HomeMy WebLinkAboutContract 61502FORT WORTH CSC No. 61502
CITY OF FORT WORTH
COOPERATIVE PURCHASE AGREEMENT
This Cooperative Purchase Agreement ("Agreement") is entered into by and between Lennox Industries, Inc.
("Vendor") and the City of Fort Worth, ("City"), a Texas home rule municipality.
The Cooperative Purchase Agreement includes the following documents which shall be construed in the order of
precedence in which they are listed:
1. This Cooperative Purchase Agreement;
2. Exhibit A — Pricing List;
3. Exhibit B — Cooperative Agency Contract BuyBoard 720-23;
and
4. Exhibit C — Conflict of Interest Questionnaire
Exhibits A, B, and C, which are attached hereto and incorporated herein, are made a part of this Agreement
for all purposes. Vendor agrees to provide City with the services and goods included in Exhibit A pursuant to the
terms and conditions of this Cooperative Purchase Agreement, including all exhibits thereto.
City shall pay Vendor in accordance with the fee schedule in Exhibit A and in accordance with the
provisions of this Agreement. Total payment made under this Agreement for the first year by City shall not exceed
Fifty Thousand Dollars ($50,000.00). Vendor shall not provide any additional items or services or bill for
expenses incurred for City not specified by this Agreement unless City requests and approves in writing the
additional costs for such services. City shall not be liable for any additional expenses of Vendor not specified by
this Agreement unless City first approves such expenses in writing.
The term of this Agreement is effective beginning on the date signed by the Assistant City
Manager below ("Effective Date") and expires on November 30, 2024. The City shall be able to renew this
agreement for two (2) one-year renewal options by written agreement of the parties.
Vendor agrees that City shall, until the expiration of three (3) years after final payment under this
Agreement, or the final conclusion of any audit commenced during the said three years, have access to and the
right to examine at reasonable times any directly pertinent books, documents, papers and records, including, but
not limited to, all electronic records, of Vendor involving transactions relating to this Agreement at no additional
cost to City. Vendor agrees that City shall have access during normal working hours to all necessary Vendor
facilities and shall be provided adequate and appropriate work space in order to conduct audits in compliance with
the provisions of this section. City shall give Vendor reasonable advance notice of intended audits.
Notices required pursuant to the provisions of this Agreement shall be conclusively determined to have
been delivered when (1) hand -delivered to the other party, its agents, employees, servants or representatives, (2)
delivered by facsimile with electronic confirmation of the transmission, or (3) received by the other party by
United States Mail, registered, return receipt requested, addressed as follows:
OFFICIAL RECORD
CITY SECRETARY
FT. WORTH, TX
To CITY: To VENDOR:
City of Fort Worth Lennox Industries, Inc.
Attn: Dana Burghdoff, Assistant City Manager
200 Texas Street Address:
Fort Worth, TX 76102-6314 2140 Lake Park Blvd
Facsimile: (817) 392-8654 Richardson, TX 75080
With copy to Fort Worth City Attorney's Office at
same address
The undersigned represents and warrants that he or she has the power and authority to execute this Agreement
and bind the respective Vendor.
CITY OF FORT WORTH:
tSayca' A:uro ri
By: Dana Burghdoff (Jun , 2024 A: 0 CDT)
Name: Dana Burghdoff
Title: Assistant City Manager
Date: Jun 5, 2024
APPROVAL RECOMMENDED:
By:
Name: Ricardo Salazar II
Title: Asst Property Management Director
ATTEST: q A "R 1n n
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By:
Name: Jannette Goodall
Title: City Secretary
VENDOR:
Lennox Industries, Inc.
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By: Christopher J Dr ry (May 20, 202414:59 CD
Name:
Title:
CONTRACT COMPLIANCE MANAGER:
By signing I acknowledge that I am the person
responsible for the monitoring and administration
of this contract, including ensuring all performance
and reporting requirements.
Deflate Ganlr
By: Denise Garcia (Jun 4, 202415:43 CDT)
Name: Denise Garcia
Title: Purchasing Manager
APPROVED AS TO FORM AND LEGALITY:
u/
By:
Name: Jessika Williams
Title: Assistant City Attorney
CONTRACT
AUTHORIZATION:
M&C: 24-0143
OFFICIAL RECORD
Date: May 20, 2024 CITY SECRETARY
FT. WORTH, TX
Exhibit A - Pricing List
Section I: HVAC Eauipment. Products. and Supplies
Discount (%) off catalog/pricelist for HVAC Equipment (all types - rooftop units, split systems, chillers,
compressors, cooling towers, heat pumps, furnaces, unit heaters, duct furnaces, and other related
items). Catalog/Pricelist MUST be included or proposal will not be considered.
Total: 0% 1
Item Notes: Vendors proposing multiple manufacturer product lines and/or catalog/pricelist per line item must submit
the information as follows or proposal may not be considered:
• Select "Add Alternate" for each additional manufacturer product line and/or catalog/pricelist
proposed
• Vendor's must list one specific percentage discount for each manufacturer and/or
catalog/pricelist listed
PROPOSAL NOTE 1: Vendors shall submit catalog (s)/pricelist(s) with their Proposal response or the
Proposal will not be considered. Vendors shall submit catalog (s)/pricelist(s) with the Proposal in a
readily available and readable electronic format, with Excel or searchable PDF preferred. No paper
catalogs or manufacturer/vendor websites will be accepted.
PROPOSAL NOTE 2: A Vendor proposing on Section I: HVAC Eauipment. Products, and SUDDIies:
Specification Lines 1-3 shall be authorized by the manufacturer to sell, install, and service the brand(s)
of product(s) proposed. Proposer's responding to this proposal invitation shall submit an approval letter
from each manufacturer for each product line proposed. Manufacturer authorization letters must include
the regions in which product may be sold. Manufacturers responding directly to this proposal invitation,
in lieu of an authorization letter, shall submit a written explanation that the company is the manufacturer
of the product line(s) proposed.
PROPOSAL NOTE 3: Vendor's responding to this Proposal Invitation for installation and repair services
shall submit copy of their license from the Texas Department of License and Regulations. If a proposer
will serve outside the State of Texas, a copy of Proposer's license from the appropriate licensing agency
for the state(s) the vendor proposes shall be provided. Vendors that assert they are not required to
maintain such a license for the proposed installation and repair services shall submit a written
explanation supporting their assertion.
Item Attributes
1. State Name of Catalog/Pricelist Proposed with Discount Percentage
NOTE: Do not include SKU, Reference Numbers, Websites, and/or "See Attached/Enclosed".
Catalog List
Page 19 of 31 pages Vendor: Lennox Industries, Inc 720-23
2
Section I:HVAC Eauiament. Products. and SuaDlies
Discount (%) off catalog/pricelist for HVAC Controls, Software, and Monitoring Systems (all
types). Catalog/Pricelist MUST be included or proposal will not be considered.
Total: 0% 1
Item Notes: Vendors proposing multiple manufacturer product lines and/or catalog/pricelist per line item must submit
the information as follows or proposal may not be considered:
• Select "Add Alternate" for each additional manufacturer product line and/or catalog/pricelist
proposed
• Vendor's must list one specific percentage discount for each manufacturer and/or
catalog/pricelist listed
PROPOSAL NOTE 1: Vendors shall submit catalogs)/pricelist(s) with their Proposal response or the
Proposal will not be considered. Vendors shall submit catalogs)/pricelist(s) with the Proposal in a
readily available and readable electronic format, with Excel or searchable PDF preferred. No paper
catalogs or manufacturer/vendor websites will be accepted.
PROPOSAL NOTE 2: A Vendor proposing on Section I: HVAC EauiDment. Products, and SUDDIies:
SDecification Lines 1-3 shall be authorized by the manufacturer to sell, install, and service the brand(s)
of product(s) proposed. Proposer's responding to this proposal invitation shall submit an approval letter
from each manufacturer for each product line proposed. Manufacturer authorization letters must include
the regions in which product may be sold. Manufacturers responding directly to this proposal invitation,
in lieu of an authorization letter, shall submit a written explanation that the company is the manufacturer
of the product line(s) proposed.
PROPOSAL NOTE 3: Vendor's responding to this Proposal Invitation for installation and repair services
shall submit copy of their license from the Texas Department of License and Regulations. If a proposer
will serve outside the State of Texas, a copy of Proposer's license from the appropriate licensing agency
for the state(s) the vendor proposes shall be provided. Vendors that assert they are not required to
maintain such a license for the proposed installation and repair services shall submit a written
explanation supporting their assertion.
Item Attributes
1. State Name of Catalog/Pricelist Proposed with Discount Percentage
NOTE: Do not include SKU, Reference Numbers, Websites, and/or "See Attached/Enclosed".
Catalog List
Page 20 of 31 pages Vendor: Lennox Industries, Inc 720-23
3 Section I:HVAC Eauipment. Products, and Suaalies
Discount (%) off catalog/pricelist for HVAC Air Handling Products (all types - coils, fans, and other related
items). Catalog/Pricelist MUST be included or proposal will not be considered.
Total: 0% 1
Item Notes: Vendors proposing multiple manufacturer product lines and/or catalog/pricelist per line item must submit
the information as follows or proposal may not be considered:
• Select "Add Alternate" for each additional manufacturer product line and/or catalog/pricelist
proposed
• Vendor's must list one specific percentage discount for each manufacturer and/or
catalog/pricelist listed
PROPOSAL NOTE 1: Vendors shall submit catalog (s)/pricelist(s) with their Proposal response or the
Proposal will not be considered. Vendors shall submit catalog (s)/pricelist(s) with the Proposal in a
readily available and readable electronic format, with Excel or searchable PDF preferred. No paper
catalogs or manufacturer/vendor websites will be accepted.
PROPOSAL NOTE 2: A Vendor proposing on Section I: HVAC EauiDment. Products. and SUDDIies:
Specification Lines 1-3 shall be authorized by the manufacturer to sell, install, and service the brand(s)
of product(s) proposed. Proposer's responding to this proposal invitation shall submit an approval letter
from each manufacturer for each product line proposed. Manufacturer authorization letters must include
the regions in which product may be sold. Manufacturers responding directly to this proposal invitation,
in lieu of an authorization letter, shall submit a written explanation that the company is the manufacturer
of the product line(s) proposed.
PROPOSAL NOTE 3: Vendor's responding to this Proposal Invitation for installation and repair services
shall submit copy of their license from the Texas Department of License and Regulations. If a proposer
will serve outside the State of Texas, a copy of Proposer's license from the appropriate licensing agency
for the state(s) the vendor proposes shall be provided. Vendors that assert they are not required to
maintain such a license for the proposed installation and repair services shall submit a written
explanation supporting their assertion.
Item Attributes
1. State Name of Catalog/Pricelist Proposed with Discount Percentage
NOTE: Do not include SKU, Reference Numbers, Websites, and/or "See Attached/Enclosed".
Catalog List
Page 21 of 31 pages Vendor: Lennox Industries, Inc 720-23
4
Section I:HVAC Eauiament. Products. and SuaDlies
Discount (%) off catalog/pricelist for HVAC Supplies (all types). Catalog/Pricelist MUST be included or proposal
will not be considered.
Total: 1 0% 1
Item Notes: Vendors proposing multiple manufacturer product lines and/or catalog/pricelist per line item must submit
the information as follows or proposal may not be considered:
• Select "Add Alternate" for each additional manufacturer product line and/or catalog/pricelist
proposed
• Vendor's must list one specific percentage discount for each manufacturer and/or
catalog/pricelist listed
PROPOSAL NOTE 1: Vendors shall submit catalogs)/pricelist(s) with their Proposal response or the
Proposal will not be considered. Vendors shall submit catalogs)/pricelist(s) with the Proposal in a
readily available and readable electronic format, with Excel or searchable PDF preferred. No paper
catalogs or manufacturer/vendor websites will be accepted.
PROPOSAL NOTE 2: A Vendor proposing on Section I: HVAC EauiDment. Products, and SUDDIies:
SDecification Lines 1-3 shall be authorized by the manufacturer to sell, install, and service the brand(s)
of product(s) proposed. Proposer's responding to this proposal invitation shall submit an approval letter
from each manufacturer for each product line proposed. Manufacturer authorization letters must include
the regions in which product may be sold. Manufacturers responding directly to this proposal invitation,
in lieu of an authorization letter, shall submit a written explanation that the company is the manufacturer
of the product line(s) proposed.
PROPOSAL NOTE 3: Vendor's responding to this Proposal Invitation for installation and repair services
shall submit copy of their license from the Texas Department of License and Regulations. If a proposer
will serve outside the State of Texas, a copy of Proposer's license from the appropriate licensing agency
for the state(s) the vendor proposes shall be provided. Vendors that assert they are not required to
maintain such a license for the proposed installation and repair services shall submit a written
explanation supporting their assertion.
Item Attributes
1. State Name of Catalog/Pricelist Proposed with Discount Percentage
NOTE: Do not include SKU, Reference Numbers, Websites, and/or "See Attached/Enclosed".
Catalog List
Page 22 of 31 pages Vendor: Lennox Industries, Inc 720-23
5
Section I:HVAC Eauiament. Products. and Suaalies
Discount (%) off catalog/pricelist for HVAC Filters (all types). Catalog/Price list MUST be included or proposal will
not be considered.
Total: 1 0% 1
Item Notes: Vendors proposing multiple manufacturer product lines and/or catalog/pricelist per line item must submit
the information as follows or proposal may not be considered:
• Select "Add Alternate" for each additional manufacturer product line and/or catalog/pricelist
proposed
• Vendor's must list one specific percentage discount for each manufacturer and/or
catalog/pricelist listed
PROPOSAL NOTE 1: Vendors shall submit catalogs)/pricelist(s) with their Proposal response or the
Proposal will not be considered. Vendors shall submit catalogs)/pricelist(s) with the Proposal in a
readily available and readable electronic format, with Excel or searchable PDF preferred. No paper
catalogs or manufacturer/vendor websites will be accepted.
PROPOSAL NOTE 2: A Vendor proposing on Section I: HVAC EauiDment. Products, and SUDDIies:
SDecification Lines 1-3 shall be authorized by the manufacturer to sell, install, and service the brand(s)
of product(s) proposed. Proposer's responding to this proposal invitation shall submit an approval letter
from each manufacturer for each product line proposed. Manufacturer authorization letters must include
the regions in which product may be sold. Manufacturers responding directly to this proposal invitation,
in lieu of an authorization letter, shall submit a written explanation that the company is the manufacturer
of the product line(s) proposed.
PROPOSAL NOTE 3: Vendor's responding to this Proposal Invitation for installation and repair services
shall submit copy of their license from the Texas Department of License and Regulations. If a proposer
will serve outside the State of Texas, a copy of Proposer's license from the appropriate licensing agency
for the state(s) the vendor proposes shall be provided. Vendors that assert they are not required to
maintain such a license for the proposed installation and repair services shall submit a written
explanation supporting their assertion.
Item Attributes
1. State Name of Catalog/Pricelist Proposed with Discount Percentage
NOTE: Do not include SKU, Reference Numbers, Websites, and/or "See Attached/Enclosed".
Catalog List
Page 23 of 31 pages Vendor: Lennox Industries, Inc 720-23
6 Section I:HVAC Eauipment. Products, and SuaDlies
Discount (%) off catalog/pricelist for HVAC Indoor Air Quality Products (all types). Catalog/Pricelist MUST be
included or proposal will not be considered.
Total: 1 0% 1
Item Notes: Vendors proposing multiple manufacturer product lines and/or catalog/pricelist per line item must submit
the information as follows or proposal may not be considered:
• Select "Add Alternate" for each additional manufacturer product line and/or catalog/pricelist
proposed
• Vendor's must list one specific percentage discount for each manufacturer and/or
catalog/pricelist listed
PROPOSAL NOTE 1: Vendors shall submit catalogs)/pricelist(s) with their Proposal response or the
Proposal will not be considered. Vendors shall submit catalog (s)/pricelist(s) with the Proposal in a
readily available and readable electronic format, with Excel or searchable PDF preferred. No paper
catalogs or manufacturer/vendor websites will be accepted.
PROPOSAL NOTE 2: A Vendor proposing on Section I: HVAC EauiDment. Products. and SUDDIies:
SDecification Lines 1-3 shall be authorized by the manufacturer to sell, install, and service the brand(s)
of product(s) proposed. Proposer's responding to this proposal invitation shall submit an approval letter
from each manufacturer for each product line proposed. Manufacturer authorization letters must include
the regions in which product may be sold. Manufacturers responding directly to this proposal invitation,
in lieu of an authorization letter, shall submit a written explanation that the company is the manufacturer
of the product line(s) proposed.
PROPOSAL NOTE 3: Vendor's responding to this Proposal Invitation for installation and repair services
shall submit copy of their license from the Texas Department of License and Regulations. If a proposer
will serve outside the State of Texas, a copy of Proposer's license from the appropriate licensing agency
for the state(s) the vendor proposes shall be provided. Vendors that assert they are not required to
maintain such a license for the proposed installation and repair services shall submit a written
explanation supporting their assertion.
Item Attributes
1. State Name of Catalog/Pricelist Proposed with Discount Percentage
NOTE: Do not include SKU, Reference Numbers, Websites, and/or "See Attached/Enclosed".
Catalog List
Page 24 of 31 pages Vendor: Lennox Industries, Inc 720-23
7
Section I:HVAC Eauiament. Products. and SuaDlies
Discount (%) off catalog/pricelist for HVAC Repair Parts (all types). Catalog/Pricelist MUST be included or
proposal will not be considered.
Total: 0% 1
Item Notes: Vendors proposing multiple manufacturer product lines and/or catalog/pricelist per line item must submit
the information as follows or proposal may not be considered:
• Select "Add Alternate" for each additional manufacturer product line and/or catalog/pricelist
proposed
• Vendor's must list one specific percentage discount for each manufacturer and/or
catalog/pricelist listed
PROPOSAL NOTE 1: Vendors shall submit catalog (s)/pricelist(s) with their Proposal response or the
Proposal will not be considered. Vendors shall submit catalogs)/pricelist(s) with the Proposal in a
readily available and readable electronic format, with Excel or searchable PDF preferred. No paper
catalogs or manufacturer/vendor websites will be accepted.
PROPOSAL NOTE 2: A Vendor proposing on Section I: HVAC Equipment. Products, and SUDDIies:
Specification Lines 1-3 shall be authorized by the manufacturer to sell, install, and service the brand(s)
of product(s) proposed. Proposer's responding to this proposal invitation shall submit an approval letter
from each manufacturer for each product line proposed. Manufacturer authorization letters must include
the regions in which product may be sold. Manufacturers responding directly to this proposal invitation,
in lieu of an authorization letter, shall submit a written explanation that the company is the manufacturer
of the product line(s) proposed.
PROPOSAL NOTE 3: Vendor's responding to this Proposal Invitation for installation and repair services
shall submit copy of their license from the Texas Department of License and Regulations. If a proposer
will serve outside the State of Texas, a copy of Proposer's license from the appropriate licensing agency
for the state(s) the vendor proposes shall be provided. Vendors that assert they are not required to
maintain such a license for the proposed installation and repair services shall submit a written
explanation supporting their assertion.
Item Attributes
1. State Name of Catalog/Pricelist Proposed with Discount Percentage
NOTE: Do not include SKU, Reference Numbers, Websites, and/or "See Attached/Enclosed".
Catalog List
Page 25 of 31 pages Vendor: Lennox Industries, Inc 720-23
8 Section I:HVAC Eauiament. Products. and SuaDlies
Discount (%) off catalog/pricelist for HVAC Refrigerants (all types). Catalog/Pricelist MUST be included or
proposal will not be considered.
Total: 0% 1
Item Notes: Vendors proposing multiple manufacturer product lines and/or catalog/pricelist per line item must submit
the information as follows or proposal may not be considered:
• Select "Add Alternate" for each additional manufacturer product line and/or catalog/pricelist
proposed
• Vendor's must list one specific percentage discount for each manufacturer and/or
catalog/pricelist listed
PROPOSAL NOTE 1: Vendors shall submit catalog (s)/pricelist(s) with their Proposal response or the
Proposal will not be considered. Vendors shall submit catalogs)/pricelist(s) with the Proposal in a
readily available and readable electronic format, with Excel or searchable PDF preferred. No paper
catalogs or manufacturer/vendor websites will be accepted.
PROPOSAL NOTE 2: A Vendor proposing on Section I: HVAC Equipment. Products, and SUDDIies:
Specification Lines 1-3 shall be authorized by the manufacturer to sell, install, and service the brand(s)
of product(s) proposed. Proposer's responding to this proposal invitation shall submit an approval letter
from each manufacturer for each product line proposed. Manufacturer authorization letters must include
the regions in which product may be sold. Manufacturers responding directly to this proposal invitation,
in lieu of an authorization letter, shall submit a written explanation that the company is the manufacturer
of the product line(s) proposed.
PROPOSAL NOTE 3: Vendor's responding to this Proposal Invitation for installation and repair services
shall submit copy of their license from the Texas Department of License and Regulations. If a proposer
will serve outside the State of Texas, a copy of Proposer's license from the appropriate licensing agency
for the state(s) the vendor proposes shall be provided. Vendors that assert they are not required to
maintain such a license for the proposed installation and repair services shall submit a written
explanation supporting their assertion.
Item Attributes
1. State Name of Catalog/Pricelist Proposed with Discount Percentage
NOTE: Do not include SKU, Reference Numbers, Websites, and/or "See Attached/Enclosed".
Catalog List
Page 26 of 31 pages Vendor: Lennox Industries, Inc 720-23
9 Section I:HVAC Eauipment. Products, and SuaDlies
Discount (%) off catalog/pricelist for HVAC Refrigerant Recovery Equipment (all types). Catalog/Pricelist
MUST be included or proposal will not be considered.
Total: 0% 1
Item Notes: Vendors proposing multiple manufacturer product lines and/or catalog/pricelist per line item must submit
the information as follows or proposal may not be considered:
• Select "Add Alternate" for each additional manufacturer product line and/or catalog/pricelist
proposed
• Vendor's must list one specific percentage discount for each manufacturer and/or
catalog/pricelist listed
PROPOSAL NOTE 1: Vendors shall submit catalog (s)/pricelist(s) with their Proposal response or the
Proposal will not be considered. Vendors shall submit catalogs)/pricelist(s) with the Proposal in a
readily available and readable electronic format, with Excel or searchable PDF preferred. No paper
catalogs or manufacturer/vendor websites will be accepted.
PROPOSAL NOTE 2: A Vendor proposing on Section I: HVAC EauiDment. Products. and SUDDIies:
SDecification Lines 1-3 shall be authorized by the manufacturer to sell, install, and service the brand(s)
of product(s) proposed. Proposer's responding to this proposal invitation shall submit an approval letter
from each manufacturer for each product line proposed. Manufacturer authorization letters must include
the regions in which product may be sold. Manufacturers responding directly to this proposal invitation,
in lieu of an authorization letter, shall submit a written explanation that the company is the manufacturer
of the product line(s) proposed.
PROPOSAL NOTE 3: Vendor's responding to this Proposal Invitation for installation and repair services
shall submit copy of their license from the Texas Department of License and Regulations. If a proposer
will serve outside the State of Texas, a copy of Proposer's license from the appropriate licensing agency
for the state(s) the vendor proposes shall be provided. Vendors that assert they are not required to
maintain such a license for the proposed installation and repair services shall submit a written
explanation supporting their assertion.
Item Attributes
1. State Name of Catalog/Pricelist Proposed with Discount Percentage
NOTE: Do not include SKU, Reference Numbers, Websites, and/or "See Attached/Enclosed".
Catalog List
Page 27 of 31 pages Vendor: Lennox Industries, Inc 720-23
Section I:HVAC Eauipment. Products, and Suaalies
1
0
Discount (%) off catalog/pricelist for UVC Emitters/Lamps (used to incorporate downstream of all cooling coils
and above all drain pans to control airborne and surface microbial growth and transfer. Fixtures and lamps must
be manufactured for this purpose and safety interlocks/features shall be provided to limit hazard to operating
staff). Catalog/Pricelist MUST be included or proposal will not be considered.
Total: 1 0% 1
Item Notes: Vendors proposing multiple manufacturer product lines and/or catalog/pricelist per line item must submit
the information as follows or proposal may not be considered:
• Select "Add Alternate" for each additional manufacturer product line and/or catalog/pricelist
proposed
• Vendor's must list one specific percentage discount for each manufacturer and/or
catalog/pricelist listed
PROPOSAL NOTE 1: Vendors shall submit catalog(s)/pricelist(s) with their Proposal response or the
Proposal will not be considered. Vendors shall submit catalog (s)/pricelist(s) with the Proposal in a
readily available and readable electronic format, with Excel or searchable PDF preferred. No paper
catalogs or manufacturer/vendor websites will be accepted.
PROPOSAL NOTE 2: A Vendor proposing on Section I: HVAC EauiDment. Products, and SUDDIies:
Specification Lines 1-3 shall be authorized by the manufacturer to sell, install, and service the brand(s)
of product(s) proposed. Proposer's responding to this proposal invitation shall submit an approval letter
from each manufacturer for each product line proposed. Manufacturer authorization letters must include
the regions in which product may be sold. Manufacturers responding directly to this proposal invitation,
in lieu of an authorization letter, shall submit a written explanation that the company is the manufacturer
of the product line(s) proposed.
PROPOSAL NOTE 3: Vendor's responding to this Proposal Invitation for installation and repair services
shall submit copy of their license from the Texas Department of License and Regulations. If a proposer
will serve outside the State of Texas, a copy of Proposer's license from the appropriate licensing agency
for the state(s) the vendor proposes shall be provided. Vendors that assert they are not required to
maintain such a license for the proposed installation and repair services shall submit a written
explanation supporting their assertion.
