | |

| Accounts payable | 348.6 | | | | 9.3 | | | | 357.9 | | |

| Retained earnings | 1,575.9 | | | | (1.0 | | ) | | 1,574.9 | | |

In accordance with the new revenue standard requirements, the disclosure of the impact of adoption on our Consolidated Balance Sheet and Consolidated Statement of Operations was as follows (in millions):

| | As Reported | | | | Balances Without Adoption of ASC 606 | | | | Effect of Change Higher/(Lower) | | |

| BALANCE SHEET | | | | | | | | | | | |

| Accounts and notes receivable, net | $ | 472.7 | | | $ | 465.9 | | | $ | 6.8 | |

[removed: Disclosure] [added: Disclosure] Controls and [removed: Procedures][added: Procedures]

Based on that evaluation, our Chief Executive Officer and Chief Financial Officer have concluded that, as of December 31, [removed: 2018,] [added: 2019,] our disclosure controls and procedures were effective to provide reasonable assurance that information required to be disclosed by us in the reports we file or submit under the Exchange Act is recorded, processed, summarized and reported, within the time periods specified in the applicable rules and forms, and that such information is accumulated and communicated to management, including our Chief Executive Officer and Chief Financial Officer, to allow timely decisions regarding required disclosure.

[removed: Management’s] [added: Management’s] Annual Report on Internal Control Over Financial [removed: Reporting][added: Reporting]

[removed: Attestation] [added: Attestation] Report of the Independent Registered Public Accounting [removed: Firm][added: Firm]

[removed: Changes] [added: Changes] in Internal Control Over Financial [removed: Reporting][added: Reporting]

[removed: We are implementing] [added: In the first quarter of 2019, we implemented] new controls [added: as part of our efforts to adopt ASU 2016-02, including new controls] related to monitoring the adoption process, implementing a new IT system to capture, calculate, and account for leases, and gather the necessary data to properly account for leases under ASC 842.

During the quarter ended December 31, 2018, we implemented new controls as part of our efforts to adopt ASU 2016-02.

[removed: PART III][added: PART III]

Incorporated herein by reference from the Company’s definitive proxy statement, which will be filed no later than 120 days after December 31, [removed: 2018.][added: 2019.]

Also, refer to Part I, Item 1 “Business - [added: Information about our] Executive Officers [removed: of the Company”] [added: ”] of this Annual Report on Form 10-K, which identifies our executive officers and is incorporated herein by reference.

Incorporated herein by reference from the Company’s definitive proxy statement, which will be filed no later than 120 days after December 31, [removed: 2018.][added: 2019.]

Incorporated herein by reference from the Company’s definitive proxy statement, which will be filed no later than 120 days after December 31, [removed: 2018.][added: 2019.]

Also, refer to Note [removed: 15] [added: 16] in the Notes to the Consolidated Financial Statements for additional information about our equity compensation plans.

Incorporated herein by reference from the Company’s definitive proxy statement, which will be filed no later than 120 days after December 31, [removed: 2018.][added: 2019.]

Incorporated herein by reference from the Company’s definitive proxy statement, which will be filed no later than 120 days after December 31, [removed: 2018.][added: 2019.]

[removed: PART IV][added: PART IV]

[removed: Financial Statements][added: Financial Statements]

| • | Consolidated Balance Sheets as of December 31, [removed: 2018] [added: 2019] and [removed: 2017] [added: 2018] |

| • | Consolidated Statements of Operations for the Years Ended December 31, [removed: 2018, 2017] [added: 2019, 2018] and [removed: 2016] [added: 2017] |

| • | Consolidated Statements of Comprehensive Income for the Years Ended December 31, [removed: 2018, 2017] [added: 2019, 2018] and [removed: 2016] [added: 2017] |

| • | Consolidated Statements of Stockholders’ (Deficit) Equity for the Years Ended December 31, [removed: 2018, 2017] [added: 2019, 2018] and [removed: 2016] [added: 2017] |

| • | Consolidated Statements of Cash Flows for the Years Ended December 31, [removed: 2018, 2017] [added: 2019, 2018] and [removed: 2016] [added: 2017] |

| • | Notes to the Consolidated Financial Statements for the Years Ended December 31, [removed: 2018, 2017] [added: 2019, 2018] and [removed: 2016] [added: 2017] |