Item Attributes
1. State Name of Catalog/Pricelist Proposed with Discount Percentage
NOTE: Do not include SKU, Reference Numbers, Websites, and/or "See Attached/Enclosed".
Catalog List
Page 28 of 31 pages Vendor: Lennox Industries, Inc 720-23
Section I:HVAC Eauipment. Products. and SuaDlies
Discount (%) off catalog/pricelist for Insulation Products for HVAC Equipment. Catalog/Pricelist MUST be
included or proposal will not be considered.
Total: 0% 1
Item Notes: Vendors proposing multiple manufacturer product lines and/or catalog/pricelist per line item must submit
the information as follows or proposal may not be considered:
• Select "Add Alternate" for each additional manufacturer product line and/or catalog/pricelist
proposed
• Vendor's must list one specific percentage discount for each manufacturer and/or
catalog/pricelist listed
PROPOSAL NOTE 1: Vendors shall submit catalog (s)/pricelist(s) with their Proposal response or the
Proposal will not be considered. Vendors shall submit catalogs)/pricelist(s) with the Proposal in a
readily available and readable electronic format, with Excel or searchable PDF preferred. No paper
catalogs or manufacturer/vendor websites will be accepted.
PROPOSAL NOTE 2: A Vendor proposing on Section I: HVAC Equipment. Products, and SUDDIies:
Specification Lines 1-3 shall be authorized by the manufacturer to sell, install, and service the brand(s)
of product(s) proposed. Proposer's responding to this proposal invitation shall submit an approval letter
from each manufacturer for each product line proposed. Manufacturer authorization letters must include
the regions in which product may be sold. Manufacturers responding directly to this proposal invitation,
in lieu of an authorization letter, shall submit a written explanation that the company is the manufacturer
of the product line(s) proposed.
PROPOSAL NOTE 3: Vendor's responding to this Proposal Invitation for installation and repair services
shall submit copy of their license from the Texas Department of License and Regulations. If a proposer
will serve outside the State of Texas, a copy of Proposer's license from the appropriate licensing agency
for the state(s) the vendor proposes shall be provided. Vendors that assert they are not required to
maintain such a license for the proposed installation and repair services shall submit a written
explanation supporting their assertion.
Item Attributes
1. State Name of Catalog/Pricelist Proposed with Discount Percentage
NOTE: Do not include SKU, Reference Numbers, Websites, and/or "See Attached/Enclosed".
Catalog List
Page 29 of 31 pages Vendor: Lennox Industries, Inc 720-23
1
2
Section I:HVAC Eauipment. Products. and Suaalies
Discount (%) off catalog/pricelist for HVAC Maintenance Agreements. Catalog/Pricelist MUST be included or
proposal will not be considered.
No Bid
Item Notes: Vendors proposing multiple manufacturer product lines and/or catalog/pricelist per line item must submit
the information as follows or proposal may not be considered:
• Select "Add Alternate" for each additional manufacturer product line and/or catalog/pricelist
proposed
• Vendor's must list one specific percentage discount for each manufacturer and/or
catalog/pricelist listed
PROPOSAL NOTE 1: Vendors shall submit catalog (s)/pricelist(s) with their Proposal response or the
Proposal will not be considered. Vendors shall submit catalog (s)/pricelist(s) with the Proposal in a
readily available and readable electronic format, with Excel or searchable PDF preferred. No paper
catalogs or manufacturer/vendor websites will be accepted.
PROPOSAL NOTE 2: A Vendor proposing on Section I: HVAC EauiDment. Products. and SuDDlies:
Specification Lines 1-3 shall be authorized by the manufacturer to sell, install, and service the brand(s)
of product(s) proposed. Proposer's responding to this proposal invitation shall submit an approval letter
from each manufacturer for each product line proposed. Manufacturer authorization letters must include
the regions in which product may be sold. Manufacturers responding directly to this proposal invitation,
in lieu of an authorization letter, shall submit a written explanation that the company is the manufacturer
of the product line(s) proposed.
PROPOSAL NOTE 3: Vendor's responding to this Proposal Invitation for installation and repair services
shall submit copy of their license from the Texas Department of License and Regulations. If a proposer
will serve outside the State of Texas, a copy of Proposer's license from the appropriate licensing agency
for the state(s) the vendor proposes shall be provided. Vendors that assert they are not required to
maintain such a license for the proposed installation and repair services shall submit a written
explanation supporting their assertion.
Item Attributes
1. State Name of Catalog/Pricelist Proposed with Discount Percentage
NOTE: Do not include SKU, Reference Numbers, Websites, and/or "See Attached/Enclosed".
No response
1 Section II: Installation and Reaair Service
3 Standard Hourly Labor Rate for Installation/Repair Service of HVAC Equipment and Products -.Not to
Exceed hourly labor rate for Installation/Repair Service of HVAC Equipment and Products.
Quantity: 1 UOM: Hourly Labor Rate
No Bid
1 Section II: Installation and Reaair Service
4 Non -Standard Hourly Labor Rate for Installation/Repair Service of HVAC Equipment and Products - Not
to Exceed hourly labor rate for Installation/Repair Service of HVAC Equipment and Products.
Quantity: 1 UOM: Hourly Labor Rate No Bid
1 Section II: Installation and Reaair Service
5 Hourly Labor Rate for Installation of HVAC Filter Change Out Service (including labor, filters, and
removal/disposal of product) - Not to Exceed hourly labor rate for Installation of HVAC Filter Products.
Quantity: 1 UOM: Hourly Labor Rate No Bid
1 Section II: Installation and Reaair Service
6 Coefficient for Standard Hours of Installation/Repair Service of HVAC Equipment and Products -
RSMeans Cost Data from the Total INCL O&P column (most current edition).
Quantity: 1 UOM: Hourly Labor Rate No Bid
Page 30 of 31 pages Vendor: Lennox Industries, Inc 720-23
1 Section II: Installation and Repair Service
7 Coefficient for Non -Standard Hours for Installation/Repair Service of HVAC Equipment and Products -
RSMeans Cost Data from the Total INCL O&P column (most current edition).
Quantity: 1 UOM: Hourly Labor Rate No Bid
Response Total: $0.00
Page 31 of 31 pages Vendor: Lennox Industries, Inc 720-23
rM u
U.yA
i 1 1 14op_t�! 40
October 9, 2023
Sent Via Email: ed.wright@lennoxintl.com
Ed Wright
Lennox Industries, Inc
2140 Lake Park Blvd, Richardson, TX 75080-2254
Richardson, TX 75080
Welcome to BuyBoard!
P.O. Box 400, Austin, Texas 78767
800.695.2919 • info@buyboard.com • buyboard.com
Re: Notice of The Local Government Purchasing Cooperative ContractAward; Proposal Invitation No. 720-
23, HVAC Equipment, Supplies, and Installation
Congratulations, The Local Government Purchasing Cooperative (Cooperative) has awarded your company
a BuyBoard® contract based on the above -referenced Proposal Invitation. The contract is effective for an
initial one-year term of December 1, 2023 through November 30, 2024, and may be subject to two possible
one-year renewals. Please refer to the Proposal Invitation for the contract documents, including the General
Terms and Conditions of the Contract.
To review the items your company has been awarded, please review Proposal Tabulation No. 720-23 at:
www.buyboard.com/vendor. Only items marked as awarded to your company are included in this contract
award, and only those awarded items may be sold through the BuyBoard contract. All sales must comply
with the contract terms and must be at or below the awarded pricing as set forth in the General Terms and
Conditions.
The contract will be posted on the BuyBoard website as an online electronic catalog(s). You are reminded
that, in accordance with the General Terms and Conditions, all purchase orders must be
processed through the BuyBoard. Except as expressly authorized in writing by the Cooperative's
administrator, you are not authorized to process a purchase order received directly from a Cooperative
member that has not been processed through the BuyBoard or provided to the Cooperative. If you receive
a purchase order directly from a Cooperative member that you have reason to believe has not been received
by the Cooperative or processed through the BuyBoard, you must promptly forward a copy of the purchase
order by email to info@buyboard.com.
A list of Cooperative members is available on the buyboard.com website. Once the contract is active, the
BuyBoard vendor relations staff will be contacting you to assist with the resources available and to provide
any support you may need as an awarded BuyBoard vendor.
On behalf of the Cooperative, we appreciate your interest in the Cooperative and we are looking forward
to your participation in the program. If you have any questions, feel free contact me at bids@buyboard.com.
Sincerely,
-314M
Stacy Finn, Bid Analyst
Texas Association of School Boards, Inc.,
Administrator for The Local Government Purchasing Cooperative
v.02.01.2021
Endorsed by A TASM VT
Exhibit B - BuyBoard 720-23
Board®
National Pumhasing Cooperative
October 10, 2023
Sent Via Email: ed.wright@lennoxintl.com
Ed Wright
Lennox Industries, Inc
2140 Lake Park Blvd, Richardson, TX 75080-2254
Richardson, TX 75080
Welcome to BuyBoard!
Re: Notice of National Purchasing Cooperative Award; Proposal Invitation No. 720-23, HVAC Equipment, Supplies, and
Installation
Congratulations, The National Purchasing Cooperative (National Cooperative) has awarded your company a BuyBoard®
contract based on the above -referenced Proposal Invitation. The contract is effective for an initial one-year term of December
1, 2023 through November 30, 2024, and may be subject to two possible one-year renewals. Please refer to the Proposal
Invitation for the contract documents, including the National Purchasing Cooperative Vendor Award Agreement and General
Terms and Conditions of the Contract.
To review the items your company has been awarded, please review Proposal Tabulation No. 720-23 at
www.buvboard.com/vendor. Only items marked as awarded to your company are included in this contract award, and only
those awarded items may be sold through the BuyBoard contract. All sales must comply with the contract terms and must
be at or below the awarded pricing as set forth in the General Terms and Conditions.
The contract will be posted on the BuyBoard website as an online electronic catalog(s). You are reminded that, in
accordance with the General Terms and Conditions, all purchase orders from National Cooperative members
must be processed through the BuyBoard. Except as expressly authorized in writing by the Cooperative's administrator,
you are not authorized to process a purchase order received directly from a National Cooperative member that has not been
processed through the BuyBoard or provided to the Cooperative. If you receive a purchase order directly from a National
Cooperative member that you have reason to believe has not been received by the National Cooperative or processed through
the BuyBoard, you must promptly forward a copy of the purchase order by e-mail to info@buyboard.com
A list of National Cooperative members is available on the buyboard.com website. Once the contract is active, the BuyBoard
vendor relations staff will be contacting you to assist with resources available and provide any support you may need as an
awarded BuyBoard vendor.
On behalf of the National Cooperative, we are looking forward to your participation in the program. If you have any questions,
feel free to contact me at bids(o)buvboard.com.
Sincerely,
_�14M
Stacy Finn, Bid Analyst
Texas Association of School Boards, Inc.,
Procurement Administrator for the National Purchasing Cooperative
v.02.01.2021
4
78767-0400
vboard.com
DwBoard
P.O. Box aOO, Austln, Texas 7$767
800.695.2919 - bldsC&buyboard.com - buyboard.com
PROPOSER'S ACCEPTANCE AND AGREEMENT
Proposal Invitation Name
HVAC Equipment, Supplies, and Installation
Proposal Invitation Number
720-23
Contract Term
December 1, 2023, through November 30, 2024,
with two possible one-year renewals.
Proposal Due Date/Opening Date and Time
July 13, 2023, at 4:00 PM
Location of Proposal Opening
Texas Association of School Boards, Inc.
BuyBoard Department
12007 Research Blvd.
Austin, TX 78759
Anticipated Cooperative Board Meeting Date
October 2023
By signature below, the undersigned acknowledges and agrees that you are authorized to submit this
Proposal, including making all acknow/edgements, consents, and certifications herein, on behalf of Proposer
and, to the best ofyour knowledge, the information provided is true, accurate, and complete,
Lennox Industries, Inc.
Name of Proposing Company
2140 Lake Park Blvd.
Street Address
Richardson, TX 75080
City, State, Zip
972-497-5000
Telephone Number of Authorized Company Official
972-497-5112
06/30/2023
Date
Signature of Authorized Company Official
Chris Drury
Printed Name of Authorized Company Official
VP Sales - NA Commercial
Position or Title of Authorized Company Official
42-0377110
Fax Number of Authorized Company Official Federal ID Number
Page 11 of 76
PROPOSAL FORMS CONST. v.05.04.2023
DwBoard
P.O. Box aOO, Austln, Texas 7$767
800.695.2919 - bldsC&buyboard.com - buyboard.com
PROPOSAL FORMS PART 1: COMPLIANCE FORMS
INSTRUCTIONS:
Proposer must review and complete all forms in this Proposal Forms Part 1:
■ Proposal Acknowledgements
■ Felony Conviction Disclosure
■ Resident/Nonresident Certification
■ Debarment Certification
■ Vendor Employment Certification
■ No Boycott Verification
■ No Excluded Nation or Foreign Terrorist Organization Certification
■ Historically Underutilized Business Certification
■ Acknowledgement of BuyBoard Technical Requirements
■ Construction -Related Goods and Services Affirmation
• Deviation and Compliance
■ Vendor Consent for Name Brand Use
■ Confidential/Proprietary Information
■ EDGAR Vendor Certification
• Compliance Forms Signature Page
An authorized representative of Proposer must initial in the bottom right corner of each page where indicated
and complete and sign the Compliance Forms Signature Page. Proposer's failure to fully complete, initial, and
sign forms as required may result in your Proposal being rejected as non -responsive.
PROPOSAL ACKNOWLEDGEMENTS
The proposing company ("you" or "your' hereby acknowledges and agrees as follows:
1. You have carefully examined and understand all information and documentation associated with this Proposal Invitation,
including the Instructions to Proposers, General Information, General Terms and Conditions, attachments/forms,
appendices, item specifications, and line items (collectively "Requirements");
2. By your response ("Proposal's to this Proposal Invitation, you propose to supply the products or services submitted at
the pricing quoted in your Proposal and in strict compliance with the Requirements, unless specific deviations or
exceptions are noted in the Proposal;
3. By your Proposal, you acknowledge and certify all items set forth in the General Terms and Conditions, Section B.12
(Certifications), including all non -collusion certifications and certifications regarding legal, ethical, and other matters set
forth therein.
4. Any and all deviations and exceptions to the Requirements have been noted in your Proposal on the required form and
no others will be claimed;
C-1'_:�
Initial:
Page 12 of 76
PROPOSAL FORMS CONST. v.05.04.2023
P.O. Box 400, Austin, Texas 78767
800.695.2919 - bidsC&buyboard.com - buyboard.com
5. If the Cooperative accepts any part of your Proposal and awards you a Contract, you will furnish all awarded products or
services at the pricing quoted and in strict compliance with the Requirements (unless specific deviations or exceptions are
noted on the required form and accepted by the Cooperative), including without limitation the Requirements related to:
a. conducting business with Cooperative members, including offering pricing to members that is the best you offer
compared to similarly situated customers in similar circumstances;
b. payment of a service fee in the amount specified and as provided for in this Proposal Invitation;
c. the possible award of a piggy -back contract by the National Purchasing Cooperative or nonprofit entity, in which
event you will offer the awarded products and services in accordance with the Requirements; and
d. submitting price sheets or catalogs in the proper format as required by the Cooperative as a prerequisite to activation
of your Contract;
6. You have clearly identified on the included form any information in your Proposal that you believe to be confidential or
proprietary or that you do not consider to be public information subject to public disclosure under the Texas Public
Information Act or similar public information law;
7. The individual submitting this Proposal is duly authorized to enter into the contractual relationship represented by this
Proposal Invitation on your behalf and bind you to the Requirements, and such individual (and any individual signing a
form or Proposal document) is authorized and has the requisite knowledge to provide the information and make the
representations and certifications required in the Requirements;
8. You have carefully reviewed your Proposal, and certify that all information provided is true, complete, and accurate to
the best of your knowledge, and you authorize the Cooperative to take such action as it deems appropriate to verify such
information; and
9. Any misstatement, falsification, or omission in your Proposal, whenever or however discovered, will be grounds for
disqualifying you from consideration for a contract award under this Proposal Invitation, termination of a contract award,
or any other remedy or action provided for in the General Terms and Conditions or by law.
FELONY CONVICTION DISCLOSURE
Subsection (a) of Section 44.034 of the Texas Education Code (Notification of Criminal History of Contractor)
states: "A person or business entity that enters into a contract with a school district must give advance notice to the district
if the person or an owner or operator has been convicted of a felony. The notice must include a general description of the
conduct resulting in the conviction of a felony."
Section 44.034 further states in Subsection (b): "A school district may terminate a contract with a person or business
entity if the district determines that the person or business entity failed to give notice as required by Subsection (a) or
misrepresented the conduct resulting in the conviction. The district must compensate the person or business entity for services
performed before the termination of the contract."
Please check (V) one of the fol%wing:
x
My company Is a publicly held corporation. (Advance notice requirement does not apply to publicly held corporation.)
❑ My company is not owned or operated by anyone who has been convicted of a felony.
❑ My company is owned/operated by the following individual(s) who has/have been convicted of a felony:
Name of Felon(s):
Details of Conviction(s):
Initial:
Page 13 of 76
PROPOSAL FORMS CONST. v.05.04.2023
DwBoard
P.O. Box aOO, Austln, Texas 7$767
800.695.2919 - bldsC&buyboard.com - buyboard.com
RESIDENT/NONRESIDENT CERTIFICATION
Chapter 2252, Subchapter A, of the Texas Government Code establishes certain requirements applicable to proposers who
are not Texas residents. Under the statute, a "resident" proposer is a person whose principal place of business is in Texas,
including a contractor whose ultimate parent company or majority owner has its principal place of business in Texas. A
"nonresident" proposer is a person who is not a Texas resident. Please indicate the status of your company as a "resident"
proposer or a "nonresident" proposer under these definitions.
Please check (V) one of the fol%wing:
x I certify that my company is a Resident Proposer.
❑ I certify that my company is a Nonresident Proposer.
If your company is a Nonresident Proposer, you must provide the following information for your resident state (the state in
which your company's principal place of business is located):
A.
a
Company Name
City
Address
State Zip Code
Does your resident state require a proposer whose principal place of business is in Texas to under -price proposers
whose resident state is the same as yours by a prescribed amount or percentage to receive a comparable contract?
❑ Yes ❑ No
What is the prescribed amount or percentage? $
or
DEBARMENT CERTIFICATION
By signature on the Compliance Forms Signature Page, I certify that neither my company nor an owner or principal of my
company has been debarred, suspended or otherwise made ineligible for participation in Federal Assistance programs under
Executive Order 12549, "Debarment and Suspension," as described in the Federal Register and Rules and Regulations. Neither
my company nor an owner or principal of my company is currently listed on the government -wide exclusions in SAM, debarred,
suspended, or otherwise excluded by agencies or declared ineligible under any statutory or regulatory authority. My company
agrees to immediately notify the Cooperative and all Cooperative members with pending purchases or seeking to purchase
from my company if my company or an owner or principal is later listed on the government -wide exclusions in SAM, or is
debarred, suspended, or otherwise excluded by agencies or declared ineligible under any statutory or regulatory authority.
VENDOR EMPLOYMENT CERTIFICATION
Section 44.031(b) of the Texas Education Code establishes certain criteria that a school district must consider when
determining to whom to award a contract. Among the criteria for certain contracts is whether the vendor or the vendor's
ultimate parent or majority owner (i) has its principal place of business in Texas; or (ii) employs at least 500 people in Texas.
If neither your company nor the ultimate parent company or majority owner has its principal place of business in Texas, does
your company, ultimate parent company, or majority owner employ at least 500 people in Texas?
Please check (V one of the following.
x Yes ❑ No
Initial:
Page 14 of 76
PROPOSAL FORMS CONST. v.05.04.2023
DwBoard
P.O. Box aOO, Austln, Texas 7$767
800.695.2919 - bidsC&buyboard.com - buyboard.com
NO BOYCOTT VERIFICATION
A Texas governmental entity may not enter into a contract with a value of $100,000 or more that is to be paid wholly or partly
from public funds with a company (excluding a sole proprietorship) that has 10 or more full-time employees for goods or services
unless the contract contains a written verification from the company that it: (1) does not boycott Israel and will not boycott
Israel during the term of the contract (TEx. Gov'T CODE Ch. 2271), (2) does not boycott energy companies and will not boycott
energy companies during the term of the contract (TEx. Gov'T CODE Ch. 2274 effective September 1, 2021), and (3) does not
have a practice, policy, guidance, or directive that discriminates against a firearm entity or firearm trade association and will not
discriminate during the term of the contract against a firearm entity or firearm trade association (TEx. Gov'T CODE Ch. 2274
effective September 1, 2021). Accordingly, this certification form is included to the extent required by law.
"Boycott Israel" means refusing to deal with, terminating business activities with, or otherwise taking any action that is
intended to penalize, inflict economic harm on, or limit commercial relations specifically with Israel, or with a person or entity
doing business in Israel or in an Israeli -controlled territory, but does not include an action made for ordinary business
purposes. TEx. Gov't CODE §808.001(1).
"Boycott energy company" means, without an ordinary business purpose, refusing to deal with, terminating business activities
with, or otherwise taking any action that is intended to penalize, inflict economic harm on, or limit commercial relations with
a company because the company: (A) engages in the exploration, production, utilization, transportation, sale, or
manufacturing of fossil fuel -based energy and does not commit or pledge to meet environmental standards beyond applicable
federal and state law; or (B) does business with a company described by Paragraph (A). TEx. Gov'T CODE §809.001(1)
(effective September 1, 2021).
"Discriminate against a firearm entity or firearm trade association" means, (A) with respect to the entity or association, to:
(i) refuse to engage in the trade of any goods or services with the entity or association based solely on its status as a firearm
entity or firearm trade association; (ii) refrain from continuing an existing business relationship with the entity or association
based solely on its status as a firearm entity or firearm trade association; or (iii) terminate an existing business relationship
with the entity or association based solely on its status as a firearm entity or firearm trade association; and (B) does not
include: (i) the established policies of a merchant, retail seller, or platform that restrict or prohibit the listing or selling of
ammunition, firearms, or firearm accessories; and (ii) a company's refusal to engage in the trade of any goods or services,
decision to refrain from continuing an existing business relationship, or decision to terminate an existing business relationship:
(aa) to comply with federal, state, or local law, policy, or regulations or a directive by a regulatory agency; or (bb) for any
traditional business reason that is specific to the customer or potential customer and not based solely on an entity's or
association's status as a firearm entity or firearm trade association. TEx. Gov'T CODE §2274.001(3) (effective September 1,
2021).
By signature on the Compliance Forms Signature Page, to the extent applicable, I certify and verify that Vendor does not
boycott Israel, boycott energy companies, or discriminate against a firearm entity or firearm trade association and will not
do so during the term of any contract awarded under this Proposal Invitation, that this certification is true, complete and
accurate, and that I am authorized by my company to make this certification.
Initial:
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P.O. Box 400, Austin, Texas 78767
800.695.2919 - bidsC&buyboard.com - buyboard.com
NO EXCLUDED NATION OR FOREIGN TERRORIST ORGANIZATION CERTIFICATION
Chapter 2252 of the Texas Government Code provides that a Texas governmental entity may not enter into a contract with a
company engaged in active business operations with Sudan, Iran, or a foreign terrorist organization — specifically, any company
identified on a list prepared and maintained by the Texas Comptroller under Texas Government Code §§806.051, 807.051, or
2252.153. (A company that the U.S. Government affirmatively declares to be excluded from its federal sanctions regime relating
to Sudan, Iran, or any federal sanctions regime relating to a foreign terrorist organization is not subject to the contract prohibition.)
By signature on the Compliance Forms Signature Page, I certify and verify that Vendor is not on the Texas Comptroller's list
identified above; that this certification is true, complete and accurate; and that I am authorized by my company to make this
certification.
HISTORICALLY UNDERUTILIZED BUSINESS CERTIFICATION
A Proposer that has been certified as a Historically Underutilized Business (also known as a Minority/Women Business
Enterprise or "MWBE" and all referred to in this form as a "HUB' is encouraged to indicate its HUB certification status when
responding to this Proposal Invitation. The BuyBoard website will indicate HUB certifications for awarded Vendors that
properly indicate and document their HUB certification on this form. (Please check (V) all that apply)
❑ I certify that my company has been certified as a HUB in the following categories:
❑ Minority Owned Business ❑ Women Owned Business
❑ Service -Disabled Veteran Owned Business (veteran defined by 38 U.S.C. §101(2), who has a
service -connected disability as defined by 38 U.S.C. § 101(16), and who has a disability rating
of 20% or more as determined by the U. S. Department of Veterans Affairs or Department of
Defense)
Certification Number:
Name of Certifying Agency:
My company has NOT been certified as a HUB.
ACKNOWLEDGEMENT OF BUYBOARD TECHNICAL REQUIREMENTS
Vendor shall review the BuyBoard Technical Requirements included in this Proposal Invitation. By signature on the Compliance
Forms Signature Page, the undersigned affirms that Proposer has obtained a copy of the BuyBoard Technical Requirements,
has read and understands the requirements, and certifies that Vendor is able to meet and will comply with those requirements
except as follows: [List and explain BuyBoard Technica/Requirements, if any, to which your company cannot or willnot
comply.]
Note: In accordance with the General Terms and Conditions of the Contract, to the extent Vendor is awarded a Contract
under this Proposal Invitation but is unable or unwilling to meet the applicable BuyBoard Technical Requirements, the
information available on the BuyBoard for Vendor's awarded products or services may be limited, potentially placing Vendor
at a disadvantage and impacting the ability of Cooperative members to search, find, review, and purchase Vendor's awarded
products and services on the BuyBoard website. Further, to the extent Vendor has acknowledged ability to meet and comply
with the BuyBoard Technical Requirements, any subsequent failure or refusal by Vendor to promptly provide information
upon request to the Cooperative administrator in accordance with those technical requirements may be deemed an event of
default under the Contract.
Initial: C�
Page 16 of 76
PROPOSAL FORMS CONST. v.05.04.2023
DgBoard
P.O. Box aOO, Austln, Texas 7$767
800.695.2919 - bidsC&buyboard.com - buyboard.com
CONSTRUCTION -RELATED GOODS AND SERVICES AFFIRMATION
The Cooperative issued the BuyBoard Procurement and Construction -Related Goods and Services Advisory for Texas Members
("Advisory"), which provides information specifically relevant to the procurement of construction -related goods and services
by Texas Cooperative members. The Advisory, available at buvboard.com/Vendor/Resources.asDx, provides an overview of
certain legal requirements that are potentially relevant to a Cooperative member's procurement of construction or
construction -related goods and services, including those for projects that may involve or require architecture, engineering or
independent testing services. A copy of the Advisory can also be provided upon request. Because many BuyBoard contracts
include goods or installation services that might be considered construction -related, Proposer must make this Construction
Related -Goods and Services Affirmation regardless of type of goods or services associated with this Proposal Invitation.
A contract awarded under this Proposal Invitation covers only the specific goods and/or services awarded by the Cooperative.
As explained in the Advisory ("Advisory"), Texas law prohibits the procurement of architecture or engineering
services through a purchasing cooperative. This Proposal Invitation and any Contract awarded thereunder
does not include such services. Architecture or engineering services must be procured by a Cooperative
member separately, in accordance with the Professional Services Procurement Act (Chapter 2254 of the Texas
Government Code) and other applicable law and local policy.
By signature on the Compliance Forms Signature Page, Proposer affirms that Proposer has obtained a copy of the Advisory,
has read and understands the Advisory, and is authorized by Proposer to make this affirmation. If Proposer sells construction -
related goods or services to a Cooperative member under a Contract awarded under this Proposal Invitation, Proposer will
comply with the Advisory and applicable legal requirements, make a good faith effort to make its Cooperative member
customers or potential Cooperative member customers aware of such requirements, and provide a Cooperative member with
a copy of the Advisory before accepting the member's Purchase Order, Member Construction Contract, or other agreement
for construction -related goods or services.
C_:�'__1_1
Initial:
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PROPOSAL FORMS CONST. v.05.04.2023
Board® P.O. Box aQo. Austin, Texas 78767
i 800.695.2919 - Wds(oibuyboard.com - buyhoard.corn
DEVIATION AND COMPLIANCE
If your company intends to deviate from the General Terms and Conditions, Proposal Specifications or other requirements
associated with this Proposal Invitation, you MUST list all such deviations on this form, and provide complete and detailed
information regarding the deviations on this form or an attachment to this form. Prior to completing this form, Vendor
shall review the General Terms and Conditions section B.4 (Deviations from Item Specifications and General
Terms and Conditions). Please note that, as provided in section B.4, certain provisions of the General Terms
and Conditions are NOT subject to deviation, and certain deviations will be deemed rejected without further
action by the Cooperative. Any attempted deviation, whether directly or indirectly, to provisions identified in
this Proposal Invitation as not subject to deviation shall be deemed rejected by the Cooperative and, unless
otherwise withdrawn by Vendor, may result in Vendor's Proposal being rejected in its entirety.
The Cooperative will consider any deviations in its contract award decision and reserves the right to accept or reject a proposal
based upon any submitted deviation.
In the absence of any deviation identified and described in accordance with the above, your company must fully comply with
the General Terms and Conditions, Proposal Specifications and all other requirements associated with this Proposal Invitation
if awarded a Contract under this Proposal Invitation. A deviation will not be effective unless accepted by the Cooperative.
The Cooperative, by and through the Cooperative administrator, may, in its sole discretion, seek clarification from and/or
communicate with Proposer(s) regarding any submitted deviation, consistent with general procurement principles of fair
competition. The Cooperative reserves the right to accept or reject a Proposal based upon any submitted deviation.
As noted on page 47 of the terms and conditions, these sections are not
Please check (1/) one of the fol%wing: subject to deviation. Any attempted deviation by Vendor to such
Terms and Conditions, whether directly or indirectly, shall be
❑ NO; Deviations deemed rejected by the Cooperative and, unless otherwise
x Yes; Deviations withdrawn by Vendor, may result in Vendor's Proposal being
rejected in its entirety.
List and fully explain any deviations you are submitting:
C
2. The parties agree that the terms of Lennox's Commercial Shipment, Cancellation, and Return Policy are hereby
incorporated by reference.
3. Lennox's standard warranty for the goods will apply.
a
nox wiu g
ana/orpu
any
m
5. The Parties are entering into this Agreement for the sale of goods into the commercial marketplace. Notwithstanding any
other terms herein, the parties acknowledge that Lennox will comply with the applicable provisions of the state and
federal statutes, rules, regulations, and Executive Orders ("Rules' described herein to the extent those Rules apply to
Lennox
Page 18 of 76
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P.O. Box 400, Austin, Texas 78767
800.695.2919 - hids(oibuyboard.com - huyhoard.corn
6. Notwithstanding anything herein to the contrary, any delivery dates are subject to Lennox's review and approval, and
Lennox will notify the purchaser of any delivery delays.
Removed Deviations and vendor accepted BuyBoard changes
Jim Tulberg
Contract Administrator
Page 19 of 76
PROPOSAL FORMS CONST. v.05.04.2023
DwBoard
P.O. Box aOO, Austln, Texas 7$767
800.695.2919 - bldsC&buyboard.com - buyboard.com
VENDOR CdS ENT FOR NAME BRAND USE
BuyBoard members seeking to make purchases using a Contract awarded under this Proposal Invitation may view information
regarding awarded Vendors, including but not limited to product catalogs, pricelists, pricing, and Proposals, through the
BuyBoard website. To improve and enhance the experience of BuyBoard members seeking to procure goods and services
under the Contract utilizing the BuyBoard website, any Vendor logo, product images, and similar brand and trademark
information provided by Vendor for purposes of the Contract ("Vendor Information") may be posted on the BuyBoard website.
You acknowledge that, by submitting your Proposal, unless you specifically opt out below, you consent to use
of your company's Vendor Information on the BuyBoard website if awarded a Contract. You further acknowledge
that whether, where, and when to include the Vendor Information on the BuyBoard website shall be at the sole discretion of
the BuyBoard Administrator. Vendor retains, however, the right of general quality control over the BuyBoard Administrator's
authorized display of proprietary Vendor Information. Neither the BuyBoard nor its administrator will be responsible for the
use or distribution of Vendor Information by BuyBoard members or any other third party using the BuyBoard website. This
Vendor Consent shall be effective for the full term of the Contract, including renewals, unless Vendor provides a signed,
written notice revoking consent to contractadmin(ftuvboard.com. BuyBoard shall have up to thirty days from the date of
receipt of a termination or revocation of a Vendor Consent to remove Vendor information from the BuyBoard website.
This Vendor Consent is subject to the Terms and Conditions of the Contract, including, but not limited to, those terms
pertaining to Disclaimer of Warranty and Limitation of Liability, Indemnification, and Intellectual Property Infringement.
Vendor logo files must be submitted in one of the formats set forth in the BuyBoard Technical Requirements. Proposers are
requested to submit this information with Vendor's Proposal. (This consent shall not authorize use of your company's Vendor
Information by BuyBoard if your company is not awarded a Contract.)
OPT OUT:
If your company wishes to opt out of the Vendor Consent for Name Brand Use, you must check the opt out box below. DO
ND select this box unless your company is opting out of this Vendor Consent for Name Brand Use,
❑ By checking this box, Vendor hereby declines to provide consent for use of Vendor Information (as defined herein) on
the BuyBoard website. By opting out, Vendor acknowledges and agrees that, if Vendor is awarded a Contract
under this Proposal Invitation, information available on the BuyBoard for Vendor's awarded products or
services may be limited, potentially placing Vendor at a disadvantage and impacting the ability of
Cooperative members to search, find, review, and purchase Vendor's awarded products and services on the
BuyBoard website.
C-1'--1)
Initial:
Page 21 of 76
PROPOSAL FORMS CONST. v.05.04.2023
DwBoard
P.O. Box aOO, Austln, Texas 7$767
800.695.2919 - bldsC&buyboard.com - buyboard.com
CONFIDENTIAL/PROPRIETARY INFORMATION
A. Public Disclosure Laws
All Proposals, forms, documentation, catalogs, pricelists, or other materials submitted by Vendor to the Cooperative in
response to this Proposal Invitation, may be subject to the disclosure requirements of the Texas Public Information Act (Texas
Government Code chapter 552.001, et. seq.) or similar disclosure law. Proposer must clearly identify on this form any
information in its Proposal (including forms, documentation, or other materials submitted with the Proposal) that Proposer
considers proprietary or confidential. If Proposer fails to properly identify the information, the Cooperative shall have no
obligation to notify Vendor or seek protection of such information from public disclosure should a member of the public or
other third -party request access to the information under the Texas Public Information Act or similar disclosure law. When
required by the Texas Public Information Act or other disclosure law, Proposer may be notified of any third -party request for
information in a Proposal that Proposer has identified in this form as proprietary or confidential.
Does your Proposal (including forms, documentation, catalogs, pricelists, or other materials submitted with the Proposal)
contain information which Vendor considers proprietary or confidential?
Please check (✓) one of the fol%wing:
NO, I certify that none of the information included with this Proposal is considered confidential or proprietary.
^ YES, I certify that this Proposal contains information considered confidential or proprietary and all such information is
specifically identified on this form.
If you responded "YES", you must clearly identify below the specific information you consider confidential or proprietary. List
each page number, form number, or other information sufficient to make the information readily identifiable. The Cooperative
and Cooperative administrator shall not be responsible for a Proposer's failure to clearly identify information considered
confidential or proprietary. Further, by submitting a Proposal, Proposer acknowledges that the Cooperative and Cooperative
administrator will disclose information when required by law, even if such information has been identified herein as
information Vendor considers confidential or proprietary.
Confidential / Proprietary Information:
Price List & Commercial Shipment Policy is confidential
(Attach additional sheets if needed.)
C�
Initial:
Page 22 of 76
PROPOSAL FORMS CONST. v.05.04.2023
DwBoard
P.O. Box aOO, Austln, Texas 7$767
800.695.2919 - bldsC&buyboard.com - buyboard.com
B. Copyright Information
Does your Proposal (including forms, documentation, pricelists, catalogs, or other materials submitted with the Proposal)
contain copyright information?
Please check (✓) one of the fo/%wing:
X NO, Proposal (including forms, documentation, pricelists, catalogs, or other materials submitted with the Proposal) does
not contain copyright information.
❑ YES, Proposal (including forms, documentation, pricelists, catalogs, or other materials submitted with the Proposal) does
contain copyright information.
If you responded "YES", clearly identify below the specific documents or pages containing copyright information.
Copyright Information:
(Attach additional sheets if needed.)
C. Consent to Release Confidential/Proprietary/Copyright Information to BuyBoard Members
BuyBoard members (Cooperative and nonprofit members) seeking to make purchases through the BuyBoard may wish to
view information included in the Proposals of awarded Vendors. If you identified information on this form as confidential,
proprietary, or subject to copyright, and you are awarded a BuyBoard contract, your acceptance of the BuyBoard contract
award constitutes your consent to the disclosure of such information to BuyBoard members, including posting of such
information on the secure BuyBoard website for members. Note: Neither the Cooperative nor Cooperative administrator will
be responsible for the use or distribution of information by BuyBoard members or any other party.
D. Consent to Release Proposal Tabulation
Notwithstanding anything in this Confidential/Proprietary Information form to the contrary, by submitting a Proposal, Vendor
consents and agrees that, upon Contract award, the Cooperative may publicly release, including posting on the public
BuyBoard website, a copy of the proposal tabulation and award information for the Contract including Vendor name; proposed
catalog/pricelist name(s); proposed percentage discount(s), hourly labor rate(s), or other specified pricing; and Vendor award
or non -award information.
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Page 23 of 76
PROPOSAL FORMS CONST. v.05.04.2023
DwBoard
P.O. Box aOO, Austln, Texas 7$767
800.695.2919 - bldsC&buyboard.com - buyboard.com
EDGAR VENDOR CERTIFICATION
(2 CFR Part 200 and Appendix II)
When a Cooperative member seeks to procure goods and services using funds under a federal grant or contract, specific
federal laws, regulations, and requirements may apply in addition to those under state law. This includes, but is not limited
to, the procurement standards of the Uniform Administrative Requirements, Cost Principles and Audit Requirements for
Federal Awards, 2 CFR 200 (sometimes referred to as the "Uniform Guidance" or new "EDGAR'�. All Vendors submitting a
Proposal must complete this EDGAR Certification Form regarding Vendor's willingness and ability to comply with certain
requirements which may be applicable to specific Cooperative member purchases using federal grant funds. Completed
forms will be made available to Cooperative members for their use while considering their purchasing options when using
federal grant funds. Cooperative members may also require Vendors to enter into ancillary agreements, in addition to the
terms and conditions of the BuyBoard contract, to address the member's specific contractual needs, including contract
requirements for a procurement using federal grants or contracts.
Foreach of the items below, Vendor should certify Vendor's agreement and ability to comply, where
applicable, by having Vendor's authorized representative check the applicable boxes, initial each page, and
sign the Compliance Forms Signature Page. If you fail to complete any item in this form, the Cooperative will
consider and may list the Vendor's response on the BuyBoard as " NO, "the Vendor is unable or unw i/ling to
comply. A 'ENO" response to any of the items may, if applicable, impact the ability of a Cooperative member to purchase
from the Vendor using federal funds.
1. Vendor Violation or Breach of Contract Terms:
Contracts for more than the simplified acquisition threshold, which is the inflation adjusted amount determined by the Civilian
Agency Acquisition Council and the Defense Acquisition Regulations Council (Councils) as authorized by 41 USC 1908, must
address administrative, contractual, or legal remedies in instances where contractors violate or breach contract terms, and
provide for such sanctions and penalties as appropriate.
Provisions regarding Vendor default are included in the BuyBoard General Terms and Conditions, including Section E.18,
Remedies for Default and Termination of Contract. Any Contract award will be subject to such BuyBoard General Terms and
Conditions, as well as any additional terms and conditions in any Purchase Order, Member Construction Contract, or
Cooperative member ancillary contract agreed upon by Vendor and the Cooperative member which must be consistent with
and protect the Cooperative member at least to the same extent as the BuyBoard Terms and Conditions. The remedies under
the Contract are in addition to any other remedies that may be available under law or in equity. By submitting a Proposal,
you agree to these Vendor violation and breach of contract terms.
X YES, I agree. ❑ NO, I do not agree.
2. Termination for Cause or Convenience:
For any Cooperative member purchase or contract in excess of $10,000 made using federal funds, you agree that the following
term and condition shall apply:
The Cooperative member may terminate or cancel any Purchase Order under this Contract at any time, with or without cause,
by pro viding se ven (7) business days advance written notice to the Vendor. If this Agreement is terminated in accordance
with this Paragraph, the Cooperative member shall only be required to pay Vendor for goods or services delivered to the
Cooperative member prior to the termination and not otherwise returned in accordance with Vendors return policy. If the
Cooperative member has paid Vendor for goods or services not yet pro vided as of the date of termination, Vendor shall
immediately refund such payment(s).
If an alternate provision for termination of a Cooperative member purchase for cause and convenience, including the manner
by which it will be effected and the basis for settlement, is included in the Cooperative member's Purchase Order, Member
Construction Contract, or ancillary agreement agreed to by the Vendor, the Cooperative member's provision shall control.
X YES, I agree.
❑ NO, I do not agree.
Initial: Cs
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PROPOSAL FORMS CONST. v.05.04.2023
P.O. Box 400, Austin, Texas 78767
800.695.2919 - bidsC&buyboard.com - buyboard.com
3. Equal Employment Opportunity:
Except as otherwise provided under 41 CFR Part 60, all Cooperative member purchases or contracts that meet the definition
of "federally assisted construction contract" in 41 CFR Part 60-1.3 shall be deemed to include the equal opportunity clause
provided under 41 CFR 60-1.4(b), in accordance with Executive Order 11246, "Equal Employment Opportunity" (30 FR 12319,
12935, 3 CFR Part, 1964-1965 Comp., p. 339), as amended by Executive Order 11375, "Amending Executive Order 11246
Relating to Equal Employment Opportunity," and implementing regulations at 41 CFR Part 60, "Office of Federal Contract
Compliance Programs, Equal Employment Opportunity, Department of Labor."
The equal opportunity clause provided under 41 CFR 60-1.4(b) is hereby incorporated by reference. Vendor agrees that such
provision applies to any Cooperative member purchase or contract that meets the definition of "federally assisted construction
contract" in 41 CFR Part 60-1.3 and Vendor agrees that it shall comply with such provision.
X YES, I agree. ❑ NO, I do not agree.
4. Davis -Bacon Act:
When required by Federal program legislation, Vendor agrees that, for all Cooperative member prime construction
contracts/purchases in excess of $2,000, Vendor shall comply with the Davis -Bacon Act (40 USC 3141-3144, and 3146-3148)
as supplemented by Department of Labor regulations (29 CFR Part 5, "Labor Standards Provisions Applicable to Contracts
Covering Federally Financed and Assisted Construction"). In accordance with the statute, Vendor is required to pay wages to
laborers and mechanics at a rate not less than the prevailing wages specified in a wage determinate made by the Secretary
of Labor. In addition, Vendor shall pay wages not less than once a week.
Current prevailing wage determinations issued by the Department of Labor are available at beta.sam.gov. Vendor agrees
that, for any purchase to which this requirement applies, the award of the purchase to the Vendor is conditioned upon
Vendor's acceptance of the wage determination.
Vendor further agrees that it shall also comply with the Copeland "Anti -Kickback" Act (40 USC 3145), as supplemented by
Department of Labor regulations (29 CFR Part 3, "Contractors and Subcontractors on Public Building or Public Work Financed
in Whole or in Part by Loans or Grants from the United States"). The Act provides that each contractor or subrecipient must
be prohibited from inducing, by any means, any person employed in the construction, completion, or repair of public work,
to give up any part of the compensation to which he or she is otherwise entitled.
❑ YES, I agree. x NO, I do not agree. Not applicable
5. Contract Work Hours and Safety Standards Act:
Where applicable, for all Cooperative member contracts or purchases in excess of $100,000 that involve the employment of
mechanics or laborers, Vendor agrees to comply with 40 USC 3702 and 3704, as supplemented by Department of Labor
regulations (29 CFR Part 5). Under 40 USC 3702 of the Act, Vendor is required to compute the wages of every mechanic and
laborer on the basis of a standard work week of 40 hours. Work in excess of the standard work week is permissible provided
that the worker is compensated at a rate of not less than one and a half times the basic rate of pay for all hours worked in
excess of 40 hours in the work week.
The requirements of 40 USC 3704 are applicable to construction work and provide that no laborer or mechanic must be
required to work in surroundings or under working conditions which are unsanitary, hazardous or dangerous. These
requirements do not apply to the purchases of supplies or materials or articles ordinarily available on the open market, or
contracts for transportation or transmission of intelligence.
X YES, I agree.
❑ NO, I do not agree.
Initial:
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PROPOSAL FORMS CONST. v.05.04.2023
DwBoard
P.O. Box aOO, Austln, Texas 7$767
800.695.2919 - bldsC&buyboard.com - buyboard.com
6. Right to Inventions Made Under a Contract or Agreement:
If the Cooperative member's Federal award meets the definition of "funding agreement" under 37 CFR 401.2(a) and the
recipient or subrecipient wishes to enter into a contract with a small business firm or nonprofit organization regarding the
substitution of parties, assignment or performance or experimental, developmental, or research work under that "funding
agreement," the recipient or subrecipient must comply with the requirements of 37 CFR Part 401, "Rights to Inventions Made
by Nonprofit Organizations and Small Business Firms Under Government Grants, Contracts and Cooperative Agreements,"
and any implementing regulations issued by the awarding agency.
Vendor agrees to comply with the above requirements when applicable.
X YES, I agree.
❑ NO, I do not agree.
7. Clean Air Act and Federal Water Pollution Control Act:
Clean Air Act (42 USC 7401-7671q.) and the Federal Water Pollution Control Act (33 USC 1251-1387), as amended — Contracts
and subgrants of amounts in excess of $150,000 must contain a provision that requires the non -Federal award to agree to
comply with all applicable standards, orders, or regulations issued pursuant to the Clean Air Act (42 USC 7401-7671q.) and
the Federal Water Pollution Control Act, as amended (33 USC 1251-1387). Violations must be reported to the Federal awarding
agency and the Regional Office of the Environmental Protection Agency (EPA).
When required, Vendor agrees to comply with all applicable standards, orders, or regulations issued pursuant to the Clean
Air Act and the Federal Water Pollution Control Act.
X YES, I agree. ❑ NO, I do not agree.
8. Debarment and Suspension:
Debarment and Suspension (Executive Orders 12549 and 12689) — A contract award (see 2 CFR 180.220) must not be made
to parties listed on the government -wide exclusions in the System for Award Management (SAM), in accordance with the
OMB guidelines at 2 CFR 180 that implement Executive Orders 12549 (3 CFR Part 1966 Comp. p. 189) and 12689 (3 CFR
Part 1989 Comp. p. 235), "Debarment and Suspension." SAM Exclusions contains the names of parties debarred, suspended,
or otherwise excluded by agencies, as well as parties declared ineligible under statutory or regulatory authority other than
Executive Order 12549.
Vendor certifies that Vendor is not currently listed on the government -wide exclusions in SAM, is not debarred, suspended, or
otherwise excluded by agencies or declared ineligible under statutory or regulatory authority other than Executive Order 12549.
Vendor further agrees to immediately notify the Cooperative and all Cooperative members with pending purchases or seeking
to purchase from Vendor if Vendor is later listed on the government -wide exclusions in SAM, or is debarred, suspended, or
otherwise excluded by agencies or declared ineligible under statutory or regulatory authority other than Executive Order 12549.
X YES, I agree. ❑ NO, I do not agree.
9. Byrd Anti -Lobbying Amendment:
Byrd Anti -Lobbying Amendment (31 USC 1352) - Vendors that apply or bid for an award exceeding $100,000 must file the
required certification. Each tier certifies to the tier above that it will not and has not used Federal appropriated funds to pay
any person or organization for influencing or attempting to influence an officer or employee of any agency, a member of
Congress, officer or employee of Congress, or an employee of a member of Congress in connection with obtaining any Federal
contract, grant or any other award covered by 31 USC 1352. Each tier must also disclose any lobbying with non -Federal funds
that takes place in connection with obtaining any Federal award. Such disclosures are forwarded from tier to tier up to the
non -Federal award. As applicable, Vendor agrees to file all certifications and disclosures required by, and otherwise comply
with, the Byrd Anti -Lobbying Amendment (31 USC 1352).
X YES, I agree. ❑ NO, I do not agree.
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PROPOSAL FORMS CONST. v.05.04.2023
P.O. Box 400, Austin, Texas 78767
800.695.2919 - bidsC&buyboard.com - buyboard.com
10. Procurement of Recovered Materials:
For Cooperative member purchases utilizing Federal funds, Vendor agrees to comply with Section 6002 of the Solid Waste Disposal
Act, as amended by the Resource Conservation and Recovery Act where applicable and provide such information and certifications
as a Cooperative member may require to confirm estimates and otherwise comply. The requirements of Section 6002 include
procuring only items designated in guidelines of the Environmental Protection Agency (EPA) at 40 CFR Part 247 that contain the
highest percentage of recovered materials practicable, consistent with maintaining a satisfactory level of competition, where the
purchase price of the item exceeds $10,000 or the value of the quantity acquired during the preceding fiscal year exceeded $10,000;
procuring solid waste management services in a manner that maximizes energy and resource recovery, and establishing an
affirmative procurement program for procurement of recovered materials identified in the EPA guidelines.
x YES, I agree.
❑ NO, I do not agree.
11. Domestic Preferences for Procurements:
Where appropriate and consistent with law, 2 CFR §200.322 contains certain considerations for domestic preferences for
procurements which may be applicable to Cooperative members using federal funds. When required by a Cooperative
member, Vendor agrees to provide such information or certification as may reasonably be requested by the Cooperative
member regarding Vendor's products, including whether goods, products, or materials are produced in the United States.
X YES, I agree.
❑ NO, I do not agree.
12. Prohibition on Certain Telecommunications and Video Surveillance Services or Equipment
2 CFR §200.216 prohibits expending federal loan or grant funds to procure or obtain certain telecommunications and video
surveillance services or equipment. To the extent applicable and when required by a Cooperative member, Vendor agrees to
provide such information or certification as may reasonably be requested by the Cooperative member to confirm whether
any telecommunications or video surveillance services or equipment provided by Vendor is covered equipment or covered
services under 2 CFR §200.216.
X YES, I agree. as applicable ❑ NO, I do not agree.
13. Profit as a Separate Element of Price:
For purchases using federal funds in excess of the Simplified Acquisition Threshold, a Cooperative member may be required
to negotiate profit as a separate element of the price. See, 2 CFR 200.324(b). When required by a Cooperative member,
Vendor agrees to provide information and negotiate with the Cooperative member regarding profit as a separate element of
the price for a particular purchase. However, Vendor agrees that the total price, including profit, charged by Vendor to the
Cooperative member shall not exceed the awarded pricing, including any applicable discount, under Vendor's Cooperative
Contract.
X YES, I agree.
❑ NO, I do not agree.