[removed: Financial] [added: Financial] Statement [removed: Schedules][added: Schedules]

The financial statement schedule included in this Annual Report on Form 10-K is Schedule II - Valuation and Qualifying Accounts and Reserves for the Years Ended December 31, [removed: 2018, 2017] [added: 2019, 2018] and [removed: 2016] [added: 2017] (see Schedule II immediately following the signature page of this Annual Report on Form 10-K).

[removed: Exhibits][added: Exhibits]

[removed: INDEX] [added: INDEX] TO [removed: EXHIBITS][added: EXHIBITS]

| 3.1 | [removed: Restated] [added: [Restated] Certificate of Incorporation of Lennox International Inc. (“LII”) (filed as Exhibit 3.1 to LII’s Registration Statement on Form S-1 (Registration Statement No. 333-75725) filed on April 6, 1999 and incorporated herein by [removed: reference).] [added: reference).](http://www.sec.gov/Archives/edgar/data/1069202/0000950134-99-002720-index.html)] |

| 3.2 | [Amended and Restated Bylaws of LII (filed as Exhibit 3.1 to LII’s Current Report on Form 8-K filed on December 16, 2013 and incorporated herein by [removed: reference).](http://www.sec.gov/Archives/edgar/data/1069202/000119312513474576/d644537dex31.htm)] [added: reference).](http://www.sec.gov/Archives/edgar/data/1069202/000119312513474576/d644537d8k.htm)] |

| 4.3 | [Form of [added: First] Supplemental Indenture among LII, the guarantors party thereto and U.S. Bank National Association, as trustee (filed as Exhibit 4.11 to LII’s Post-Effective Amendment No. 1 to Registration Statement on S-3 (Registration No. 333-155796) filed on May 3, 2010, and incorporated herein by reference)](http://www.sec.gov/Archives/edgar/data/1017609/000095012310042399/d72548exv4w11.htm). |

| 4.4 | [Sixth Supplemental Indenture, dated as of November 3, 2016, among LII, each other existing Guarantor under the Indenture, dated as of May 3, 2010, as subsequently supplemented, and US Bank National Association, as trustee (filed as Exhibit 4.2 to LII’s Current Report on Form 8-K filed on November 3, 2016, and incorporated [added: herein] by reference).](http://www.sec.gov/Archives/edgar/data/1069202/000119312516758285/d284193dex42.htm) |

| 4.5 | [Seventh Supplemental Indenture, dated as of January 23, 2019, among LII Mexico Holdings Ltd., Lennox International Inc., each other existing Guarantor under the Indenture, dated as of May 3, 2010, as subsequently supplemented, and US Bank National Association, as trustee (filed [removed: herewith).](https://www.sec.gov/Archives/edgar/data/1069202/000106920219000008/lii-ex45_20181231x10k.htm)] [added: as Exhibit 4.5 to LII’s Annual Report on Form 10-K filed on February 19,2019 and incorporated herein by reference).](http://www.sec.gov/Archives/edgar/data/1069202/000106920219000008/lii-ex45_20181231x10k.htm)] |

| 4.6 | [Form of 3.000% Notes due 2023 (filed as Exhibit A in Exhibit 4.2 to LII’s Current Report on Form 8-K filed on November 3, 2016, and incorporated [added: herein] by reference).](http://www.sec.gov/Archives/edgar/data/1069202/000119312516758285/d284193dex42.htm) |

| 10.3 | [Second Amendment To Sixth Amended and Restated Credit Facility Agreement dated March 16, 2018, among Lennox International Inc., the lenders a party thereto, and J.P.Morgan Chase Bank, N.A., as Administrative Agent (filed as Exhibit 10.2 to LII’s Quarterly Report on Form 10-Q filed on April 23, 2018, and incorporated [added: herein] by reference).](http://www.sec.gov/Archives/edgar/data/1069202/000106920218000009/lii-ex102xsecondamendmentt.htm) |