14. General Compliance and Cooperation with Cooperative Members:
In addition to the foregoing specific requirements, Vendor agrees, in accepting any Purchase Order from a Cooperative
member, it shall make a good faith effort to work with Cooperative members to provide such information and to satisfy such
requirements as may apply to a particular Cooperative member purchase or purchases including, but not limited to, applicable
recordkeeping and record retention requirements.
X YES, I agree.
❑ NO, I do not agree.
Initial:
Page 27 of 76
PROPOSAL FORMS CONST. v.05.04.2023
P.O. Box 400, Austin, Texas 78767
800.695.2919 - bidsC&buyboard.com - buyboard.com
COMPLIANCE FORMS SIGNATURE PAGE
By initialing pages and by signature below, I certify that I have reviewed the following forms; that the information provided
therein is true, complete, and accurate; and that I am authorized by my company to make all certifications, consents,
acknowledgements, and agreements contained herein:
■ Proposal Acknowledgements
■ Felony Conviction Disclosure
■ Debarment Certification
• Resident/Nonresident Certification
■ Vendor Employment Certification
■ No Boycott Verification
■ No Excluded Nation or Foreign Terrorist Organization Certification
■ Historically Underutilized Business Certification
■ Construction -Related Goods and Services Affirmation
• Acknowledgement of BuyBoard Technical Requirements
■ Deviation and Compliance
■ Vendor Consent for Name Brand Use
• Confidential/Proprietary Information
• EDGAR Vendor Certification
Lennox Industries Inc.
Company Name C ,�
Signature of Authorized Company Official
Chris Drury _ VP Sales - NA Commercial
Printed Name and Title
June 30, 2023 15:23 UTC
Date
Page 28 of 76
PROPOSAL FORMS CONST. v.05.04.2023
DwBoard
P.O. Box aOO, Austln, Texas 7$767
800.695.2919 - bldsC&buyboard.com - buyboard.com
PROPOSAL FORMS PART 2: VENDOR INFORMATION FORMS
INSTRUCTIONS:
Proposer must completely and accurately provide all information requested in the following Vendor Information Forms or
your Proposal may be rejected as non -responsive:
■ Vendor Business Name
■ Vendor Contact Information
■ Federal and State/Purchasing Cooperative
Experience
■ Governmental References
■ Company Profile
■ Texas Regional Service Designation
■ State Service Designation
■ National Purchasing Cooperative Vendor Award
Agreement (Vendors serving outside Texas only)
■ Local/Authorized Seller Listings
■ Manufacturer Dealer Designation
■ Proposal Invitation Questionnaire
■ Vendor Request to Self -Report BuyBoard
Purchases (optional)
To the extent any information requested is not applicable to your company, you must so indicate on the form.
VENDOR BUSINESS NAME
By submitting a Proposal, Vendor is seeking to enter into a legal contract with the Cooperative. As such, Vendor must be
an individual or legal business entity capable of entering into a binding contract.
Name of Proposing Company:
Lennox Industries Inc.
(List the legal name of the company seeking to contract with the Cooperative. Do NOTlist an assumed name, dba, aka, etc. here. Such information
maybe provided below. If you are submitting a joint proposal with another entity to provide the same proposed goods or services, each submitting entity
should complete a separate vendor information form. Separately operating legal business entities, even ifaffliated entities, which propose to provide
goods or services separately must submit their own Proposals.)
Please check (V) one of the following:
Type of Business: ❑ Individual/Sole Proprietor x Corporation
❑ Other (Specify:
State of Incorporation (if applicable): Delaware
Federal Employer Identification Number: 42-0377110
(Vendor must include a completed IRS W-9 form with their Proposal)
❑ Limited Liability Company ❑ Partnership
Name by which Vendor, if awarded, wishes to be identified on the BuyBoard: (Note: If different than the Name of
Proposing Company listed above, only valid trade names (dba, aka, etc.) of the Proposing Company may be used and a copy of yourAssumed Name
Certificate(s), If applicable, must be attached.)
Lennox Industries Inc.
Page 29 of 76
PROPOSAL FORMS CONST. v.05.04.2023
Form Request for Taxpayer Give Form to the
(Rev. October2018) Identification Number and Certification requester. Do not
Department of the Treasury send to the IRS.
Internal Revenue Service I► Go to www.irs.gov/For7nW9 for instructions and the latest information.
1 Name (as shown on your income tax return). Name is required on this line; do not leave this line blank.
Lennox Industries Inc
2 Business name/disregarded entity name, if different from above
M
0)3
Check appropriate box for federal tax classification of the person whose name is entered on line 1. Check only one of the
4 Exemptions (codes apply only to
0)
following seven boxes.
certain entities, not individuals; see
a
instructions on page 3):
o
❑ Individual/sole proprietor or 21 C Corporation ❑ S Corporation ❑ Partnership ❑ Trust/estate
ai C
single -member LLC
5
Exempt payee code (if any)0.0
❑ Limited liability company. Enter the tax classification (C=C corporation, S=S corporation, P=Partnership) ►
o` ;?
Note: Check the appropriate box in the line above for the tax classification of the single -member owner. Do not check
Exemption from FATCA reporting
LLC if the LLC is classified as a single -member LLC that is disregarded from the owner unless the owner of the LLC is
code (if any) E
another LLC that is not disregarded from the owner for U.S. federal tax purposes. Otherwise, a single -member LLC that
a
w
is disregarded from the owner should check the appropriate box for the tax classification of its owner.
❑ Other (see instructions) ►
(Applies to accounts maintained outside the U.S)
6 Address (number, street, and apt. or suite no.) See instructions. Requester's name and address (optionaD
2140 Lake Park Blvd
6 City, state, and ZIP code
Richardson, TX 75080
7 List account number(s) here (optional)
JIM Taxpayer identification Number (TIN)
Enter your TIN in the appropriate box. The TIN provided must match the name given on line 1 to avoid I Social security number
backup withholding. For individuals, this is generally your social security number (SSN). However, for a
resident alien, sole proprietor, or disregarded entity, see the instructions for Part I, later. For other
entities, it is your employer identification number (EIN). If you do not have a number, see Now to get a
TIN, later. or
Note: If the account is in more than one name, see the instructions for line 1. Also see What Name and I Employer identification number
Number To Give the Requester for guidelines on whose number to enter. I
M42 -I 0 3 17 7 I 1 1 j 0
JjM Certification
Under penalties of perjury, I certify that:
1. The number shown on this form is my correct taxpayer identification number (or I am waiting for a number to be issued to me); and
2. 1 am not subject to backup withholding because: (a) I am exempt from backup withholding, or (b) I have not been notified by the Internal Revenue
Service (IRS) that I am subject to backup withholding as a result of a failure to report all interest or dividends, or (c) the IRS has notified me that I am
no longer subject to backup withholding; and
3. 1 am a U.S, citizen or other U.S. person (defined below); and
4. The FATCA code($) entered on this form (if any) indicating that I am exempt from FATCA reporting is correct.
Certification instructions. You must cross out item 2 above if you have been notified by the IRS that you are currently subject to backup withholding because
you have failed to report all interest and dividends on your tax return. For real estate transactions, item 2 does not apply. For mortgage interest paid,
acquisition or abandonment of secured property, cancellation of debt, contributions to an individual retirement arrangement (IRA), and generally, payments
other than interest and dividends, you are not required to sign the certification, but you must provide your correct TIN. See the instructions for Part 11, later.
Sign Signature of
Here U.S. person ►
General Instructions
Section references are to the Internal Revenue Code unless otherwise
noted.
Future developments. For the latest information about developments
related to Form W-9 and its instructions, such as legislation enacted
after they were published, go to www.irs.gov/FormW9.
Purpose of Form
An individual or entity (Form W-9 requester) who is required to file an
information return with the IRS must obtain your correct taxpayer
identification number (TIN) which may be your social security number
(SSN), individual taxpayer identification number (ITIN), adoption
taxpayer identification number (ATIN), or employer identification number
(EIN), to report on an information return the amount paid to you, or other
amount reportable on an information return. Examples of information
returns include, but are not limited to, the following.
• Form 1099-INT (interest earned or paid)
Date► 1142 6 /oZOa2.3
• Form 1099-DIV (dividends, including those from stocks or mutual
funds)
• Form 1099-MISC (various types of income, prizes, awards, or gross
proceeds)
• Form 1099-B (stock or mutual fund sales and certain other
transactions by brokers)
• Form 1099-S (proceeds from real estate transactions)
• Form 1099-K (merchant card and third party network transactions)
• Form 1098 (home mortgage interest), 1098-E (student loan interest),
1098-T (tuition)
• Form 1099-C (canceled debt)
• Form 1099-A (acquisition or abandonment of secured property)
Use Form W-9 only if you are a U.S. person (including a resident
alien), to provide your correct TIN.
If you do not retum Form W-9 to the requester with a TIN, you might
be subject to backup withholding. See What is backup withholding,
later.
Cat. No. 10231 X Form w-9 (Rev. 10-2018)
DwBoard
P.O. Box aOO, Austln, Texas 7$767
800.695.2919 - bldsC&buyboard.com - buyboard.com
VENDOR CONTACT INFORMATION
Vendor shall provide the requested Vendor Contact Information in the electronic proposal submission system
including contract, purchase order, RFQ, and invoice contacts (or, if submitting a hard copy Proposal, timely
request and complete the Vendor Contact Information form in accordance with the Instructions to
Proposers).
FEDERAL AND STATE/PURCHASING COOPERATIVE EXPERIENCE
The Cooperative strives to provide Cooperative members with the best services and products at the best prices available from
Vendors with the technical resources and ability to serve Cooperative members. Please respond to the following questions.
1. Provide the dollar value of sales to or through purchasing cooperatives at or based on an established catalog or market
price durina the previous 12-month period or the last fiscal year: $_ not public info . (The period of the 12-month
period is _ not public J. In the event that a dollar value is not an appropriate measure of the sales, provide
and describe your own measure of the sales of the item(s).
2. By submitting a proposal, you agree that, based on your written discounting policies, the discounts you offer the
Cooperative are equal to or better than the best price you offer other purchasing cooperatives for the same items
under equivalent circumstances.
3. Provide the information requested below for other purchasing cooperatives for which Proposer currently serves, or in the past
has served, as an awarded vendor. Rows should be added to accommodate as many purchasing cooperatives as required.
1. Federal General Services Administration not public information not pumic
2. T-PASS (State of Texas)
3. OMNIA Partners
4. Sourcewell (NJPA)
5. E&I Cooperative
6. Houston -Galveston Area Council (HGAC)
7. Choice Partners
8. The Interlocal Purchasing System (TIPS)
9. Other
not public information
not public information
not public information
not public information
not public information
not public information
not public information
not public information
not public information
not public information
not public information
not public information
not public information
not public information
not public information
not public information
❑ MY COMPANY DOES NOT CURRENTLY HAVE ANY OF THE ABOVE OR SIMILAR TYPE CONTRACTS.
CURRENT BUYBOARD VENDORS
If you are a current BuyBoard vendor in the same contract category as proposed in this Proposal Invitation, indicate the
discount for your current BuyBoard contract and the proposed discount in this Proposal. Explain any difference between
your current and proposed discounts.
Current Discount (%): 0 Proposed Discount (%): _ 0
Explanation: Discount Terms will be the same as previous terms
Page 30 of 76
PROPOSAL FORMS CONST. v.05.04.2023
DwBoard
P.O. Box aOO, Austln, Texas 7$767
800.695.2919 - bldsC&buyboard.com - buyboard.com
GOVERNMENTAL REFERENCES
For your Proposal to be considered, you must supply a minimum of five (5) individual governmental entity references. The
Cooperative may contact any and all references provided as part of the Proposal evaluation. Provide the information
requested below, including the existing pricing/discounts you offer each customer. The Cooperative may determine whether
pricing/discounts are fair and reasonable by comparing pricing/discounts stated in your Proposal with the pricing/discounts
you offer other governmental customers. Attach additional pages if necessary.
Quantity/
Entity Name Contact Phone# Email Address Discount Volume
McKinney ISD Floyd Kincaid 214-930-3275 fkinkaid@mckinneyisd.net not public
1.
2. Arlington ISD David Jackson 214-952-8110 djackso7@aisd.net not public info
Irving ISD Curt Grady 817-233-7056 cgrady@irvingisd.net not public info
4. Mesquite ISD Shawn Hogue 972-977-6993 Mhogue@mesquiteisd.org not public info
5. Sherman ISD Steve Allson 903-891-6428 sallison@shermanisd.net not public info
Do you ever modify your written policies or standard governmental sales practices as identified in the above chart to give
better discounts (lower pricing) than indicated? YES ❑ NO x If YES, please explain:
COMPANY PROFILE
Information on awarded Cooperative Contracts is available to Cooperative Members on the BuyBoard website. If your
company is awarded a Contract under this Proposal Invitation, please provide a brief company description that you would
like to have included with your company profile on the BuyBoard website. Submit your company profile in a separate
file, in Word format, with your Proposal. (Note: Vendor is solely responsible for any content provided for inclusion on
the BuyBoard website. The Cooperative reserves the right to exclude or remove any content in its sole discretion, with or
without prior notice, including but not limited to any content deemed by the Cooperative to be inappropriate, irrelevant to
the Contract, inaccurate, or misleading.)
Page 31 of 76
PROPOSAL FORMS CONST. v.05.04.2023
P.O. Sox 400, Austin, Texas 78767
800.695.2919 - bids(cibuyboard.com - buyboard.com
TEXAS REGIONAL SERVICE DESIGNATION
This form must be completed in the electronic proposal submission system (or, if submitting a hard copy
Proposal, timely request and complete the form in accordance with the Instructions to Proposers),
The Cooperative (referred to as "Texas Cooperative" in this form and in the State Service Designation form) offers vendors
the opportunity to service its members throughout the entire State of Texas. In the electronic proposal submission system,
you must indicate if you will service Texas Cooperative members statewide or, if you do not plan to service all Texas
Cooperative members statewide, you must indicate the specific regions you will service. If you propose to serve different
regions for different products or services included in your Proposal, you must complete and submit a separate Texas
Regional Service Designation form for each group of products and clearly indicate the products or services to which the
designation applies. (Additional forms can be obtained by contacting bids()buvboard.com at least five (5) business
days prior to the Proposal Due Date.) By designating a region or regions, you are certifying that you are
authorized and willing to provide the proposed products and services in those regions. Designating regions
in which you are either unable or unwilling to provide the specified products and services shall be grounds
for either rejection of your Proposal or, if awarded, termination of your Contract. Additionally, if you do not plan to
service Texas Cooperative members (i.e., if you will service only states other than Texas), you must so indicate on the
form in the electronic proposal submission system.
Regional Education Service Centers Region and Headquarters
1
Edinburg
2
Corpus Christi
3
Victoria
4
Houston
5
Beaumont
6
Huntsville
7
Kilgore
8
Mount Pleasant
9
Wichita Falls
10
Richardson
11
Fort Worth
12
Waco
13
Austin
14
Abilene
15
San Angelo
16
Amarillo
17
Lubbock
18
Midland
19
ElPaso
20
San Antonio
Page 32 of 76
PROPOSAL FORMS CONST. v.05.04.2023
Ll LENNOX Lennox International Inc. Mailing Address: Telephone: 972.497.5000
2140 Lake Park Boulevard P.O. Box 799900 Facsimile: 972.497.5349
I N T E R N A T I O N A L
Richardson, Texas 75080-2254 Dallas, Texas 75379-9900 Lennox International. com
Lennox Company Profile
We have built our business on a heritage of integrity and innovation dating back to
1895. Our employees are dedicated to providing trusted brands, innovative products,
unsurpassed quality and responsive service. We provide indoor comfort solutions for
office buildings, schools, restaurants, retail establishments, and other light commercial
applications in North America. Products include packaged rooftop units, split systems,
chillers, commercial controls, indoor air quality systems, and related equipment.
� �VBoard-
P.O. Box 400, Austin. Texas 78787
800.695.2919 • hldsg6uyboard.com - 6uyboard.com
STATE SERVICE DESIGNATION
This form must be completed in the electronic proposal submission system (or, if submitting a hard copy
Proposal, timely request and complete the in accordance with the Instructions to Proposers).
As set forth in the Proposal Invitation, it is the Cooperative's intent that other governmental entities in the United States
have the opportunity to purchase goods or services awarded under the Contract, subject to applicable state law, through a
piggy -back award or similar agreement through the National Purchasing Cooperative BuyBoard. If you plan to service the
entire United States or only specific states, you must complete the State Service Designation information in the electronic
proposal submission system. (Note: If you plan to service Texas Cooperative members, be sure that you complete the
Texas Regional Service Designation form.) In addition to this form, to be considered for a piggy -back award by
the National Purchasing Cooperative, you must have an authorized representative sign the National
Purchasing Cooperative Vendor Award Agreement that follows this page.
If you serve different states for different products or services included in your Proposal, you must complete and submit a
separate State Service Designation form for each group of products and clearly indicate the products or services to which
the designation applies. (Additional forms can be obtained by contacting bids(@buvboard.com at least five (5)
business days prior to the Proposal Due Date.) By designating a state or states, you are certifying that you are
authorized and willing to provide the proposed products and services in those states, Designating states in
which you are either unable or unwilling to provide the specified products and services shall be grounds for
either rejection of your Proposal or, if awarded, termination of your Contract.
• I will service all states in the United States.
■ I will not service all states in the United States.
Alabama
Montana
Alaska
Nebraska
Arizona
Nevada
Arkansas
New Hampshire
California (Public Contract Code 20118 & 20652)
New Jersey
Colorado
New Mexico
Connecticut
New York
Delaware
North Carolina
District of Columbia
North Dakota
Florida
Ohio
Georgia
Oklahoma
Hawaii
Oregon
Idaho
Pennsylvania
Illinois
Rhode Island
Indiana
South Carolina
Iowa
South Dakota
Kansas
Tennessee
Kentucky
Texas
Louisiana
Utah
Maine
Vermont
Maryland
Virginia
Massachusetts
Washington
Michigan
West Virginia
Minnesota
Wisconsin
Mississippi
Wyoming
Missouri
Page 33 of 76
PROPOSAL FORMS CONST. v.05.04.2023
� �VBoard-
P.O. Box 400, Austin, Texas 7$767
500.695.2919 • bldsgbuyboard.com • buyboard.com
NATIONAL PURCHASING COOPERATIVE VENDOR AWARD AGREEMENT
In accordance with the Terms and Conditions associated with this Proposal Invitation, a contract awarded under this
Proposal Invitation may be "piggy -backed" by another governmental entity. The National Purchasing Cooperative is an
intergovernmental purchasing cooperative formed by certain school districts outside of Texas to serve its members
throughout the United States. If you agree to be considered for a piggy -back award by the National Purchasing Cooperative,
you agree to the following terms and agree to serve National Purchasing Cooperative members in the states you have
indicated on the State Service Designation form, in your Proposal.
By signing this form, Proposer (referred to in this Agreement as "Vendor") agrees as follows:
1. Vendor acknowledges that if The Local Government Purchasing Cooperative ("Texas Cooperative") awards Vendor a
contract under this Proposal Invitation ("Underlying Award"), the National Purchasing Cooperative ("National Cooperative's
may - but is not required to - "piggy -back" on or re -award all or a portion of that Underlying Award ("Piggy -Back Award").
By signing this National Cooperative Vendor Award Agreement ("Agreement"), Vendor accepts and agrees to be bound by
any such Piggy -Back Award as provided for herein.
2. In the event National Cooperative awards Vendor a Piggy -Back Award, the National Cooperative Administrator ("BuyBoard
Administrator's will notify Vendor in writing of such Piggy -Back Award, which award shall commence on the effective date
stated in the Notice and end on the expiration date of the Underlying Award, subject to annual renewals as authorized in
writing by the BuyBoard Administrator. Vendor agrees that no further signature or other action is required of Vendor in
order for the Piggy -Back Award and this Agreement to be binding upon Vendor. Vendor further agrees that no interlineations
or changes to this Agreement by Vendor will be binding on National Cooperative, unless such changes are agreed to by its
BuyBoard Administrator in writing.
3. Vendor agrees that it shall offer its goods and services to National Cooperative members at the same pricing and same
general terms and conditions, subject to applicable state laws in the state of purchase, as required by the Underlying Award.
However, nothing in this Agreement prevents Vendor from offering National Cooperative members better (i.e., lower)
competitive pricing and more favorable terms and conditions than those in the Underlying Award.
4. Vendor hereby agrees and confirms that it will serve those states it has designated on the State Service Designation
Form of this Proposal Invitation. Any changes to the states designated on the State Service Designation Form must be
approved in writing by the BuyBoard Administrator.
5. Vendor agrees to pay National Cooperative the service fee provided for in the Underlying Award based on the amount
of purchases generated from National Cooperative members through the Piggy -Back Award. Vendor shall remit payment to
National Cooperative on such schedule as it specifies (which shall not be more often than monthly). Further, upon request,
Vendor shall provide National Cooperative with copies of all purchase orders generated from National Cooperative members,
vendor invoices, and/or such other documentation regarding those purchase orders as the Cooperative's administrators
may require in their reasonable discretion for purposes of reviewing and verifying purchase activity. Vendor further agrees
that National Cooperative shall have the right, upon reasonable written notice, to review Vendor's records pertaining to
purchases made by National Cooperative members in order to verify the accuracy of service fees.
6. Vendor agrees that the Underlying Award, including its General Terms and Conditions, are adopted by reference to the
fullest extent such provisions can reasonably apply to the post-proposal/contract award phase. The rights and
responsibilities that would ordinarily inure to the Texas Cooperative pursuant to the Underlying Award shall inure to National
Cooperative; and, conversely, the rights and responsibilities that would ordinarily inure to Vendor in the Underlying Award
shall inure to Vendor in this Agreement. Vendor recognizes and agrees that Vendor and National Cooperative are the only
parties to this Agreement, and that nothing in this Agreement has application to other third parties, including the Texas
Cooperative. In the event of conflict between this Agreement and the terms of the Underlying Award, the terms of this
Agreement shall control, and then only to the extent necessary to reconcile the conflict.
Page 34 of 76
PROPOSAL FORMS CONST. v.05.04.2023
PFBoard-
P.O. Box 400, Austin, Texas 78767
800.695.2919 • bids(mbuyboard.com • buyboard.corn
7. This Agreement shall be governed and construed in accordance with the laws of the State of Texas and venue for any
dispute shall lie in the federal district court of Travis County, Texas.
8. Vendor acknowledges and agrees that the award of a Piggy -Back Award is within the sole discretion of National
Cooperative, and that this Agreement does not take effect unless and until National Cooperative awards Vendor a Piggy -
Back Award and the BuyBoard Administrator notifies Vendor in writing of such Piggy -Back Award as provided for herein.
WHEREFORE, by signing below Vendor agrees to the foregoing and warrants that it has the authority to enter into this
Agreement.
720-23
Lennox Industries Inc.
Name of Vendo Proposal Invitation Number
a
Chris Drury
Signature of Authorized Company Official Printed Name of Authorized Company Official
June 30, 2023 15:23 UTC
Date
Page 35 of 76
PROPOSAL FORMS CONST. v.05.04.2023
Baard® F!o. BOX 400, Aust]1l, Texas 78767
AV800.695.2919 - bids(u:buybuard.com - buyboard.com
LOCATION/AUTHORIZED SELLER LISTINGS
If you have more than one location/authorized seller that will service a Contract awarded under this Proposal Invitation,
please list each location/authorized seller below. If additional sheets are required, please duplicate this form as necessary.
NOTE: Awarded Vendors shall remain responsible for all aspects of the Contract, including processing of Purchase Orders,
and shall be responsible for the performance of all locations and authorized sellers under and in accordance with the
Contract. If you are a product manufacturer and wish to designate Designated Dealers as defined in the
General Terms and Conditions to receive Cooperative member Purchase Orders on your behalf, you must
complete the Manufacturer Designated Dealer form,
Page 36 of 76
PROPOSAL FORMS CONST. v.05.04.2023
� �WBoard-
P.U. Box 400, Austin, Texas 7$767
800.695.2919 • hids(m6uyboard.com • 6uyboard.com
MANUFACTURER DEALER DESIGNATION
If Vendor is a manufacturer that sells products through a dealer network and wishes to designate a dealer or multiple
dealers ("Designated Dealers' to receive Cooperative member Purchase Orders on Vendor's behalf, you must complete
this form for each dealer you wish to designate.
Regardless of any Designated Dealers submitted by Vendor, Vendor specifically agrees and acknowledges that any such
designations are for Vendor's convenience only and shall not, if Vendor is awarded a Contract, relieve Vendor of any
obligations under the Contract, including payment of Cooperative service fees on all Purchase Orders submitted to Vendor
or any Designated Dealer. In accordance with the General Terms and Conditions, an awarded Vendor shall remain
responsible and liable for all of its obligations under the Contract and the performance of both Vendor and any of Vendor's
Designated Dealers under and in accordance with the Contract and remain subject to all remedies for default thereunder,
including, but not limited to suspension and termination of Vendor's Contract for nonpayment of service fees.
If awarded, Vendor authorizes the Cooperative, in its sole discretion, to list any Vendor Designated Dealers in the BuyBoard
system and to receive Purchase Orders directly from Cooperative members on behalf of Vendor. To the extent a Vendor
with Designated Dealers receives a Purchase Order directly, it shall be the responsibility of Vendor to appropriately process
such Purchase Order in accordance with the Contract, including but not limited to timely forwarding such Purchase Order
to a Designated Dealer for processing.
The Cooperative reserves the right, in its sole discretion, to refuse addition of, or request removal of, any Designated Dealer,
and Vendor agrees to immediately require such Designated Dealer to cease accepting Purchase Orders or otherwise acting
on Vendor's behalf under the Contract. Further, the Cooperative administrator shall be authorized to remove or suspend
any or all Designated Dealers from the BuyBoard at any time in its sole discretion.
If you wish to designate a dealer to service a contract awarded under this Proposal Invitation, please list the Designated
Dealer below. If you wish to designate multiple dealers, please duplicate this form as necessary.
Designated Dealer Name
Designated Dealer Address
City
Phone Number
Designated Dealer Contact Person
State
Fax Number
Zip Code
Email address Designated Dealer Tax ID Number* (*attach W-9)
Page 37 of 76
PROPOSAL FORMS CONST. v.05.04.2023
Board® Pa. Box 400, Austin, Texas 7$767
PF
800.695.2919 • bids(mbuyboard.com • buyboard.corn
PROPOSAL INVITATION QUESTIONNAIRE
The Cooperative will use your responses to the questions below in evaluating your Proposal and technical and financial
resources to provide the goods and perform the services ("Work' under the BuyBoard contract contemplated by this
Proposal Invitation ("Contract"). Proposers must fully answer each question, numbering your responses to correspond to
the questions/numbers below. Proposers must complete below or attach your responses to this questionnaire and submit
in one document with your Proposal. You must submit the questionnaire and responses with your Proposal or
the Proposal will not be considered.
1. List the number of years Proposer has been in business and former business names (if applicable). Note whether your
company is currently for sale or involved in any transaction that would significantly alter its business or result in
acquisition by another entity.
128 Years. Lennox is a publicly held company. Please refer to our 2022 1 OK
2. Describe Vendor's direct experience (not as a subcontractor) performing the Work proposed under this Contract. Include
a brief description of the projects you have completed for Texas governmental entities in the last 5 years, and include
for each the project name, scope, value, and date, and the name of the procuring government entity and entity contact
person. Identify the contracts that best represent Vendor's capabilities relative to this Contract.
Lennox currently provides the work proposed for Buy Board. We are not able to provide specifics for others due to non -disclosure agreements.
3. Describe the resources Proposer has to manage staff and successfully perform the Work contemplated under this
Contract. State the number and summarize the experience of company personnel who may be utilized for the Work,
including those who will be available to Cooperative members for assistance with project development, technical issues,
and product selection for Work associated with this Contract.
Please refer to the attached Customer Service document
Page 38 of 76
PROPOSAL FORMS CONST. v.05.04.2023
Ll LENNOX Lennox International Inc. Mailing Address: Telephone: 972.497.5000
2140 Lake Park Boulevard P.O. Box 799900 Facsimile: 972.497.5349
I N T E R N A T I O N A L
Richardson, Texas 75080-2254 Dallas, Texas 75379-9900 Lennox International. com
CUSTOMER SERVICE
At Lennox we have strategically designed and implemented a Customer Service solution
center that provides Lennox customer (internal/external) with expedient, accurate, and
reliable support and services. The Customer Service department can be reached by phone
at 1-800-453-6669 or lennoxcustomerservice(a�lennoxind.com. The customer service
phone number can connect customers with multiple departments included sales, technical
support and warranty support. In addition to the Customer Service department, Lennox
has dedicated sales teams to support pricing, availability and application support.
Customers can also utilize any of the many retail locations throughout North America.
PFBoard-
P.O. Box 400, Austin. Texas 78767
800.695.2919 • hids(L6uyboard.com • buyboard.com
4. The Contract does not include architectural or engineering services, which must be procured separately, outside of the
Cooperative, in accordance with Chapter 2254 of the Texas Government Code (Professional Services Procurement Act)
or other applicable law (for entities outside of Texas). If you are performing Work under the Contract on a project that
requires the services of an architect or professional engineer, how will you work with a Cooperative member and its
designated architect or engineer with respect to services that must be procured outside the Contract?
We do not provide engineering services for BuyBoard. We partner directly with engineers and contractors to deliver the required services.
5. Describe the tasks and functions that can be completed by Vendor in-house without the use of a subcontractor or other
third party.
Lennox handles all tasks and functions internally with the exception of shipping. Lennox will work directly with the carriers to insure that
deliveries are made in a timely manner.
6. Marketina Strateav: For your Proposal to be considered, you must submit the Marketing Strategy you will use if the
Cooperative accepts all or part of your Proposal. (Example: Explain how your company will initiallyinform Cooperative
members of your BuyBoard Contract, and how you will continue to support the BuyBoard for the duration of the Contract
term.) Attach additional pages if necessary.
Please see the attached Marketing Strategy document
7. Describe Proposer's financial capability to perform the Contract. State or describe the firm's financial strength and
rating, bonding capacity, and insurance coverage limits. State whether the firm, or any of the firm's past or present
owners, principal shareholders or stockholders, or officers, have been a debtor party to a bankruptcy, receivership, or
insolvency proceeding in the last 7 years, and identify any such debtor party by name and relationship to or position
with your firm.
Please refer to the attached 2022 1 OK and Certificate of Insurance
Page 39 of 76
PROPOSAL FORMS CONST. v.05.04.2023
ILI LENNOX Lennox International Inc. Mailing Address: Telephone: 972.497.5000
2140 Lake Park Boulevard P.O. Box 799900 Facsimile: 972.497.5349
I N T E R N A T I O N A L
Richardson, Texas 75080-2254 Dallas, Texas 75379-9900 Lennoxlnternational.com
Lennox Commercial Go -To -Market Strategv
As a leading differentiator, Lennox owns and operates its distribution channel. By directly
managing the distribution of our products and services, Lennox is able to provide consistent
delivery, timely updates, and world -class support ensuring a seamless process for our customers.
Moreover, our single point of contact throughout the sales, installation, and product support
lifecycle ensures a personalized and hassle -free experience. This factory -to -customer model
enables easier access to products and services, reduces complexities, and ensures swift
responses to customer requirements to increase satisfaction.
Lennox believes in building strong, long-term customer relationships through our value -add
consultative approach. Our team's comprehensive understanding of the industry and product
offerings enables them to provide tailored solutions, address specific pain points, and guide your
administrators toward making well-informed decisions that positively impact your institution.
At our annual in -person Lennox Sales and Store Manager Meeting, the entire Lennox salesforce,
technical trainers, and distribution leaders are brought together to collaborate, share market
insights, and be equipped with the most up-to-date product knowledge, resources, and tools
available. This translates into a higher level of expertise and personalized support when
engaging with your decision -makers.
Lennox leverages a robust suite of platforms including marketing automation software, content
management systems, relationship management software, support ticketing systems, and
learning management systems to strengthen our ability to serve our customers effectively. These
platforms enable targeted communication, effortless access to technical documents, personalized
support, efficient issue resolution, and comprehensive training resources. Through these
technologies, Lennox empowers your team to make informed decisions, streamline their
workflows, and maximize the value derived from our HVAC solutions.
Lennox is committed to being your trusted partner in the HVAC industry.
UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington. D.C. 20549
Form 10-K
0 ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 2022
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 0 No ❑
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).Yes ❑ No ❑O
As of June 30, 2022, the aggregate market value of the common stock held by non -affiliates of the registrant was approximately $7 billion
based on the closing price of the registrant's common stock on the New York Stock Exchange. As of February 3, 2023, there were 35,474,054 shares of the registrant's
common stock outstanding.
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the registrant's 2022 Definitive Proxy Statement to be filed with the Securities and Exchange Commission in connection with the registrant's 2022 Annual
Meeting of Stockholders to be held on May 18, 2023 are incorporated by reference into Part III of this report.
Auditor Name: KPMG LLP Auditor Location: Dallas, Texas Auditor Firm ID: 185
LENNOX INTERNATIONAL INC.
FORM 10-K
For the Fiscal Year Ended December 31, 2022
Page
PART I
ITEM 1.
Business
1
ITEM IA.
Risk Factors
8
ITEM 113.
Unresolved Staff Comments
14
ITEM 2.
Properties
15
ITEM 3.
Legal Proceedinag
16
ITEM 4.
Mine Safetv Disclosures
16
PART II
ITEM 5.
Market for Reeistrant'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 Analvsis of Financial Condition and Results of Operations
17
ITEM 7A.
Ouantitative and Oualitative Disclosures about Market Risk
30
ITEM 8.
Financial Statements and Supplementary Data
31
ITEM 9.
Chances in and Disaereements With Accountants on Accounting and Financial Disclosure
73
ITEM 9A.
Controls and Procedures
73
ITEM 9B.
Other Information
73
PART III
ITEM 10.
Directors. Executive Officers and Corporate Governance
73
ITEM 11.
Executive Compensation
73
ITEM 12.
Security Ownership of Certain Beneficial Owners and Manaeement and Related Stockholder Matters
73
ITEM 13.
Certain Relationships and Related Transactions. and Director Independence
74
ITEM 14.
Principal Accountine Fees and Services
74
PART IV
ITEM 15.
Exhibits and Financial Statement Schedules
74
ITEM 16.
Form 10-K Summary
77
SIGNATURES
78
SCHEDULE II - VALUATION AND OUALIFYING ACCOUNTS AND RESERVES
79
PART I
Item 1. Business
References in this Annual Report on Form 10-K to "we," "our," "us," "LIP' or the "Company" refer to Lennox International Inc. and its subsidiaries,
unless the context requires otherwise.
The Company
We are a global leader in energy -efficient 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 2022 by segment. Segment financial data for 2022, 2021 and 2020, 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.
2022
Net Sales (in
Segment
Products & Services
Product and Brand Names millions)
Residential Heating &
Furnaces, air conditioners, heat pumps,
Lennox, Dave Lennox Signature Collection, Armstrong $ 3,198.3
Cooling
packaged heating and cooling systems, indoor
Air, Ducane, AirEase, Concord, MagicPak, ADP
air quality equipment, comfort control products,
Advanced Distributor Products, Allied, Elite Series,
replacement parts and supplies
Merit Series, Comfort Sync, Healthy Climate, Healthy
Climate Solutions, iComfort ComfortSense and Lennox
Stores
Commercial Heating &
Unitary heating and air conditioning equipment,
Lennox, Model L, CORE, Energence, Prodigy, 900.7
Cooling
applied systems, controls, installation and
Strategos, Landmark, Raider, Lennox VRF, Lennox
service of commercial heating and cooling
National Account Services, Allied Commercial,
equipment, variable refrigerant flow
MagicPak
commercial products
Refrigeration
Condensing units, unit coolers, fluid coolers, air
Heatcraft Worldwide Refrigeration, Lennox (Europe 619.4
cooled condensers, air handlers, process
HVAC), Bohn, MAGNA, Larkin, Climate Control,
chillers, controls, compressorized racks.
Chandler Refrigeration, Friga-Bohn, HK Refrigeration,
Hyfra, IntelliGen and Interlink
Total $ 4,718.4
In November 2022, we announced the decision to explore strategic alternatives for our European commercial HVAC and refrigeration businesses, which
represent approximately 5% of our annual revenues. We will continue to invest in our Heatcraft Worldwide Refrigeration business which will become part
of the Commercial Heating & Cooling segment beginning in 2023 and the European portfolio will be presented with Corporate and Other beginning in
2023 until disposition. As we will manage the businesses in this manner beginning in 2023, we will present the financial results of the revised segments
beginning in 2023.
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" business and brands ("Dave Lennox Signature Collection," "Elite Series," "Merit Series," "iComfort," "ComfortSense" and "Healthy
Climate Solutions") are sold directly to independent installing dealers, making us one of the largest wholesale distributors of residential heating, ventilation,
and air conditioning products in North America. We continue to invest in our network of 245 Lennox Stores across the United States and Canada. These
stores provide an easy access solution for contractors and independent dealers to obtain universal service and replacement parts, supplies, convenience
items, tools, Lennox equipment and OEM parts.
The Allied Air Enterprise business and brands ("Armstrong Air," "AirEase," "Concord," "Ducane," "Allied," and "MagicPak") include a full line of
heating, ventilation and air conditioning products and are sold through independent wholesale distributors in the U.S. and Canada. The Allied Air Enterprise
business also sells a full line of heating, ventilation and cooling equipment through private label brands.
The Advanced Distributor Products ("ADP") business and brand ("ADP Advanced Distributor Products") sells evaporator coils, air handlers and unit
heaters to independent HVAC wholesale distributors across the U.S. and Canada.
Commercial Heating & Cooling
North America. In North America, we manufacture and sell unitary heating and cooling equipment used in light commercial applications, such as low-
rise office buildings, restaurants, retail centers, distribution, churches and schools. Our product offerings for these applications include rooftop units ranging
from 2 to 50 tons of cooling capacity and split system/air handler combinations, which range from 1.5 to 20 tons of cooling capacity. These products are
distributed primarily through commercial contractors and directly to national account customers. In 2021, we launched the Lennox Model L rooftop unit
featuring the industry leading CORE control system and advanced variable -speed technology to maximize rebates and energy savings. In late 2022, we
introduced the Enlight rooftop unit which features a high efficiency heat pump line perfectly positioned to help our customers reach their environmental and
sustainability goals. We believe the success of our products is attributable to their efficiency, impact to the environment, design flexibility, total cost of
ownership, ease of service, and advanced control technology.
National Account Services. National Account Service ("NAS") provides installation, service and preventive maintenance for commercial HVAC
national account customers in the United States and Canada.
Refrigeration
We manufacture and market equipment for the global commercial refrigeration markets under the Heatcraft Worldwide Refrigeration name. We sell
these products to distributors, installing contractors, engineering design firms, original equipment manufacturers and end -users. Our global manufacturing,
distribution, sales and marketing footprint serves customers in approximately 100 countries worldwide.
North America. Our commercial refrigeration products for the North American market include condensing units, unit coolers, fluid coolers, air-cooled
condensers, air handlers and refrigeration rack systems. These products preserve food and other perishables in supermarkets, convenience stores,
restaurants, warehouses and distribution centers. In addition, our products are used to cool a wide variety of industrial processes, including data centers,
machine tooling, and other critical cooling applications. We routinely provide application engineering for consulting engineers, contractors, store planners,
end customers and others to support the sale of commercial refrigeration products.
International. In Europe, we manufacture and sell unitary HVAC products, which range from 2 to 70 tons of cooling capacity, and applied systems with
up to 200 tons of cooling capacity. Our European products consist of small package units, rooftop units, chillers, air handlers and fan coils that serve
medium -rise commercial buildings, shopping malls, other retail and entertainment buildings, institutional applications and other field -engineered
applications. We manufacture heating and cooling products in several locations in Europe and market these products through both direct and indirect
distribution channels in Europe, the United Kingdom, Eastern Europe, Turkey, Africa, and the Middle East.
We also manufacture and market refrigeration products including condensing units, unit coolers, air-cooled condensers, fluid coolers, compressor racks
and industrial process chillers. We have manufacturing locations in Germany, France and Spain. In addition, we own a 50% interest in a joint venture in
Mexico that produces unit coolers, air-cooled condensers, condensing units, compressors and compressorized racks of the same design and quality as those
manufactured by our U.S. business. This joint venture product line is complemented with imports from the U.S., which are sold through the joint
venture's distribution network
Business Strategy
Lennox offers a full spectrum of cooling, heating, indoor air quality and refrigeration products to meet the energy -efficient climate -control needs of
residential and commercial customers across North America. We are focused on expanding our market position primarily through organic growth while
leveraging costs to drive margin expansion and higher profit. This strategy is supported by the following four strategic priorities:
Innovative Product and System Solutions. In all of our markets, we are building on our heritage of innovation by developing residential and commercial
products that give families and business owners more precise control over more aspects of their indoor environments, while significantly lowering their
energy costs.
Manufacturing and Sourcing Excellence. We maintain our commitment to manufacturing and sourcing excellence by maximizing factory efficiencies
and leveraging our engineering capabilities, purchasing power and sourcing initiatives to expand the use of lower -cost materials and components that meet
our high -quality standards.
Distribution Excellence. By investing resources in expanding our distribution network and capabilities, we are making products available to our
customers in a timely, cost-efficient manner. Additionally, we provide enhanced dealer support through the use of technology, training, advertising and
merchandising.
Expense Reduction. Through our cost management initiatives, we are optimizing operating, manufacturing and administrative costs.
Marketing and Distribution
We utilize multiple channels of distribution and offer different brands at various price points in order to better penetrate the HVACR markets. Our
products and services are sold through a combination of direct sales, distributors and company -owned parts and supplies stores. Dedicated sales forces and
manufacturers' representatives are deployed across our business segments and brands in a manner designed to maximize our ability to service each
distribution channel. To optimize enterprise -wide effectiveness, we have active cross -functional and cross -organizational teams coordinating approaches to
pricing, product design, distribution and national account customers.
The North American residential heating and cooling market provides an example of the competitive strength of our marketing and distribution strategy.
We use three distinct distribution approaches in this market: the company -owned distribution system, the independent distribution system and direct sales to
end -users. We distribute our "Lennox" brands in a company -owned process directly to independent dealers that install these heating and cooling products.
We distribute our "Armstrong Air," "Ducane," "Air -Ease," "Concord," "MagicPak" and "ADP Advanced Distributor Products" brands through the
traditional independent distribution process pursuant to which we sell our products to distributors who, in turn, sell the products to installing contractors.
We also sell our products through our Lennox Stores.
Manufacturing
We operate manufacturing facilities worldwide and utilize the best available manufacturing techniques based on the needs of our businesses, including
the use of lean manufacturing and principles of Six Sigma, a disciplined, data -driven approach and methodology for improving quality. We use numerous
metrics to track and manage annual efficiency improvements. Some facilities are impacted by seasonal production demand, and we manufacture both
heating and cooling products in those facilities to balance production and maintain a relatively stable labor force. We may also hire temporary employees to
meet changes in demand.
Strategic Sourcing
We rely on various suppliers to furnish the raw materials and components used in the manufacturing of our products. To maximize our buying
effectiveness in the marketplace, we have a central strategic sourcing group that consolidates purchases of certain materials, components and indirect items
across business segments. The goal of the strategic sourcing group is to develop global strategies for a given component group, concentrate purchases with
three to five suppliers and develop long-term relationships with these vendors. By developing these strategies and relationships, we seek to leverage our
material needs to reduce costs and improve financial and operating performance. Our strategic sourcing group also works with selected suppliers to reduce
costs, improve quality and delivery performance by employing lean manufacturing and Six Sigma.
Compressors, motors and controls constitute our most significant component purchases, while steel, copper and aluminum account for the bulk of our
raw material purchases. We own a minority equity interest in a joint venture that manufactures compressors. This joint venture provides us with
compressors for our residential and commercial heating and cooling, and refrigeration businesses.
Research and Development and Technology
Research and development is a key pillar of our growth strategy. We operate a global engineering and technology organization that focuses on new
technology invention, product development, product quality improvements and process enhancements, including our development of next -generation
control systems as well as heating and cooling products that include some of the most efficient products in their respective categories. We leverage
intellectual property and innovative designs across our businesses. We also leverage product development cycle time improvements and product data
management systems to commercialize new products to market more rapidly. We use advanced, commercially available computer -aided design, computer -
aided manufacturing, computational fluid dynamics and other sophisticated design tools to streamline the design and manufacturing processes. We use
complex computer simulations and analyses in the conceptual design phase before functional prototypes are created. We also operate a full line of
prototype machine equipment and advanced laboratories certified by applicable industry associations.
Seasonality
Our sales and related segment profit tend to be seasonally higher in the second and third quarters of the year because summer is the peak season for sales
of air conditioning equipment and services in the U.S. and Canada. For the same reason, our working capital needs are generally greater in the first and
second quarters, and we generally have higher operating cash inflows in the third and fourth quarters.
HVAC markets are driven by seasonal weather patterns. HVAC products and services are sold year round, but the volume and mix of product sales and
service change significantly by season. The industry generally ships roughly twice as many units during June as it does in December. Overall, cooling
equipment represents a substantial portion of the annual HVAC market. Between the heating season (roughly November through February) and cooling
season (roughly May through August) are periods commonly referred to as "shoulder seasons" when the distribution channel transitions its buying patterns
from one season to the next. These seasonal fluctuations in mix and volume drive our sales and related segment profit, resulting in somewhat higher sales in
the second and third quarters due to the higher volume in the cooling season relative to the heating season.
Patents and Trademarks
We hold numerous patents that relate to the design and use of our products. We consider these patents important, but no single patent is material to the
overall conduct of our business. We proactively obtain patents to further our strategic intellectual property objectives. We own or license several trademarks
and service marks we consider important in the marketing of our products and services, and we protect our marks through national registrations and
common law rights.
Competition
Substantially all markets in which we participate are competitive. The most significant competitive factors we face are availability, reliability, energy
efficiency, product performance, service and price, with the relative importance of these factors varying among customer applications. The following are
some of the companies we view as significant competitors in each of our three business segments, with relevant brand names, when different from the
company name, shown in parentheses. The marks below may be the registered or unregistered trademarks or trade names of their respective owners.
• Residential Heating & Cooling - Carrier Global Corporation (Carrier, Bryant, Payne, Tempstar, Comfortmaker, Heil, Arcoairc, KeepRite, Day &
Night); Trane Technologies plc (Trane, American Standard, Ameristar, Oxbox, RunTru); Paloma Industries, Inc. (Rheem, Ruud, Weather King);
Johnson Controls, Inc. (York, Luxaire, Coleman); Daikin Industries, Ltd. (Daikin, Goodman, Amana, GMC); and Melrose Industries PLC (Maytag,
Westinghouse, Frigidaire, Tappan, Philco, Kelvinator, Gibson, Broan, NuTone).
• Commercial Heating & Cooling - Carrier Global Corporation (Carrier, ICP Commercial); Trane Technologies plc (Trane); Paloma Industries, Inc.
(Rheem, Ruud); Johnson Controls, Inc. (York); Daikin Industries, Ltd. (Goodman, McQuay); Melrose Industries PLC (Mammoth); and AAON, Inc.
• Refrigeration - Hussmann Corporation; Paloma Industries, Inc. (Rheem Manufacturing Company (Heat Transfer Products Group)); Emerson Electric
Co. (Copeland); Carrier Global Corporation (Carrier); GEA Group (Kuba, Searle, Goedhart); Alfa Laval; Gunther GmbH; Kelvion - Profroid
(Carrier); Panasonic Corp. (Sanyo); Technotrans; and Deltatherm.
Human Capital Management
Our success, in large part, relies on the character of our people. That character is reflected in our core values of integrity, respect and excellence. Our
continued success depends on our ability to attract, motivate, develop and retain employees who embody our core values.
Management strives to maintain the right number of employees with the necessary skills to match the expected demand for the products we manufacture
and distribute. As of December 31, 2022, we employed approximately 13,200 people. Of these employees, approximately 5,100 were salaried and 8,100
were hourly. The number of hourly workers varies in order to match our labor needs during periods of fluctuating demand.
Approximately 3,000 of our employees, including international locations, are represented by unions. We believe we have good relationships with our
employees and with the unions representing them. On November 1, 2021, our Marshalltown, Iowa -based union ratified a five-year labor agreement. We
currently do not anticipate any material adverse consequences resulting from negotiations to renew other collective bargaining agreements.
To succeed in an ever -changing and competitive labor market, we have identified priorities we believe are critical to our success in attracting,
motivating, developing, and retaining employees. These include among other things: (1) providing competitive compensation and benefit programs, (2)
providing career development programs, (3) promoting health and safety, and (4) championing a diverse and inclusive work environment. Further
information is available in our Environmental Social and Governance (ESG) report available on our website. The information on our website, including the
ESG Report, is not a part of, or incorporated by reference into, this Annual Report on Form 10-K.
Compensation and Benefit Programs. We are committed to providing our employees with a competitive compensation package that rewards
performance and achievement of desired business results. Our compensation package consists of three primary benefits: pay (base pay and incentive
programs), health and welfare benefits, and retirement contributions. We analyze our compensation and benefits programs annually to ensure we remain
competitive and make changes as necessary.
Career Development Programs. To help our employees succeed in their roles and grow their careers at Lennox, we provide numerous training and
development programs. One example is our "Career Journey" program which provides employees with engaging tools enabling them to reflect on skills and
interests, and explore a variety of potential career paths. Career Journey allows employees to have more meaningful career development conversations with
their manager. In addition to training and development programs we have a robust performance review and goal setting process for all employees. We
believe this helps ensure that employees meet expectations throughout the year while continuing development of their long -tern careers at Lennox.
Employee Health and Safety. As part of our effort to attract and retain a competitive workforce, we are committed to ensuring that every employee
returns home safe at the end of each day. Safety is our top priority and our safety programs are succeeding to reduce risks across our operations. In response
to the COVID-19 pandemic, we have taken extensive actions that are aligned with the World Health Organization and Centers for Disease Control and
Prevention to protect the health and safety of our workers.
Diversity and Inclusion. We are committed to a diverse workforce built on a foundation of respect and value for people of different backgrounds,
experiences, and perspectives. Our commitment to diversity and inclusion enables all employees to be creative, feel challenged, and thrive, which allows us
to leverage the unique strengths of our employees to deliver innovative products and solutions for our customers.
Our senior managers, together with our human resources team, are devoted to promoting the above priorities to ensure we remain an employer of choice.
We regularly conduct anonymous surveys to seek feedback from our employees on a variety of subjects, including safety, communications, diversity and
inclusion, management support to succeed within our company, and career growth.
Despite these efforts, we have experienced, and could continue to experience, higher employee absenteeism, particularly in manufacturing and
distribution locations. These concerns have decreased the pool of available qualified talent for certain functions. As a result, we have made and continue to
make strong efforts to maintain and recruit qualified talent and are committed to being competitive to retain the best talent possible.
Environmental Regulation
Our operations are subject to evolving and often increasingly stringent international, federal, state and local laws and regulations concerning the
environment. Environmental laws affect or could affect our operations. We believe we are in substantial compliance with such existing environmental laws
and regulations.