| 10.4 | [Third Amendment (Incremental Amendment) to Sixth Amended and Restated Credit Facility Agreement dated as of January 22, 2019, among Lennox International Inc., a Delaware corporation, the lenders from time to time party thereto, and J.P.Morgan Chase Bank, N.A., as Administrative Agent (filed as Exhibit 10.1 to LII’s Current Report on Form 8-K filed on January 25, 2019, and incorporated [added: herein] by reference).](http://www.sec.gov/Archives/edgar/data/1069202/000106920219000002/exhibit10120188k.htm) |

| 10.12 | [Amendment No. 7 to Amended and Restated Receivables Purchase Agreement among LPAC Corp., as the Seller, Lennox Industries Inc., as the Master Servicer, Victory Receivables Corporation, as Purchaser and The Bank of Tokyo-Mitsubishi UFJ, Ltd., New York Branch, as Administrative Agent, a Liquidity Bank and a Purchaser Agent (filed as Exhibit 10.1 to LII’s Quarterly Report on Form 10-Q filed on April 23, 2018, and incorporated [added: herein] by reference).](http://www.sec.gov/Archives/edgar/data/1069202/000106920218000009/lii-ex101xamendmentno7toam.htm) |

| 10.13 | [Amendment No. 8 to Amended and Restated Receivables Purchase Agreement among LPAC Corp., as the Seller, Lennox Industries Inc., as the Master Servicer, Victory Receivables Corporation, as Purchaser and MUFG Bank, Ltd., as Administrative Agent, BTMU Liquidity Bank, Wells Fargo Bank, National Association, a Liquidity Bank and PNC Bank, N National Association, a Purchaser Agent (filed as Exhibit 10.1 to LII’s Quarterly Report on Form 10-Q filed on October 22, 2018, and incorporated [added: herein] by reference).](http://www.sec.gov/Archives/edgar/data/1069202/000106920218000020/liiex101_2018930-10q.htm) |

| [removed: 10.14] [added: 10.17*] | [removed: [Amended and Restated Lease Agreement, dated as of March 22, 2013, by and between BTMU Capital Leasing & Finance, Inc., as lessor, and Lennox] [added: [Lennox] International [removed: Inc., as lessee] [added: Inc. 2019 Equity and Incentive Compensation Plan] (filed as Exhibit 10.1 to [removed: LII's] [added: LII’s] Current Report on Form 8-K filed on [removed: March 25, 2013] [added: May 24, 2019,] and incorporated herein by [removed: reference).](http://www.sec.gov/Archives/edgar/data/1069202/000119312513124282/d506512dex101.htm)] [added: reference).](http://www.sec.gov/Archives/edgar/data/1069202/000119312519157041/d752008dex101.htm)] |

| [removed: 10.17*] [added: 10.23*] | [removed: [Lennox] [added: [Amendment Number One to the Lennox] International Inc. [removed: 2010 Incentive] [added: Supplemental Retirement] Plan, as amended and restated [added: as of January 1, 2009, dated December 28, 2018] (filed as Exhibit [removed: 10.1] [added: 10.23] to [removed: LII's Current] [added: LII’s Annual] Report on Form [removed: 8-K] [added: 10-K] filed on [removed: May 19, 2010] [added: February 19,2019] and incorporated herein by [removed: reference](http://www.sec.gov/Archives/edgar/data/1069202/000095012310051306/c01426exv10w1.htm)).] [added: reference).](http://www.sec.gov/Archives/edgar/data/1069202/000106920219000008/lii-ex1023_20181231x10k.htm)] |

| 10.18* | [Form of Long-Term Incentive Award Agreement for U.S. Employees - Vice President and Above (for use under the [removed: 2010] [added: 2019] Incentive Plan) (filed [removed: herewith).](https://www.sec.gov/Archives/edgar/data/1069202/000106920219000008/lii-ex1018_20181231x10k.htm)] [added: herewith).](https://www.sec.gov/Archives/edgar/data/1069202/000106920220000004/lii-ex101820191231x10k.htm)] |