Energy Efficiency. The U.S. Department of Energy has numerous active energy conservation rulemakings that impact residential and commercial
heating, air conditioning and refrigeration equipment. We are actively involved in U.S. Department of Energy activities related to energy efficiency. We
are prepared to have compliant products in place in advance of the effective dates of all such regulations being considered by the U.S. Department of
Energy.
Refrigerants. The use of hydroflurocarbons ("HFCs") as refrigerants for air conditioning and refrigeration equipment is common practice in the HVACR
industry and is regulated. We believe we have complied with applicable rules and regulations in various countries governing the use of HFCs. We are an
active participant in the ongoing international and domestic dialogue on this subject and are well positioned to react in a timely manner to changes in the
regulatory landscape.
Remediation Activity. In addition to affecting our ongoing operations, applicable environmental laws can impose obligations to remediate hazardous
substances at our properties, at properties formerly owned or operated by us and at facilities to which we have sent or send waste for treatment or disposal.
We are aware of contamination at some of our facilities; however, based on facts presently known, we do not believe that any future remediation costs at
such facilities will be material to our results of operations. For more information, see Note 5 in the Notes to our Consolidated Financial Statements.
In the past, we have received notices that we are a potentially responsible party along with other potentially responsible parties in Superfund
proceedings under the Comprehensive Environmental Response, Compensation and Liability Act for cleanup of hazardous substances at certain sites to
which the potentially responsible parties are alleged to have sent waste. Based on the facts presently known, we do not believe environmental cleanup costs
associated with any Superfund sites about which we have received notice that we are a potentially responsible party will be material to our results of
operations.
E-Waste and Related Compliance. Many countries around the world as well as many states in the U.S. have enacted directives, laws, and regulations
directed at preventing electrical and electronic equipment waste by encouraging reuse and recycling as well as restricting the use of hazardous products in
electrical and electronic equipment. All HVACR products and certain components of such products are potentially subject to these types of requirements.
We are not uniquely affected as compared to other manufacturers. We actively monitor the development and evolution of such requirements and believe we
are well positioned to comply with such directives in the required time frames.
Available Information
Our web site address is www.lennoxintemational.com. We make available, free of charge through our web site, our annual reports on Form 10-K,
quarterly reports on Form 10-Q, current reports on Form 8-K, including exhibits, and amendments to those reports filed or furnished pursuant to the
Securities Exchange Act of 1934, as amended (the "Exchange Act'), as soon as reasonably possible after such material is electronically filed with, or
furnished to, the Securities and Exchange Commission. The information on our web site is not a part of, or incorporated by reference into, this Annual
Report on Form 10-K.
The Securities and Exchange Commission maintains a website at www.sec.gov that contains reports, proxy and information statements, and other
information regarding issuers, including Lennox International, that file electronically with the Securities and Exchange Commission.
Information about our Executive Officers
Our executive officers, their present positions and their ages are as follows as of February 3, 2023:
Name
Age
Position
Alok Maskara
51
Chief Executive Officer
Joseph W. Reitmeier
58
Executive Vice President, Chief Financial Officer
Douglas L. Young
60
Executive Vice President
Gary S. Bedard
58
Executive Vice President & President LII Residential Heating & Cooling
Prakash Bedapudi
56
Executive Vice President, Chief Technology Officer
Daniel M. Sessa
58
Executive Vice President, Chief Human Resources Officer
John D. Torres
64
Executive Vice President, Chief Legal Officer and Secretary
Joe Nassab
55
Executive Vice President & President LII North America Commercial Heating &
Cooling
Chris A. Kosel
55
Vice President, Chief Accounting Officer and Controller
Alok Maskara joined Lennox International Inc. as Chief Executive Officer on May 9, 2022. Most recently he served for five years as CEO of Luxfer
Holdings PLC, an international industrial company focused on advanced materials. Mr. Maskara also served for nearly a decade as president of several
global business units at Pentair PLC, a leading provider of water treatment and sustainable applications. Previously he held various leadership positions at
General Electric Corporation and McKinsey & Company. Mr. Maskara also serves on the board of Franklin Electric (Nasdaq: FELE) a company focused on
global water and fluid solutions. Mr. Maskara graduated with a bachelor of technology degree in chemical engineering from the Indian Institute of
Technology in 1992 and a master's degree in chemical engineering from the University of New Mexico in 1994. In 2000, he earned an MBA from the
Kellogg School of Management at Northwestern University.
Joseph W. Reitmeier was appointed Executive Vice President, Chief Financial Officer in July 2012. He had served as Vice President of Finance for the
LII's Commercial Heating & Cooling segment since 2007 and as Director of Internal Audit from 2005 to 2007. Before joining the Company, he held
financial leadership roles at Cummins Inc. and PolyOne Corporation. He is a director of Watts Water Technologies, Inc., a global provider of plumbing,
heating and water quality solutions for residential, industrial, municipal and commercial settings. Mr. Reitmeier holds a bachelor's degree in accounting
from the University of Akron and an MBA from Case Western Reserve University. He is also a Certified Public Accountant.
Douglas L. Young has served as an Executive Vice President since January 2023. Most recently he served as Executive Vice President, President and
Chief Operating Officer of LII's Residential Heating & Cooling segment in October 2006. Mr. Young had previously served as Vice President and General
Manager of North American Residential Products since 2003 and as Vice President and General Manager of Lennox North American Residential Sales,
Marketing, and Distribution from 1999 to 2003. Prior to his career with LII, Mr. Young was employed in the Appliances division of GE, where he held
various management positions before serving as General Manager of Marketing for GE Appliance division's retail group from 1997 to 1999 and as General
Manager of Strategic Initiatives in 1999. He holds a BSBA from Creighton University and a master's of science in management from Purdue University.
Mr. Young serves on the Board of Directors of Beacon Roofing Supply, a general building material distributor and is a past Chairman of the Board of
Directors of AHRI (the Air -Conditioning, Heating, and Refrigeration Institute), the trade association for the HVACR and water heating equipment
industries. In November 2022, Mr. Young advised leadership that he intended to retire effective June 30, 2023.
Gary S. Bedard was appointed Executive Vice President & President of LII's Residential Heating & Cooling business in January 2023. Most recently, he
served as Executive Vice President & President of LII's Worldwide Refrigeration business, a position he held since October 2017. Prior to that, Mr. Bedard
served as Vice President and General Manager, LII Residential Heating & Cooling for 12 years. He has also held the positions of Vice President,
Residential Product Management, LII Worldwide Heating and Cooling, Director of Brand and Product Management, and District Manager for Lennox
Industries' New York District. Before joining LII in 1998, Mr. Bedard spent eight years at York International in product management and sales leadership
roles for commercial applied and unitary systems as well as residential systems. Mr. Bedard has a bachelor's degree in engineering management from the
United States Military Academy at West Point. Mr. Bedard serves on the Board of Directors of the AHRI, the trade association for the HVACR and water
heating equipment industries.
Prakash Bedapudi was appointed Executive Vice President, Chief Technology Officer in July 2008. He had previously served as Vice President, Global
Engineering and Program Management for Trane Inc. Commercial Systems from 2006 through 2008, and as Vice President, Engineering and Technology
for Trane's Residential Systems division from 2003 through 2006. Prior to his career at Trane, Mr. Bedapudi served in senior engineering leadership
positions for GE Transportation Systems, a division of General Electric Company, and for Cummins Engine Company. He holds a bachelor of science in
mechanical/automotive engineering from Karnataka University, India and a master's of science in mechanical/aeronautical engineering from the University
of Cincinnati.
Daniel M. Sessa was appointed Executive Vice President, Chief Human Resources Officer in June 2007. He had previously served in numerous senior
human resources and legal leadership positions for United Technologies Corporation since 1996, including Vice President, Human Resources for Otis
Elevator Company - Americas from 2005 to 2007, Director, Employee Benefits and Human Resources Systems for United Technologies Corporation from
2004 to 2005, and Director, Human Resources for Pratt & Whitney from 2002 to 2004. He holds a bachelor of arts in law and society from the State
University of New York at Binghamton and a juris doctor from the Hofstra University School of Law.
John D. Torres was appointed Executive Vice President, Chief Legal Officer and Secretary in December 2008. He had previously served as Senior Vice
President, General Counsel and Secretary for Freescale Semiconductor, a semiconductor manufacturer that was originally part of Motorola. He joined
Motorola's legal department as Senior Counsel in 1996 and was appointed Vice President, General Counsel of the company's semiconductor business in
2001. Prior to joining Motorola, Mr. Torres served 13 years in private practice in Phoenix, specializing in commercial law. He holds a bachelor of arts from
Notre Dame and a juris doctor from the University of Chicago.
Joe Nassab was appointed Executive Vice President & President of our North America Commercial Heating & Cooling business on May 4, 2022. He
joined LII in 2010 as Vice President and General Manager of Allied Air. Before joining LII, Joe worked for 20 years at General Electric Company in a
variety of general management, product management, and marketing leadership roles. Joe has a bachelor's degree in finance from the University of
Michigan.
Chris A. Kosel was appointed Vice President, Chief Accounting Officer and Controller in May 2017. He had previously served as Vice President,
Business Analysis and Planning for the Company since 2016. He also had served as Vice President, Finance and Controller and Director of Finance for the
Company's North America Commercial Business from 2015 to 2016 and Director, Financial Planning and Analysis for the Company's Residential Business
Unit from 2014 to 2015. Prior to 2014 he had served as Director, Finance for the Company's Lennox Stores business and Director of the Company's
Financial Shared Services function. Prior to joining Lennox, he worked for Ernst & Young. He holds a bachelor's degree in accounting from Texas A&M
University. He is also a Certified Public Accountant.
Item IA. Risk Factors
Forward -Looking Statements
This Annual Report on Form 10-K contains forward -looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended,
and Section 2 1 E of the Exchange Act that are based on information currently available to management as well as management's assumptions and beliefs as
of the date hereof. All statements, other than statements of historical fact, included in this Annual Report on Form 10-K constitute forward -looking
statements within the meaning of the Private Securities Litigation Reform Act of 1995. Forward -looking statements can be identified by the words "may,"
"will," "should," "plan," "predict," "anticipate," "believe," "intend," "estimate" and "expect" and similar expressions. Statements that are not historical
should also be considered forward -looking statements. Such statements reflect our current views with respect to future events. Readers are cautioned not to
place undue reliance on these forward -looking statements. We believe these statements are based on reasonable assumptions; however, such statements are
inherently subject to risks and uncertainties, including but not limited to the specific uncertainties discussed elsewhere in this Annual Report on Form 10-K
and the risk factors set forth in Item 1A. Risk Factors in this Annual Report on Form 10-K. These risks and uncertainties may affect our performance and
results of operations. Should one or more of these risks or uncertainties materialize, or should underlying assumptions prove incorrect, actual results may
differ materially from those in the forward -looking statements. We disclaim any intention or obligation to update or review any forward -looking statements
or information, whether as a result of new information, future events or otherwise unless required by law.
Risk Factors
The following risk factors and other information included in this Annual Report on Form 10-K should be carefully considered. We believe these are the
principal material risks currently facing our business; however, additional risks and uncertainties not presently known to us or that we presently deem less
significant may also impair our business operations. If any of the following risks or those disclosed in our other SEC filings occurs, our business, financial
condition or results of operations could be materially adversely affected.
Business and Operational Risks
We May Not be Able to Compete Favorably in the Competitive HVACR Business.
Substantially all of the markets in which we operate are competitive. The most significant competitive factors we face are product reliability, product
performance, reputation of our company and brands, service and price and global supply chain constraints, with the relative importance of these factors
varying among our product lines. Other factors that affect competition in the HVACR market include the development and application of new technologies,
an increasing emphasis on the development of more efficient HVACR products and new product introductions. We may not be able to adapt to market
changes as quickly or effectively as our current and future competitors. Also, the establishment of manufacturing operations in low-cost countries could
provide cost advantages to existing and emerging competitors. Some of our competitors may have greater financial resources than we have, allowing them
to invest in more extensive research and development and/or marketing activity and making them better able to withstand adverse HVACR market
conditions. 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 a material adverse effect on our results of operations.
If We Cannot Successfully Execute our Business Strategy, Our Results of Operations Could be Adversely Impacted.
Our future success depends on our continued investment in research and new product development as well as our ability to commercialize new HVACR
technological advances in domestic and global markets. If we are unable to continue to timely and successfully develop and market new products, achieve
technological advances, or extend our business model and technological advances into international markets, our business and results of operations could be
adversely impacted.
We are engaged in various manufacturing rationalization actions designed to achieve our strategic priorities of manufacturing, sourcing, and distribution
excellence and of lowering our cost structure. 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. In such
case, our results of operations and profitability may be negatively impacted, making us less competitive and potentially causing us to lose market share.
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 Demand.
We manufacture many of our products at single -location production facilities. In certain instances, we heavily rely on suppliers who also may
concentrate production in single locations or source unique, necessary products from only one supplier. Any significant interruptions in production at one or
more of our facilities, or at a facility of one of our key suppliers, could negatively impact our ability to deliver our products to our customers, especially as
we continue to experience disruptions in supply.
Further, even with all of our facilities running at full production, we could potentially be unable to fully meet demand during an unanticipated period of
exceptionally high demand. Our inability to meet our customers' demand for our products could have a material adverse effect on our business, financial
condition, and results of operations.
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 Rights.
We rely upon patent, copyright, trademark and trade secret laws and agreements to establish and maintain intellectual property rights in the products we
sell. Our intellectual property rights could be challenged, invalidated, infringed, circumvented, or be insufficient to permit us to take advantage of current
market trends or to otherwise provide competitive
advantages. Further, the laws of certain countries do not protect proprietary rights to the same extent as the laws of the United States
Third parties may also claim that we are infringing upon their intellectual property rights. If we do not license infringed intellectual property or if we are
required to substitute similar technology from another source, our operations could be adversely affected. Even if we believe that intellectual property
claims are without merit, they can be time consuming, require significant resources and be costly to defend. Claims of intellectual property infringement
also might require us to redesign affected products, pay costly damage awards, or face injunction prohibiting us from manufacturing, importing, marketing,
or selling certain of our products. Even if we have agreements to indemnify us, indemnifying parties may be unable or unwilling to do so.
Our Operations Can Be Adversely Affected By Our Ability to Attract, Motivate, Develop, and Retain Our Employees, Labor Shortages and Work
Stoppages, Turnover, Labor Cost Increases and Other Labor Relations Problems.
We are committed to attracting, motivating, developing, and retaining our employees to ensure we remain an employer of choice. Despite our efforts, we
have experienced, and could continue to experience, higher employee turnover and absenteeism, particularly in manufacturing and distribution locations, as
a result of COVID-19 related concerns and other factors. A number of factors may adversely affect the labor force available or increase labor costs,
including high employment levels, related competition, and federal unemployment subsidies, such as unemployment benefits offered in response to the
COVID-19 pandemic. These concerns have decreased the pool of available qualified talent for certain functions. In addition, as of December 31, 2022,
approximately 23% of our workforce, including international locations, was unionized. Our Marshalltown, Iowa -based union ratified a five-year labor
agreement on November 1, 2021; however, the results of future negotiations with unions are uncertain. If we are unsuccessful in meeting these challenges,
our results of operations could be materially impacted.
Volatility in Capital Markets Could Necessitate Increased Cash Contributions by Us to Our Pension Plans to Maintain Required Levels of Funding.
Volatility in the capital markets may have a significant impact on the funding status of our defined benefit pension plans. If the performance of the
capital markets depresses the value of our defined benefit pension plan assets or increases the liabilities, we would be required to make additional
contributions to the pension plans. 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 adverse effect on our results of operations.
Industry Risks
Our Financial Performance Is Affected by the Conditions and Performance of the U.S. Construction Industry.
Our business is affected by the performance of the U.S. construction industry. Our sales in the residential and commercial new construction markets
correlate to the number of new homes and buildings that are built, which in turn is influenced by cyclical factors such as interest rates, inflation, availability
of financing, consumer spending habits and confidence, employment rates and other macroeconomic factors over which we have no control. Our sales may
not improve, or improvement may be limited or lower than expected.
Cooler than Normal Summers and Warmer than Normal Winters May Depress Our Sales.
Demand for our products and for our services is seasonal and strongly affected by the weather. Cooler than normal summers depress our sales of
replacement air conditioning and refrigeration products and services. Similarly, warmer than normal winters have the same effect on our heating products
and services. The effects of climate change, such as extreme weather conditions and events and water scarcity, may exacerbate fluctuations in typical
weather patterns, creating financial risks to our business.
Price Volatility for Commodities and Components We Purchase or Significant Supply Interruptions Could Have an Adverse Effect on Our Cash Flow
or Results of Operations.
We depend on raw materials, such as steel, copper and aluminum, and components purchased from third parties to manufacture our products. Some of
these third -party suppliers are located outside of the United States. We generally
10
concentrate purchases for a given raw material or component with a small number of suppliers. If a supplier is unable or unwilling to meet our supply
requirements, including suffering any disruptions at its facilities or in its supply chain, we could experience supply interruptions or cost increases, either of
which could have an adverse effect on our results of operations. Similarly, suppliers of components that we purchase for use in our products may be affected
by rising material costs and pass these increased costs on to us. Although we regularly pre -purchase a portion of our raw materials at fixed prices each year
to hedge against price increases, an increase in raw materials prices not covered by our fixed price arrangements could significantly increase our cost of
goods sold and negatively impact our margins if we are unable to effectively pass such price increases on to our customers. 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.
The ongoing COVID-19 pandemic has resulted in increased global supply chain constraints and disruption to the operations of certain of our suppliers
and we cannot predict the duration or severity of current supply -chain issues, including increased input material costs and component shortages, delivery
disruptions and delays, and inflation. Additionally, the effects of climate change, including extreme weather events, long-term changes in temperature
levels, water availability, increased cost for decarbonizing process heating, supply costs impacted by increasing energy costs, or energy costs impacted by
carbon prices or offsets may exacerbate supply chain constraints and disruption. Resulting supply chain constraints have required, and may continue to
require, in certain instances, alternative delivery arrangements and increased costs and could have a material adverse effect on our business and operations.
In addition, we use derivatives to hedge price risk associated with forecasted purchases of certain raw materials. Our hedged prices could result in
paying higher or lower prices for commodities as compared to the market prices for those commodities when purchased.
Legal, Tax and Regulatory Risks
Changes in Environmental and Climate -Related Legislation, Government Regulations, or Policies Could Have an Adverse Effect on Our Results of
Operations.
The sales, gross margins, and profitability for each of our segments could be directly impacted by changes in legislation, government regulations, or
policies (collectively, "LRPs") relating to global climate change and other environmental initiatives and concerns. These LRPs, implemented under global,
national, and sub -national climate objectives or policies, can include changes in environmental and energy efficiency standards and tend to target the global
warming potential of refrigerants and hydrofluorocarbons, equipment energy efficiency, and combustion of fossil fuels as a heating source. Many of our
products consume energy and use refrigerants and hydroflurocarbons. LRPs that seek to reduce greenhouse gas emissions may require us to make increased
capital expenditures to develop or market new products to meet new LRPs. Further, our customers and the markets we serve may impose emissions or other
environmental standards through LRPs or consumer preferences that may require additional time, capital investment, or technological advancement. Our
inability or delay in developing or marketing products that match customer demand while also meeting applicable LRPs may negatively impact our results.
There continues to be a lack of consistent climate legislation and regulations, which creates economic and regulatory uncertainty. Such regulatory
uncertainty could adversely impact the demand for energy efficient buildings and could increase costs of compliance. Additionally, the extensive and ever -
changing legislation and regulations could impose increased liability for remediation costs and civil or criminal penalties in cases of non-compliance.
Because these laws are subject to frequent change, we are unable to predict the future costs resulting from environmental compliance.
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 U.S.-Mexico-Canada 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. The sales, gross margins, and profitability for each of our segments could be directly impacted by changes in tariffs and trade
agreements.
M
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 teens 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.
We May Incur Substantial Costs as a Result of Claims Which Could Have an Adverse Effect on Our Results of Operations.
The development, manufacture, sale and use of our products involve warranty, intellectual property infringement, and product liability claims, and other
liabilities and risks for the installation and service of our products. Our product liability insurance policies have limits that, if exceeded, may result in
substantial costs that could have an adverse effect on our results of operations. In addition, warranty claims are not covered by our product liability
insurance and certain product liability claims may also not be covered by our product liability insurance.
For some of our HVACR products, we provide warranty terms ranging from one to 20 years to customers for certain components such as compressors or
heat exchangers. For certain limited products, we provided lifetime warranties. Warranties of such extended lengths pose a risk to us as actual future costs
may exceed our current estimates of those costs. Warranty expense is recorded on the date that revenue is recognized and requires significant assumptions
about what costs will be incurred in the future. We may be required to record material adjustments to accruals and expense in the future if actual costs for
these warranties are different from our assumptions.
We are Subject to Claims, Lawsuits, and Other Litigation That Could Have an Adverse Effect on Our Results of Operations.
We are involved in various claims and lawsuits incidental to our business, including those involving product liability, labor relations, alleged exposure to
asbestos -containing materials and environmental matters, some of which claim significant damages. Estimates related to our claims and lawsuits, including
estimates for asbestos -related claims and related insurance recoveries, involve numerous uncertainties. Given the inherent uncertainty of litigation and
estimates, we cannot be certain that existing claims or litigation or any future adverse legal developments will not have a material adverse impact on our
financial condition.
General Risk Factors
Global General Business, Economic and Market Conditions Could Adversely Affect Our Financial Performance and Limit Our Access to the Capital
Markets.
Disruptions in U.S. or global financial and credit markets or increases in the costs of capital might have an adverse impact on our business. The
tightening, unavailability or increased cost of credit adversely affects the ability of our customers to obtain financing for significant purchases and
operations, resulting in a decrease in sales of our products and services and may impact the ability of our customers to make payments to us. Similarly,
tightening of available credit may adversely affect our supplier base and increase the potential for one or more of our suppliers to experience financial
distress or bankruptcy. Our business may also be adversely affected by future decreases in the general level of economic activity and increases in borrowing
costs, which may cause our customers to cancel, decrease or delay their purchases of our products and services.
If financial markets were to deteriorate, or costs of capital were to increase significantly due to a lowering of our credit ratings, prevailing industry
conditions, the volatility of the capital markets or other factors, we may be unable to obtain new financing on acceptable terms, or at all. A deterioration in
our financial performance could also limit our future ability to access amounts currently available under our Credit Agreement. In addition, availability
under our asset securitization agreement may be adversely impacted by credit quality and performance of our customer accounts receivable. The availability
under our asset securitization agreement is based on the amount of accounts receivable that meet the eligibility criteria of the asset securitization agreement.
If receivable losses increase or credit quality deteriorates, the amount of eligible receivables could decline and, in turn, lower the availability under the asset
securitization.
We cannot predict the likelihood, duration, or severity of any future disruption in financial markets or any adverse economic conditions in the U.S. and
other countries.
IN
The COVID-19 Pandemic Has Disrupted Our Business Operations and Results of Operations.
Since 2020, the spread of COVID-19 and the developments surrounding the global pandemic have disrupted our business operations and affected our
results of operations. In 2022, the COVID-19 pandemic continued to create supply chain disruptions and higher employee absenteeism in our factories and
distribution locations. We cannot predict whether any of our manufacturing, operational, or distribution facilities will experience any future disruptions, or
how long such disruptions would last.
There remains uncertainty regarding how COVID-19 will impact the economy and our results in the future. The extent to which the COVID-19
pandemic impacts us will depend on numerous evolving factors and future developments that we are not able to predict, including the duration and scope of
the pandemic; governmental, business, and individuals' actions in response to the pandemic; our ability to maintain sufficient qualified personnel due to
employee illness, quarantine, willingness to return to work, vaccine and/or testing mandates, face -coverings and other safety requirements, general scarcity
of employees, or travel and other restrictions; current global supply chain disruptions caused by the COVID-19 pandemic; and the impact on economic
activity, including financial market instability.
Our International Operations Subject Us to Risks Including Foreign Currency Fluctuations, Regulations and Other Risks.
We earn revenue, pay expenses, own assets, and incur liabilities in countries using currencies other than the U.S. dollar including the Canadian dollar,
the Mexican peso, and the Euro. Our Consolidated Financial Statements are presented in U.S. dollars and we translate revenue, income, expenses, assets,
and liabilities into U.S. dollars at exchange rates in effect during or at the end of each reporting period. Therefore, increases or decreases in the value of the
U.S. dollar relative to other currencies may affect our net operating revenues, operating income and the value of balance sheet items denominated in foreign
currencies. Because of the geographic diversity of our operations, weaknesses in some currencies might be offset by strengths in others over time. However,
we cannot assure that fluctuations in foreign currency exchange rates, particularly the strengthening of the U.S. dollar against major currencies, would not
materially affect our financial results.
In addition to the currency exchange risks inherent in operating in foreign countries, our international sales, and operations, including purchases of raw
materials from international suppliers, are subject to risks associated with local government laws, regulations, and policies (including those related to tariffs
and trade barriers, investments, taxation, exchange controls, employment regulations and changes in laws and regulations). Our international sales and
operations are also sensitive to changes in foreign national priorities, including government budgets, as well as to geopolitical and economic instability.
International transactions may involve increased financial and legal risks due to differing legal systems and customs in foreign countries, as well as
compliance with anti -corruption laws such as the U.S. Foreign Corrupt Practices Act and the U.K. Bribery Act. The ability to manage these risks could be
difficult and may limit our operations and make the manufacture and sale of our products internationally more difficult, which could negatively affect our
business and results of operations.
Conflicts, wars, natural disasters, climate change, infectious disease outbreaks or terrorist acts could also cause significant damage or disruption to our
operations, employees, facilities, systems, suppliers, 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 approximately 11% of our total net sales in 2022.
Security Breaches and Other Disruptions or Misuse of Information Systems We Rely Upon Could Affect Our Ability to Conduct Our Business
Effectively.
Our information systems and those of our business partners are important to our business activities. We also outsource various information systems,
including data management, to 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, denial of service attacks, malicious social engineering or other malicious activities, or any
combination thereof. Attempts have been made to attack our information systems, but we do not believe that material harm has resulted. While we have
implemented controls and taken other preventative actions to strengthen these systems against future attacks, we can give no assurance that these controls
and preventative actions will be effective. Any breach of data security could result in a disruption of our services or improper disclosure of personal data or
confidential information, which could
13
harm our reputation, require us to expend resources to remedy such a security breach or defend against further attacks or subject us to liability under laws
that protect personal data, resulting in increased operating costs or loss of revenue.
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 Form.
From time to time, we may seek to complement or expand our businesses through strategic acquisitions, joint ventures, and strategic relationships. The
success of these transactions will depend, in part, on our ability to timely identify those relationships, negotiate and close the transactions and then integrate,
manage, and operate those businesses profitably. 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.
Any Future Determination that a Significant Impairment of the Value of Our Goodwill Intangible Asset Occurred Could Have an Adverse Effect on
Our Results of Operations.
As of December 31, 2022, we had goodwill of $186.3 million on our Consolidated Balance Sheet. Any future determination that an impairment of the
value of goodwill occurred would require a write -down of the impaired portion of goodwill to fair value and would reduce our assets and stockholders'
equity and could have a material adverse effect on our results of operations.
Item 111. Unresolved Staff Comments
None.
14
Item 2. Properties
The following chart lists our principal domestic and international manufacturing, distribution and office facilities as of December 31, 2022 and indicates
the business segment that uses such facilities, the approximate size of such facilities and whether such facilities are owned or leased. Also included in the
chart are large warehouses that hold significant inventory balances.
Approx. Sq. Ft. (In
Location
Segment
Tvoe or Use of Facilitv
thousands)
Owned/Leased
Saltillo, Mexico
Residential Heating & Cooling
Manufacturing & Distribution
1,081
Owned
Marshalltown, IA
Residential Heating & Cooling
Manufacturing & Distribution
1,000
Owned & Leased
Orangeburg, SC
Residential Heating & Cooling
Manufacturing & Distribution
900
Owned & Leased
Grenada, MS
Residential Heating & Cooling
Manufacturing & Distribution
395
Owned & Leased
Romeoville, IL
Residential Heating & Cooling
Distribution & Office
697
Leased
McDonough, GA
Residential Heating & Cooling
Distribution
254
Leased
Grove City, OH
Residential Heating & Cooling
Distribution
279
Leased
Concord, NC
Residential Heating & Cooling
Distribution
248
Leased
Pittston, PA
Residential Heating & Cooling
Distribution
144
Leased
Harahan, LA
Residential Heating & Cooling
Distribution & Office
83
Leased
North Kansas City, MO
Residential Heating & Cooling
Distribution & Office
59
Leased
West Columbia, SC
Residential Heating & Cooling
Research & Development
63
Leased
Eastvale, CA
Residential & Commercial Heating & Cooling
Distribution
377
Leased
Carrollton, TX
Residential & Commercial Heating & Cooling
Distribution
252
Leased
Brampton, Canada
Residential & Commercial Heating & Cooling
Distribution
251
Leased
Houston, TX
Residential & Commercial Heating & Cooling
Distribution
204
Leased
Orlando, FL
Residential & Commercial Heating & Cooling
Distribution
173
Leased
Middletown, PA
Residential & Commercial Heating & Cooling
Distribution
166
Leased
Lenexa, KS
Residential & Commercial Heating & Cooling
Distribution
147
Leased
East Fife, WA
Residential & Commercial Heating & Cooling
Distribution
112
Leased
Calgary, Canada
Residential & Commercial Heating & Cooling
Distribution
145
Leased
Stuttgart, AR
Commercial Heating & Cooling
Manufacturing
750
Owned
Jessup, PA
Commercial Heating & Cooling
Distribution
130
Leased
DFW Airport, TX
Commercial Heating & Cooling
Distribution
80
Leased
Indianapolis, IN
Commercial Heating & Cooling
Distribution
69
Leased
Medley, FL
Commercial Heating & Cooling
Distribution
70
Leased
Norcross, GA
Commercial Heating & Cooling
Distribution & Office
95
Leased
Longvic, France
Refrigeration
Manufacturing
142
Owned
Longvic, France
Refrigeration
Distribution
133
Owned
Burgos, Spain
Refrigeration
Manufacturing
140
Owned
Mions, France
Refrigeration
Research & Development
129
Owned
Genas, France
Refrigeration
Manufacturing, Distribution & Offices
ill
Owned
Tifton, GA
Refrigeration
Manufacturing & Distribution
738
Owned & Leased
Stone Mountain, GA
Refrigeration
Manufacturing & Business Unit
139
Owned
Headquarters
Richardson, TX
Corporate and other
Corporate Headquarters
356
Owned & Leased
Carrollton, TX
Corporate and other
Research & Development
294
Owned
Chennai, India
Corporate and other
Research & Development & Office
73
Leased
15
In addition to the properties described above, we lease numerous facilities in the U.S. and worldwide for use as sales offices, service offices, district and
regional warehouses, and Lennox Stores. We routinely evaluate our facilities to ensure adequate capacity, effective cost structure, and consistency with our
business strategy. We believe that our properties are in good condition, suitable and adequate for their present requirements and that our principal
manufacturing plants are generally adequate to meet our production needs.
Item 3. Legal Proceedings
We are involved in a number of claims and lawsuits incident to the operation of our businesses. Insurance coverages are maintained and estimated costs
are recorded for such claims and lawsuits. 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 cash flows. For more information, see Note 5 in the Notes to the Consolidated
Financial Statements.
Item 4. Mine Safety Disclosures
Not applicable.
PART II
Item 5. Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities
Market Information for Common Stock
Our common stock is listed for trading on the New York Stock Exchange under the symbol "LII."
Holders of Common Stock
As of the close of business on February 3, 2023, approximately 544 holders of record held our common stock.
Comparison of Total Stockholder Return
The following graph compares the cumulative total returns of LII's common stock with the cumulative total returns of the Standards & Poor's Midcap
400 Index, a broad index of mid -size U.S. companies of which the Company is a part, and with a peer group of U.S. industrial manufacturing and service
companies in the HVACR businesses. The graph assumes that $100 was invested on December 31, 2017, with dividends reinvested. Our peer group
includes AAON, Inc., Comfort Systems USA, Inc., Johnson Controls Inc., and Watsco, Inc.
16
Comparison of 5 Year Cumulative Total Return
Assumes Initial Investment of $100
December 2022
250.00
200.00
150.00
100.00
50.00
0.00
2017 201E
Lennox International, Inc.
2019 2020
—tS&P MidCap 400 Index
2021 2022
—Peer Group
This performance graph and other information furnished under this Comparison of Total Stockholder Return section shall not be deemed to be "soliciting
material" or to be "filed" with the Securities and Exchange Commission or subject to Regulation 14A or 14C, or to the liabilities of Section 18 of the
Exchange Act.
Our Purchases of Company Equity Securities
Our Board of Directors has authorized a total of $4 billion to repurchase shares of our common stock (collectively referred to as the "Share Repurchase
Plans"), including an incremental $1.0 billion share repurchase authorization in July 2021. The Share Repurchase Plans authorize open market repurchase
transactions and do not have a stated expiration date. As of December 31, 2022, $546 million is available to repurchase shares under the Share Repurchase
Plans.
In the fourth quarter of 2022, we purchased shares of our common stock as follows:
October 1 through October 31
November 1 through November 30
December 1 through December 31
Average Price Paid
Total Shares per Share (including
Purchased (') fees)
56 $ 233.04
1,482 258.34
8.910 267.95
10,448
Approximate Dollar
Value of Shares that
Shares Purchased As may yet be Purchased
Part of Publicly Under the Plans
Announced Plans (in millions)
546.0
546.0
546.0
(t) These shares of common stock were surrendered to LII to satisfy employee tax -withholding obligations in connection with the exercise of long-term
incentive awards.
Item 6. Selected Financial Data
Not applicable
Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations
The following discussion should be read in conjunction with the other sections of this report, including the Consolidated Financial Statements and
related Notes to the Consolidated Financial Statements in Item 8, "Other Financial Statement Details," of this Annual Report on Form 10-K.
17
Business Overview
We operate in three reportable business segments of the heating, ventilation, air conditioning and refrigeration ("HVACR") industry. Our reportable
segments are Residential Heating & Cooling, Commercial Heating & Cooling, and Refrigeration. For more detailed information regarding our reportable
segments, see Note 3 in the Notes to the Consolidated Financial Statements.
We sell our products and services through a combination of direct sales, distributors and company -owned stores. The demand for our products and
services is seasonal and significantly impacted by the weather. Warmer than normal summer temperatures generate demand for replacement air conditioning
and refrigeration products and services, and colder than normal winter temperatures have a similar effect on heating products and services. Conversely,
cooler than normal summers and warmer than normal winters depress the demand for HVACR products and services. In addition to weather, demand for
our products and services is influenced by national and regional economic and demographic factors, such as interest rates, the availability of financing,
regional population and employment trends, new construction, general economic conditions and consumer spending habits and confidence. A substantial
portion of the sales in each of our business segments is attributable to replacement business, with the balance comprised of new construction business.
The principal elements of cost of goods sold are components, raw materials, factory overhead, labor, estimated costs of warranty expense and freight and
distribution costs. The principal raw materials used in our manufacturing processes are steel, copper and aluminum. In recent years, pricing volatility for
these commodities and related components has impacted us and the HVACR industry in general. We seek to mitigate the impact of commodity price
volatility through a combination of pricing actions, vendor contracts, improved production efficiency and cost reduction initiatives. We also partially
mitigate volatility in the prices of these commodities by entering into futures contracts and fixed forward contracts.
Impact of COVID-19 Pandemic
A novel strain of coronavirus ("COVID-19") has surfaced and spread around the world. The COVID-19 pandemic is creating supply chain disruptions
and higher employee absenteeism in our factories and distribution locations since 2020. We cannot predict whether any of our manufacturing, operational or
distribution facilities will experience any future disruptions, or how long such disruptions would last. It also remains unclear how various national, state,
and local governments will react if new variants of the virus spread. If the pandemic worsens or continues longer than presently expected, COVID-19 could
impact our results of operations, financial position and cash flows.
Executive Leadership Transition
On March 23, 2022, the Board of Directors appointed Alok Maskara as Chief Executive Officer ("CEO") effective May 9, 2022. Mr. Maskara succeeded
Todd Bluedorn, who announced in July 2021 his plans to step down by mid-2022 as Chairman and CEO. Todd J. Teske was appointed Chairman of the
Board and served as interim CEO until Mr. Maskara assumed the role on May 9, 2022.
Financial Highlights
• Net sales increased $524 million, or 13%, to $4,718 million in 2022 from $4,194 million in 2021.
• Operating income in 2022 was $656 million compared to $590 million in 2021.
• Net income in 2022 increased to $497 million from $464 million in 2021.
• Diluted earnings per share from continuing operations were $13.88 per share in 2022 compared to $12.39 per share in 2021.
• We generated $302 million of cash flow from operating activities in 2022 compared to $516 million in 2021.
• In 2022, we returned $142 million to shareholders through dividend payments and we used $300 million to purchase 1.3 million shares of stock
under our Share Repurchase Plans.
Overview of Results
The Residential Heating & Cooling segment performed well in 2022, with a 15% increase in net sales and a $57 million increase in segment profit
compared to 2021 primarily due to higher price and sales volumes. Our Commercial Heating & Cooling segment saw an increase in net sales of 4% and a
$30 million decrease in segment profit compared to 2021 primarily
18
due to increased product costs. Sales in our Refrigeration segment increased 12% and segment profit increased $30 million compared to 2021 primarily due
to higher price and sales volumes.
Results of Operations
The following table provides a summary of our financial results, including information presented as a percentage of net sales (dollars in millions):
For the Years Ended December 31,
2022 2021 2020
Net sales
Cost of goods sold
Gross profit
Selling, general and administrative expenses
Losses (gains) and other expenses, net
Restructuring charges
Loss from natural disasters, net of insurance recoveries
Income from equity method investments
Operating income
Loss from discontinued operations
Net income
Dollars
Percent
Dollars
Percent
Dollars
Percent
$ 4,718.4
100.0 %
$ 4,194.1
100.0 %
$ 3,634.1
100.0 %
3,433.7
72.8 %
3,005.7
71.7 %
2,594.0
71.4 %
1,284.7
27.2 %
1,188.4
28.3 %
1,040.1
28.6 %
627.2
13.3 %
598.9
14.3 %
555.9
15.3 %
4.9
0.1 %
9.2
0.2 %
7.4
0.2 %
1.5
- %
1.8
- %
10.8
0.3 %
-
- %
-
- %
3.1
0.1 %
(5.1)
(0.1)%
(11.8)
(0.3)%
(15.6)
(0.4)%
$ 656.2
13.9 %
$ 590.3
14.1 %
$ 478.5
13.2 %
-
- %
-
- %
(0.8)
- %
$ 497.1
10.5 %
$ 464.0
11.1 %
$ 356.3
9.8 %
Year Ended December 31, 2022 Compared to Year Ended December 31, 2021 - Consolidated Results
Net Sales
Net sales increased 13% in 2022 compared to 2021, driven by higher price of 10%, product mix of 2%, and 2% higher sales volume. Partially offsetting
these increases was 1% due to unfavorable foreign currency.
Gross Profit
Gross profit margins for 2022 declined 110 basis points ("bps") to 27.2% compared to 28.3% in 2021. Gross profit margin decreased 240 bps from
higher commodity costs, 170 bps from higher component costs, 140 bps from other product costs including LIFO, 90 bps from factory inefficiencies, 80 bps
from higher freight and distribution costs, and 60 bps from product mix. Partially offsetting these margin decreases were 650 bps from favorable price and
20 bps from lower product warranty costs.
Selling, General and Administrative Expenses
SG&A expenses increased by $28 million in 2022 compared to 2021. As a percentage of net sales, SG&A expenses decreased 100 bps from 14.3% to
13.3% in the same periods primarily due to lower discretionary expenditures.
19
Losses (Gains) and Other Expenses, Net
Losses (gains) and other expenses, net for 2022 and 2021 included the following (in millions):
Realized losses (gains) on settled future contracts
Foreign currency exchange gains
Loss (gain) on disposal of fixed assets
Other operating income
Net change in unrealized (gains) losses on unsettled futures contracts
Environmental liabilities and special litigation charges
Charges incurred related to COVID-19 pandemic
Other items, net
(Gains) losses and other expenses, net (pre-tax)
For the Years Ended December
31,
2022 2021
$ 0.1 $ (1.2)
(1.3) (2.2)
(1.0) (0.2)
(1.0) (1.5)
0.4 —
7.5 9.6
0.8 2.2
(0.6) 2.5
$ 4.9 $ 9.2
The net change in unrealized losses on unsettled futures contracts was due to changes in commodity prices relative to the unsettled futures contract
prices. For more information on our derivatives, see Note 9 in the Notes to the Consolidated Financial Statements. Foreign currency exchange gains
decreased in 2022 primarily due to changes in foreign exchange rates in our primary markets. Environmental liabilities and special legal contingency
charges in 2022 relate to estimated remediation costs at some of our facilities and outstanding legal settlements including asbestos. Refer to Note 5 in the
Notes to the Consolidated Financial Statements for more information on litigation, including the asbestos -related litigation, and the environmental
liabilities. The charges incurred related to the COVID-19 pandemic related primarily to facility cleaning costs and sanitization supplies to ensure the health
and safety of our employees.
Restructuring Charges
Restructuring charges were $1.5 million in 2022 compared to $1.8 million in 2021. Charges in 2022 were related to ongoing cost reduction actions taken
in prior years. For more information on our restructuring activities, see Note 7 in the Notes to the Consolidated Financial Statements.
Goodwill
We performed a qualitative impairment analysis and noted no indicators of goodwill impairment for the year ended December 31, 2022. We did not
record any goodwill impairments in 2022 or 2021. Refer to Note 9 in the Notes to the Consolidated Financial Statements for more information on goodwill.
Asset Impairments
We did not have any impairments of assets in 2022 or 2021.
Pension Settlement
We did not have significant pension buyout activity in 2022 and 2021. Refer to Note 10 in the Notes to the Consolidated Financial Statements for more
information on pensions and employee benefit plans.
Income from Equity Method Investments
Investments over which we do not exercise control but have significant influence are accounted for using the equity method of accounting. Income from
equity method investments was $5 million in 2022 compared to $12 million in 2021. The decrease is due to lower operating results at the investees due to
higher material costs.
Interest Expense, net
Net interest expense of $39 million in 2022 increased from $25 million in 2021 primarily due to higher borrowing costs.
20
Income Taxes
The income tax provision was $119 million in 2022 compared to $96 million in 2021, and the effective tax rate was 19.3% in 2022 compared to 17.2%
in 2021. The 2022 and 2021 effective tax rates differ from the statutory rate of 21% primarily due to foreign taxes. Refer to Note 12 in the Notes to the
Consolidated Financial Statements for more information on income taxes.
Year Ended December 31, 2022 Compared to Year Ended December 31, 2021 - Results by Segment
Residential Heating & Cooling
The following table presents our Residential Heating & Cooling segment's net sales and profit for 2022 and 2021 (dollars in millions):
For the Years Ended December 31,
Net sales
Profit
% of net sales
2022 2021
3,198.3 $ 2,775.6 $
596.9 $ 540.3 $
18.7 % 19.5 %
Difference % Change
422.7 15%
56.6 10%
Residential Heating & Cooling net sales increased 15% in 2022 compared to 2021 due to an increase in price of 11%, an increase in sales volume of 4%,
and 1% from product mix. Partially offsetting these increases was 1% from unfavorable foreign currency.
Segment profit in 2022 increased $57 million compared to 2021 due to $297 million from higher price, $33 million from higher sales volume, and $9
million from lower product warranty costs. Partially offsetting these increases were $85 million from higher commodity costs, $49 million from higher
component costs, $47 million higher other product costs including LIFO, unfavorable product mix of $34 million, $33 million from higher freight and
distribution charges, $20 million from higher SG&A costs, $7 million from factory inefficiencies, $5 million from unfavorable foreign currency, and $2
million from miscellaneous other items.
Commercial Heating & Cooling
The following table presents our Commercial Heating & Cooling segment's net sales and profit for 2022 and 2021 (dollars in millions):
For the Years Ended December 31,
2022 2021 Difference % Change
Net sales
Profit
% of net sales
900.7 $ 864.8 $ 35.9 4 %
80.9 $ 110.9 $ (30.0) (27)%
9.0 % 12.8 %
Commercial Heating & Cooling net sales increased 4% in 2022 compared to 2021 due to an increase in price of 7% and 7% from product mix. Partially
offsetting these increases were lower sales volume of 9% and unfavorable foreign currency of 1%.
Segment profit in 2022 decreased $30 million compared to 2021 due to $28 million from factory inefficiencies, $25 million from lower sales volume,
$21 million from higher component costs, $20 million from higher other product costs including LIFO, $13 million from higher commodity costs, $8
million from higher SG&A costs, and $2 million from higher freight and distribution charges. Partially offsetting these decreases were $61 million from
higher price, $24 million from favorable product mix, and $2 million from lower product warranty costs.
Refrigeration
21
The following table presents our Refrigeration segment's net sales and profit for 2022 and 2021 (dollars in millions):
For the Years Ended December 31,
2022 2021
Net sales $ 619.4 $ 553.7
Profit $ 78.8 $ 49.1
% of net sales 12.7 % 8.9 %
Difference % Change
65.7 12 %
29.7 60 %
Net sales increased 12% in 2022 compared to 2021 due to a 13% increase in price, 3% increase in sales volume, and 1% from product mix. Partially
offsetting these increases was unfavorable foreign currency of 5%.
Segment profit in 2022 increased $30 million compared to 2021 due to $70 million from higher price, $7 million from favorable product mix, and $7
million from higher sales volume. Partially offsetting these increases were $17 million from higher commodity costs, $12 million from higher component
costs, $12 million from higher SG&A, $7 million from factory inefficiencies, $4 million from higher freight and distribution costs, and $2 million from
higher other product costs.
In November 2022, we announced the decision to explore strategic alternatives for our European commercial HVAC and refrigeration businesses. We
will continue to invest in our Heatcraft Worldwide Refrigeration business which will become part of the Commercial Heating & Cooling segment beginning
in 2023. The European portfolio will be presented with Corporate and Other beginning in 2023 until disposition. As we will manage the businesses in this
manner beginning in 2023, we will present the financial results of the revised segments beginning in 2023. The European portfolio realized net sales of
$234 million in 2022 and $230 million in 2021 and generated losses of $3 million and $5 million for 2022 and 2021, respectively.
Corporate and Other
Corporate and other expenses decreased by $6 million in 2022 compared to 2021 primarily due to lower incentive compensation costs.
Year Ended December 31, 2021 Compared to Year Ended December 31, 2020 - Consolidated Results
Net Sales
Net sales increased 15% in 2021 compared to 2020, driven by higher sales volumes of 11% and an improved combined price and mix of 4%. The
increases in volume, price and mix were due to strong demand across all three of our business segments.
Gross Profit
Gross profit margins for 2021 decreased 30 basis points ("bps") to 28.3% compared to 28.6% in 2020. Gross profit margin decreased 180 bps from
higher commodity costs, 90 bps from other product costs, 20 bps from higher freight and distribution costs, and 10 bps for lower factory efficiency. Partially
offsetting these cost increases was 270 bps from favorable combined price and mix.
Selling, General and Administrative Expenses
SG&A expenses increased by $43 million in 2021 compared to 2020. As a percentage of net sales, SG&A expenses decreased 100 bps from 15.3% to
14.3% in the same periods primarily due to lower discretionary expenditures.
22
Losses (Gains) and Other Expenses, Net
Losses (gains) and other expenses, net for 2021 and 2020 included the following (in millions):
Realized (gains) losses on settled futures contracts
Foreign currency exchange gains
Gain on disposal of fixed assets
Other operating income
Net change in unrealized gains on unsettled futures contracts
Environmental liabilities and special litigation charges
Charges incurred related to COVID-19 pandemic
Other items, net
For the Years Ended December
31,
2021 2020
$ (1.2) $ 0.1
(2.2) (3.6)
(0.2) (0.2)
(1.5) (2.2)
— (0.3)
9.6 5.3
2.2 8.3
2.5 —
Losses (gains) and other expenses, net $ 9.2 $ 7.4
The charges incurred related to the COVID-19 pandemic related primarily to facility cleaning costs and sanitization supplies to ensure the health and
safety of our employees. The net change in unrealized losses on unsettled futures contracts was due to changes in commodity prices relative to the unsettled
futures contract prices. For more information on our derivatives, see Note 10 in the Notes to the Consolidated Financial Statements.
Foreign currency exchange gains decreased in 2021 primarily due to weakening in foreign exchange rates in our primary markets. The special legal
contingency charges in 2021 relate to outstanding legal settlements. The asbestos -related litigation relates to known and estimated future asbestos matters.
The environmental liabilities relate to estimated remediation costs for contamination at some of our facilities. Refer to Note 5 in the Notes to the
Consolidated Financial Statements for more information on litigation, including the asbestos -related litigation, and the environmental liabilities.
Restructuring Charges
Restructuring charges were $1.8 million in 2021 compared to $10.8 million in 2020. Charges in 2021 were related to ongoing cost reduction actions
taken in prior years. The charges in 2020 related primarily to several cost reduction actions taken in response to the economic impact of the COVID-19
pandemic on our business. These actions consisted of employee terminations for positions that were no longer needed to support the business, selective
facility closures, and cancellations of certain sales and marketing activities. For more information on our restructuring activities, see Note 7 in the Notes to
the Consolidated Financial Statements.
Goodwill
We performed a qualitative impairment analysis and noted no indicators of goodwill impairment for the year ended December 31, 2021. We did not
record any goodwill impairments in 2021 or 2020. Refer to Note 9 in the Notes to the Consolidated Financial Statements for more information on goodwill.
Asset Impairments
We did not have any impairments of assets in 2021 or 2020.
Pension Settlement
We did not have significant pension buyout activity in 2021 and 2020. Refer to Note 10 in the Notes to the Consolidated Financial Statements for more
information on pensions and employee benefit plans.
Income from Equity Method Investments
Investments over which we do not exercise control but have significant influence are accounted for using the equity method of accounting. Income from
equity method investments was $12 million in 2021 compared to $16 million in 2020. The decrease is due to rising production costs at the joint ventures.
23
Interest Expense, net
Net interest expense of $25 million in 2021 decreased from $28 million in 2020 primarily due to lower borrowing and lower borrowing costs.
Income Taxes
The income tax provision was $96 million in 2021 compared to $88 million in 2020, and the effective tax rate was 17.2% in 2021 compared to 19.8% in
2020. The 2021 and 2020 effective tax rates differ from the statutory rate of 2 1 % primarily due to state and foreign taxes. Refer to Note 12 in the Notes to
the Consolidated Financial Statements for more information on income taxes.
Year Ended December 31, 2021 Compared to Year Ended December 31, 2020 - Results by Segment
Residential Heating & Cooling
The following table presents our Residential Heating & Cooling segment's net sales and profit for 2021 and 2020 (dollars in millions):
For the Years Ended December 31,
2021 2020 Difference % Change
Net sales $ 2,775.6 $ 2,361.5 $ 414.1 18%
Profit $ 540.3 $ 428.5 $ 111.8 26%
% of net sales
19.5 % 18.1 %
Residential Heating & Cooling net sales increased 18% in 2021 compared to 2020. Sales volume increased 13%, price increased 5% and favorable
foreign currency exchange rates caused an increase of 1%. Partially offsetting these increases was a 1% reduction due to unfavorable product mix.