| 10.19* | [Form of Restricted Stock Unit Award Agreement for Non-Employee Directors (for use under the [removed: 2010] [added: 2019] Incentive Plan) (filed [removed: herewith).](https://www.sec.gov/Archives/edgar/data/1069202/000106920219000008/lii-ex1019_20181231x10k.htm)] [added: herewith).](https://www.sec.gov/Archives/edgar/data/1069202/000106920220000004/lii-ex101920191231x10k.htm)] |

| 10.20* | [removed: [Short-Term] [added: [Form of Short-Term] Incentive Program for Lennox International Inc. and its Subsidiaries (filed [removed: herewith).](https://www.sec.gov/Archives/edgar/data/1069202/000106920219000008/lii-ex1020_20181231x10k.htm)] [added: herewith).](https://www.sec.gov/Archives/edgar/data/1069202/000106920220000004/lii-ex102020191231x10k.htm)] |

| [removed: 10.23*] [added: 10.24*] | [removed: [Amendment Number One to the Lennox] [added: [Lennox] International Inc. Supplemental [added: Restoration] Retirement Plan, [removed: as amended and restated] [added: effective] as of January 1, [removed: 2009,] [added: 2019,] dated December 28, 2018 (filed [removed: herewith).](https://www.sec.gov/Archives/edgar/data/1069202/000106920219000008/lii-ex1023_20181231x10k.htm)] [added: as Exhibit 10.24 to LII’s Annual Report on Form 10-K filed on February 19,2019 and incorporated herein by reference).](http://www.sec.gov/Archives/edgar/data/1069202/000106920219000008/lii-ex1024_20181231x10k.htm)] |

| 10.25* | [removed: Form] [added: [Form] of Indemnification Agreement entered into between LII and certain executive officers and directors of LII (filed as Exhibit 10.15 to LII’s Registration Statement on Form S-1 (Registration No. 333-75725) filed on April 6, 1999 and incorporated herein by [removed: reference).] [added: reference).](http://www.sec.gov/Archives/edgar/data/1069202/0000950134-99-002720-index.html)] |

| 21.1 | [Subsidiaries of LII (filed [removed: herewith).](https://www.sec.gov/Archives/edgar/data/1069202/000106920219000008/lii-ex211_20181231x10kss1.htm)] [added: herewith).](https://www.sec.gov/Archives/edgar/data/1069202/000106920220000004/lii-ex21120191231x10k.htm)] |

| 23.1 | [Consent of KPMG LLP (filed [removed: herewith).](https://www.sec.gov/Archives/edgar/data/1069202/000106920219000008/lii-ex231_20181231x10kss1.htm)] [added: herewith).](https://www.sec.gov/Archives/edgar/data/1069202/000106920220000004/lii-ex23120191231x10k.htm)] |

| 31.1 | [Certification of the principal executive officer (filed [removed: herewith).](https://www.sec.gov/Archives/edgar/data/1069202/000106920219000008/lii-ex311_20181231x10kss1.htm)] [added: herewith).](https://www.sec.gov/Archives/edgar/data/1069202/000106920220000004/lii-ex31120191231x10k.htm)] |

| 31.2 | [Certification of the principal financial officer (filed [removed: herewith).](https://www.sec.gov/Archives/edgar/data/1069202/000106920219000008/lii-ex312_20181231x10kss1.htm)] [added: herewith).](https://www.sec.gov/Archives/edgar/data/1069202/000106920220000004/lii-ex31220191231x10k.htm)] |

| 32.1 | [Certification of the principal executive officer and the principal financial officer pursuant to 18 U.S.C. Section 1350 (furnished [removed: herewith).](https://www.sec.gov/Archives/edgar/data/1069202/000106920219000008/lii-ex321_20181231x10kss1.htm)] [added: herewith).](https://www.sec.gov/Archives/edgar/data/1069202/000106920220000004/lii-ex32120191231x10k.htm)] |

[removed: Exhibit No. (101).SCH] [added: | 101 | SCH Inline] XBRL Taxonomy Extension Schema Document [added: |]