Segment profit in 2021 increased $112 million compared to 2020 due to $108 million from favorable pricing, $91 million from higher sales volume, $9
million from favorable foreign currency exchange, $5 million from higher factory productivity, and $2 million from sourcing and engineering -led cost
reductions. Partially offsetting these increases were $59 million from commodity costs, $20 million from higher warranty and other product costs, $14
million from higher SG&A, $5 million from unfavorable product mix, and $5 million from lower income from equity method investments.
Commercial Heating & Cooling
The following table presents our Commercial Heating & Cooling segment's net sales and profit for 2021 and 2020 (dollars in millions):
For the Years Ended December 31,
Net sales
Profit
% of net sales
2021 2020 Difference % Change
864.8 $ 800.9 $ 63.9 8 %
110.9 $ 136.9 $ (26.0) (19)%
12.8 % 17.1 %
Commercial Heating & Cooling net sales increased 8% in 2021 compared to 2020. Price and mix combined increased 4%, sales volume was 3% higher,
and foreign currency improved 1%.
Segment profit in 2021 decreased $26 million compared to 2020 due to $17 million from higher other product costs, $14 million from factory
inefficiencies, $6 million from sourcing and engineering -led cost increases, $6 million from higher commodity costs, $6 million from higher freight and
distribution costs, $4 million from higher SG&A costs, and $1 million from unfavorable foreign currency. Partially offsetting these declines was a favorable
increase in combined price and mix of $19 million and $9 million from higher sales volume.
Refrigeration
24
The following table presents our Refrigeration segment's net sales and profit for 2021 and 2020 (dollars in millions):
For the Years Ended December 31,
Net sales
Profit
% of net sales
2021 2020
553.7 $
49.1 $
8.9 %
471.7 $
32.8 $
7.0 %
Difference % Change
82.0 17 %
16.3 50 %
Net sales increased 17% in 2021 compared to 2020. Sales volume increased 14%, price increased 3%, and foreign currency improved 1%. Partially
offsetting these increases was a 1% reduction due to unfavorable mix.
Segment profit in 2021 increased $16 million compared to 2020 due to $23 million from higher sales volume, $13 million from higher price, $3 million
from higher factory productivity, and $1 million from higher income from equity method investments. Partially offsetting these increases were $10 million
from higher SG&A, $8 million from higher commodity costs, $2 million from higher other product costs, $2 million from unfavorable product mix, and $2
million from higher freight and distribution costs.
In November 2022, we announced the decision to explore strategic alternatives for our European commercial HVAC and refrigeration businesses. We
will continue to invest in our Heatcraft Worldwide Refrigeration business which will become part of the Commercial Heating & Cooling segment beginning
in 2023 and the European portfolio will be presented with Corporate and Other beginning in 2023 until disposition. As we will manage the businesses in
this manner beginning in 2023, we will present the financial results of the revised segments beginning in 2023. The European portfolio realized net sales of
$230 million in 2021 and $214 million in 2020 and generated losses of $5 million for both 2021 and 2020.
Corporate and Other
Corporate and other expenses increased by $5 million in 2021 compared to 2020 primarily due to increased headcount and increases in incentive
compensation costs.
Accounting for Futures Contracts
Realized gains and losses on settled futures contracts are a component of segment profit (loss). Unrealized gains and losses on unsettled futures
contracts are excluded from segment profit (loss) as they are subject to changes in fair value until their settlement date. Both realized and unrealized gains
and losses on futures contracts are a component of Losses (gains) and other expenses, net in the accompanying Consolidated Statements of Operations. See
Note 9 of the Notes to Consolidated Financial Statements for more information on our derivatives and Note 3 of the Notes to the Consolidated Financial
Statements for more information on our segments and for a reconciliation of segment profit to operating income.
Liquidity and Capital Resources
Our working capital and capital expenditure requirements are generally met through internally generated funds, bank lines of credit and an asset
securitization arrangement. Working capital needs are generally greater in the first and second quarters due to the seasonal nature of our business cycle.
Statement of Cash Flows
The following table summarizes our cash flow activity for the years ended December 31, 2022, 2021 and 2020 (in millions):
Net cash provided by operating activities
Net cash used in investing activities
Net cash used in financing activities
2022 2021 2020
302.3 $ 515.5 $ 612.4
(103.0) (106.4) (79.7)
(174.1) $ (498.7) $ (441.8)
Net Cash Provided By Operating Activities - Net cash provided by operating activities activities decreased $214 million to $302 million in 2022
compared to $516 million in 2021. The decrease was primarily attributable to increases in working capital including a $249 million increase in inventory
due to investments to replenish finished goods ahead of the minimum-
25
efficiency regulatory changes and in raw material to increase supply chain resiliency and a $112 million increase in accounts and notes receivable due to
higher sales volume. Partially offsetting the increased working capital was an increase in net income.
Net Cash Used In Investing Activities - Net cash used in investing activities decreased $3 million from 2021 to 2022 primarily due to lower capital
expenditures. Capital expenditures were $101 million, $107 million and $79 million in 2022, 2021 and 2020, respectively. Capital expenditures in 2022
were primarily related to the expansion of our manufacturing capacity including investments in our Commercial factory in Mexico, equipment, and
investments in systems and software to support the overall enterprise.
Net Cash Used In Financing Activities - Net cash used in financing activities was $174 million in 2022 and $499 million in 2021. The decrease is
primarily due to a decrease in share repurchases in 2022 which was partially offset by an increase in net borrowings and repayments on debt. During 2022
we repurchased $300 million of shares compared to $600 million of shares in 2021. We also returned $142 million to shareholders through dividend
payments in 2022. For additional information on share repurchases, refer to Note 6 in the Notes to the Consolidated Financial Statements.
Debt Position
The following table details our lines of credit and financing arrangements as of December 31, 2022 (in millions):
Outstanding
Borrowings
Current maturities of long-term debt.
Asset securitization program (1)
$ 350.0
Finance lease obligations
11.2
Senior unsecured notes
350.0
Debt issuance costs
(0.6)
Total current maturities of long -tern debt
$ 710.6
Long-term debt.
Finance lease obligations
28.3
Credit agreement (2)
192.0
Senior unsecured notes
600.0
Debt issuance costs
(6.1)
Total long-term debt
814.2
Total debt
$ 1,524.8
0) The maximum securitization amount ranges from $300.0 million to $450.0 million, depending on the period. The maximum capacity of the Asset
Securitization Program ("ASP") is the lesser of the maximum securitization amount or 100% of the net pool balance less reserves, as defined under the
ASP. Refer to Note 13 in the Notes to the Consolidated Financial Statements for more details.
�2> The total capacity on the facility is $750.0 million. The amount available future borrowings on our Credit Agreement is $556 million after being reduced
by the outstanding borrowings and $2 million in outstanding standby letters of credit as of December 31, 2022.
Both our Asset Securitization Program as well as our $350.0 million 2023 Notes will mature in 2023. We are currently evaluating our options related to
these obligations including refinancing and other alternatives. We do not believe that our options or alternatives will have any material impact on our results
of operations or liquidity.
Credit Agreement
In July 2021, we entered into a new Credit Agreement (the "Credit Agreement') with JPMorgan Chase Bank, N.A., as administrative agent, and the
other lenders party thereto, which refinanced and replaced the Seventh Amended and Restated Credit Facility.
26
The Credit Agreement provides for revolving credit commitments of $750 million with sublimits for swingline loans of up to $65 million, letters of
credit up to $100 million and revolving loans in certain non-U.S. currencies up to the U.S. dollar equivalent of $40 million. The Credit Agreement will
expire and outstanding loans will be required to be repaid in July 2026, unless maturity is extended by the lenders pursuant to two one-year extension
options that we may request under the Credit Agreement. At our request and subject to certain conditions, the revolving credit commitments under the
Credit Agreement may be increased by up to a total of $350 million to the extent that existing or new lenders agree to provide additional commitments.
The Credit Agreement is guaranteed by certain of our subsidiaries and contains customary covenants applicable to us and our subsidiaries including
limitations on indebtedness, liens, dividends, stock repurchases, mergers and sales of all or substantially all of its assets. In addition, the Credit Agreement
contains a financial covenant requiring us to maintain, as of the last day of each fiscal quarter for the four prior fiscal quarters, a Total Net Leverage Ratio
of no more than 3.50 to 1.00 (or, at our election, on up to two occasions following a material acquisition, 4.00 to 1.00). The Credit Agreement is subject to
customary events of default, including non-payment of principal or other amounts under the Credit Agreement, material inaccuracy of representations and
warranties, breach of covenants, cross -default to other indebtedness in excess of $75 million, judgements in excess of $75 million, certain voluntary and
involuntary bankruptcy events, and the occurrence of a change of control. As of December 31, 2022, we believe we were in compliance with all covenant
requirements.
Financial Leverage
We periodically review our capital structure, including our primary bank facility, to ensure the appropriate levels of liquidity and leverage and to take
advantage of favorable interest rate environments or other market conditions. We consider various other financing alternatives and may, from time to time,
access the capital markets.
We also evaluate our debt -to -capital and debt-to-EBITDA ratios to determine, among other considerations, the appropriate targets for capital
expenditures and share repurchases under our Share Repurchase Plans. Our book value of debt -to -total -capital ratio decreased to 115% at December 31,
2022 compared to 128% at December 31, 2021.
As of December 31, 2022, our senior credit ratings were Baa2 with a stable outlook, and BBB with a stable outlook, by Moody's Investors Service, Inc.
("Moody's") and Standard & Poor's Rating Group ("S&P"), respectively. The security ratings are not a recommendation to buy, sell or hold securities and
may be subject to revision or withdrawal at any time by the assigning rating agency. Each rating should be evaluated independently of any other rating. Our
goal is to maintain investment grade ratings from Moody's and S&P to help ensure the capital markets remain available to us.
Liquidity
We believe our cash and cash equivalents of $53 million, future cash generated from operations and available future borrowings are sufficient to fund
our operations, planned capital expenditures, future contractual obligations, share repurchases, anticipated dividends and other needs in the foreseeable
future. Included in our cash and cash equivalents as of December 31, 2022 was $23 million of cash held in foreign locations, although that amount can
fluctuate significantly depending on the timing of cash receipts and payments. Our cash and cash equivalents held in foreign locations is generally available
for use in our U.S. operations and could be subject to foreign withholding taxes and U.S. state taxes.
No contributions are required to be made to our U.S. defined benefit plans in 2023. We made $22.5 million in total contributions to pension plans in
2022.
Dividend payments were $142 million in 2022 compared to $127 million in 2021. On May 19, 2022, our Board of Directors approved a 15% increase in
our quarterly dividend on common stock from $0.92 to $1.06 per share effective with the July 2022 dividend payment.
We also continued to increase shareholder value through our Share Repurchase Plans. We returned $300 million to our investors through share
repurchases in 2022. Our Board of Directors authorized an incremental $1.0 billion of share repurchases in July 2021, and we had $546 million of
repurchases available under the Share Repurchase Plans at December 31, 2022. We expect to repurchase $200 million of shares in 2023.
We expect capital expenditures of approximately $250 million in 2023
Financial Covenants related to our Debt
27
Our Credit Agreement is guaranteed by certain of our subsidiaries and contains a financial covenant relating to leverage. Other covenants contained in
the our Credit Agreement restrict, among other things, certain mergers, asset dispositions, guarantees, debt, liens, and affiliate transactions. The financial
covenant requires us to maintain a defined Consolidated Indebtedness to Adjusted EBITDA Ratio of no greater than 3.5 : 1.0.
Our Credit Agreement contains customary events of default. These events of default include nonpayment of principal or other amounts, material
inaccuracy of representations and warranties, breach of covenants, default on certain other indebtedness or receivables securitizations (cross default),
certain voluntary and involuntary bankruptcy events and the occurrence of a change in control. A cross default under our credit facility could occur if:
• We fail to pay any principal or interest when due on any other indebtedness or receivables securitization exceeding $75.0 million; or
• We are in default in the performance of, or compliance with any term of any other indebtedness or receivables securitization in an aggregate
principal amount exceeding $75.0 million, or any other condition exists which would give the holders the right to declare such indebtedness due and
payable prior to its stated maturity.
Each of our major debt agreements contains provisions by which a default under one agreement causes a default in the others (a cross default). If a cross
default under our Credit Agreement, our senior unsecured notes, or our ASP were to occur, it could have a wider impact on our liquidity than might
otherwise occur from a default of a single debt instrument or lease commitment.
If any event of default occurs and is continuing, the administrative agent, or lenders with a majority of the aggregate commitments may require the
administrative agent to, terminate our right to borrow under our Credit Agreement and accelerate amounts due under our Credit Agreement (except for a
bankruptcy event of default, in which case such amounts will automatically become due and payable and the lenders' commitments will automatically
terminate).
In the event of a credit rating downgrade below investment grade resulting from a change of control, holders of our senior unsecured notes will have the
right to require us to repurchase all or a portion of the senior unsecured notes at a repurchase price equal to 101 % of the principal amount of the notes, plus
accrued and unpaid interest, if any. The notes are guaranteed, on a senior unsecured basis, by each of our subsidiaries that guarantee payment by us of any
indebtedness under our Credit Agreement. The indenture governing the notes contains covenants that, among other things, limit our ability and the ability of
the subsidiary guarantors to: create or incur certain liens; enter into certain sale and leaseback transactions; enter into certain mergers, consolidations and
transfers of substantially all of our assets; and transfer certain properties. The indenture also contains a cross default provision which is triggered if we
default on other debt of at least $75 million in principal which is then accelerated, and such acceleration is not rescinded within 30 days of the notice date.
As of December 31, 2022, we believe we were in compliance with all covenant requirements. Delaware law limits the ability to pay dividends to surplus
or, if there is no surplus, out of net profits for the fiscal year in which the dividend is declared and/or the preceding fiscal year. In addition, stock
repurchases can only be made out of surplus and only if our capital would not be impaired.
Leasing Commitments
Refer to Note 5 in the Notes to the Consolidated Financial Statements for more details on our leasing commitments.
Guarantees related to our Debt Obligations
Our senior unsecured notes were issued by Lennox International Inc. (the "Parent") and are unconditionally guaranteed by certain of our subsidiaries
(the "Guarantor Subsidiaries") and are not secured by our other subsidiaries. The Guarantor Subsidiaries are 100% owned and consolidated, all guarantees
are full and unconditional, and all guarantees are joint and several.
Off Balance Sheet Arrangements
We have no off -balance sheet arrangements that we believe may have a material current or future effect on our financial condition, liquidity or results of
operations.
28
Contractual Obligations
Contractual obligations arise in the normal course of business and include debt and related interest payments, leases, purchase obligations, pension and
post -retirement benefits and warranty liabilities. For additional information regarding our contractual obligations, see Note 5 of the Notes to the
Consolidated Financial Statements. See Note 10 of the Notes to the Consolidated Financial Statements for more information on our pension and post -
retirement benefits obligations. See Note 13 of the Notes to the Consolidated Financial Statements for more information on our debt obligations.
Fair Value Measurements
Fair value is the price that would be received to sell an asset or the price paid to transfer a liability in an orderly transaction between market participants
at the measurement date. Fair value is based upon the transparency of inputs to the valuation of an asset or liability as of the measurement date and requires
consideration of our creditworthiness when valuing certain liabilities. Our framework for measuring fair value is based on a three -level hierarchy for fair
value measurements.
The three -level fair value hierarchy for disclosure of fair value measurements is defined as follows:
Level 1 - Quoted prices for identical instruments in active markets at the measurement date.
Level 2 - Quoted prices for similar instruments in active markets; quoted prices for identical or similar instruments in markets that are not active; and
model -derived valuations in which all significant inputs and significant value drivers are observable in active markets at the measurement
date and for the anticipated term of the instrument.
Level 3 - Valuations derived from valuation techniques in which one or more significant inputs or significant value drivers are unobservable inputs that
reflect the reporting entity's own assumptions about the assumptions market participants would use in pricing the asset or liability
developed based on the best information available in the circumstances.
Where available, the fair values were based upon quoted prices in active markets. However, if quoted prices were not available, then the fair values were
based upon quoted prices for similar assets or liabilities or independently sourced market parameters, such as credit default swap spreads, yield curves,
reported trades, broker/dealer quotes, interest rates and benchmark securities. For assets and liabilities without observable market activity, if any, the fair
values were based upon discounted cash flow methodologies incorporating assumptions that, in our judgment, reflect the assumptions a marketplace
participant would use. Valuation adjustments to reflect either parry's creditworthiness and ability to pay were incorporated into our valuations, where
appropriate, as of December 31, 2022 and 2021, the measurement dates. See Note 16 of the Notes to the Consolidated Financial Statements for more
information on the assets and liabilities measured at fair value.
Market Risk
Commodity Price Risk
We enter into commodity futures contracts to stabilize prices expected to be paid for raw materials and parts containing high copper and aluminum
content. These contracts are for quantities equal to or less than quantities expected to be consumed in future production. Fluctuations in metal commodity
prices impact the value of the futures contracts that we hold. When metal commodity prices rise, the fair value of our futures contracts increases.
Conversely, when commodity prices fall, the fair value of our futures contracts decreases. Information about our exposure to metal commodity price market
risks and a sensitivity analysis related to our metal commodity hedges is presented below (in millions):
Notional amount (pounds of aluminum and copper) 56.6
Carrying amount and fair value of net asset $ (7.5)
Change in fair value from 10% change in forward prices $ 10.1
Refer to Note 9 of the Notes to the Consolidated Financial Statements for additional information regarding our commodity futures contracts.
Interest Rate Risk
29
Our results of operations can be affected by changes in interest rates due to variable rates of interest on our debt facilities, cash, cash equivalents and
short -tern investments. A 10% adverse movement in the levels of interest rates across the entire yield curve would have resulted in an increase to pre-tax
interest expense of approximately $1.7 million, $0.4 million and $1.3 million for the years ended December 31, 2022, 2021 and 2020, respectively.
From time to time, we may use an interest rate swap hedging strategy to eliminate the variability of cash flows in a portion of our interest payments.
This strategy, when employed, allows us to fix a portion of our interest payments while also taking advantage of historically low interest rates. As of
December 31, 2022 and 2021, no interest rate swaps were in effect.
Foreign Currency Exchange Rate Risk
Our results of operations are affected by changes in foreign currency exchange rates. Net sales and expenses in foreign currencies are translated into
U.S. dollars for financial reporting purposes based on the average exchange rate for the period. Our primary exposure to foreign currencies are the Canadian
dollar, Mexican Peso, and the Euro. During 2022, 2021 and 2020, net sales from outside the U.S. represented 11.4%, 13.1% and 13.0%, respectively, of our
total net sales. For the years ended December 31, 2022, 2021, and 2020, foreign currency transaction gains and losses did not have a material impact to our
results of operations. A 10% change in foreign exchange rates would have had an estimated $3.5 million, $2.7 million and $0.6 million impact to net
income for the years ended December 31, 2022, 2021 and 2020, respectively.
We seek to mitigate the impact of currency exchange rate movements on certain short-term transactions by periodically entering into foreign currency
forward contracts. By entering into forward contracts, we lock in exchange rates that would otherwise cause losses should the U.S. dollar appreciate and
gains should the U.S. dollar depreciate. Refer to Note 9 of the Notes to the Consolidated Financial Statements for additional information regarding our
foreign currency forward contracts.
Critical Accounting Estimates
A critical accounting estimate is one that requires difficult, subjective or complex estimates and assessments and is fundamental to our results of
operations and financial condition. The following describes our critical accounting estimate related to product warranties and product -related contingencies
and how we develop our judgments, assumptions and estimates about future events and how such policies can impact our financial statements. This
discussion and analysis should be read in conjunction with our Consolidated Financial Statements and related Notes in "Item 8. Financial Statements and
Supplementary Data."
Product Warranties and Product -Related Contingencies
The estimate of our liability for future warranty costs requires us to make assumptions about the amount, timing and nature of future product -related
costs. Some of the warranties we issue extend 10 years or more in duration and a relatively small adjustment to an assumption may have a significant
impact on our overall liability.
From time to time, we may also incur costs to repair or replace installed products experiencing quality issues in order to satisfy our customers and
protect our brand. These product -related costs may not be covered under our warranties and are not covered by insurance.
We periodically review the assumptions used to determine the liabilities for product warranties and product -related contingencies and we adjust our
assumptions based upon factors such as actual failure rates and cost experience. Numerous factors could affect actual failure rates and cost experience,
including the amount and timing of new product introductions, changes in manufacturing techniques or locations, components or suppliers used. Should
actual costs differ from our estimates, we may be required to adjust the liabilities and to record expense in future periods. See Note 5 in the Notes to the
Consolidated Financial Statements for more information on our product warranties and product -related contingencies.
Recent Accounting Pronouncements
See Note 2 in the Notes to the Consolidated Financial Statements for disclosure of recent accounting pronouncements and the potential impact on our
financial statements and disclosures.
Item 7A. Quantitative and Qualitative Disclosures About Market Risk
The information required by this item is included under the caption "Market Risk" in Item 7 above.
30
Item 8. Financial Statements and Supplementary Data
MANAGEMENT'S REPORT ON INTERNAL CONTROL OVER FINANCIAL REPORTING
Our management is responsible for establishing and maintaining adequate internal control over financial reporting. As defined by the Securities and
Exchange Commission, internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial
reporting and the preparation of the Consolidated Financial Statements in accordance with U.S. generally accepted accounting principles.
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of
effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of
compliance with the policies or procedures may deteriorate.
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, 2022, based on criteria established in Internal Control - Integrated Framework (2013) by the
Committee of Sponsoring Organizations of the Treadway Commission. Management's assessment included an evaluation of the design of the Company's
internal control over financial reporting and testing of the operational effectiveness of those controls.
Based on this assessment, management concluded that as of December 31, 2022, the Company's internal control over financial reporting was effective.
KPMG LLP, the independent registered public accounting firm that audited the Company's 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, 2022, a copy of which is included herein.
31
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Stockholders and Board of Directors
Lennox International Inc.:
Opinions on the Consolidated Financial Statements and Internal Control Over Financial Reporting
We have audited the accompanying consolidated balance sheets of Lennox International Inc. and subsidiaries (the Company) as of December 31, 2022 and
2021, the related consolidated statements of operations, comprehensive (loss) income, stockholders' deficit, and cash flows for each of the years in the
three-year period ended December 31, 2022, 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, 2022, based on criteria
established in Internal Control — Integrated 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, 2022 and 2021, and the results of its operations and its cash flows for each of the years in the three-year period ended December 31, 2022, 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, 2022 based on criteria established in Internal Control — Integrated Framework (2013) issued by the
Committee of Sponsoring Organizations of the Treadway Commission.
Basis for Opinions
The Company's management is responsible for these consolidated financial statements, for maintaining effective internal control over financial reporting,
and for its assessment of the effectiveness of internal control over financial reporting, included in the accompanying Management's Report on Internal
Control Over Financial Reporting. Our responsibility is to express an opinion on the Company's consolidated financial statements and an opinion on the
Company's internal control over financial reporting based on our audits. We are a public accounting firm registered with the Public Company Accounting
Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Company in accordance with the U.S. federal securities
laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audits to obtain reasonable
assurance about whether the consolidated financial statements are free of material misstatement, whether due to error or fraud, and whether effective
internal control over financial reporting was maintained in all material respects.
Our audits of the consolidated financial statements included performing procedures to assess the risks of material misstatement of the consolidated financial
statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis,
evidence regarding the amounts and disclosures in the consolidated financial statements. Our audits also included evaluating the accounting principles used
and significant estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements. Our audit of internal
control over financial reporting included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness
exists, and testing and evaluating the design and operating effectiveness of internal control based on the assessed risk. Our audits also included performing
such other procedures as we considered necessary in the circumstances. We believe that our audits provide a reasonable basis for our opinions.
Definition and Limitations of Internal Control Over Financial Reporting
A company's internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting
and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company's internal control
over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly
reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit
preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are
being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding
prevention or timely detection of unauthorized acquisition, use, or disposition of the company's assets that could have a material effect on the financial
statements.
32
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of
effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of
compliance with the policies or procedures may deteriorate.
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 judgments. 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 liahility
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 $142.7 million as of December 31,
2022.
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 category by year, and estimated cost per failure, involved subjective and
complex auditor judgment.
The following are the primary procedures we performed to address this critical audit matter. We evaluated the design and tested the operating
effectiveness of 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.
/s/ KPMG LLP
We have served as the Company's auditor since 2002.
Dallas, Texas
February 21, 2023
33
LENNOX INTERNATIONAL INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(In millions, except shares and par values)
As of December 31,
2022
2021
ASSETS
Current Assets:
Cash and cash equivalents
$ 52.6 $
31.0
Short-term investments
8.5
5.5
Accounts and notes receivable, net of allowances of $15.5 and $10.7 in 2022 and 2021, respectively
608.5
508.3
Inventories, net
753.0
510.9
Other assets
73.9
119.7
Total current assets
1,496.5
1,175.4
Property, plant and equipment, net of accumulated depreciation of $920.8 and $888.8 in 2022 and 2021, respectively
548.9
515.1
Right -of -use assets from operating leases
219.9
196.1
Goodwill
186.3
186.6
Deferred income taxes
27.5
11.3
Other assets, net
88.5
87.4
Total assets
$ 2,567.6 $
2,171.9
LIABILITIES AND STOCKHOLDERS' DEFICIT
Current Liabilities:
Current maturities of long-term debt
710.6
11.3
Current operating lease liabilities
63.3
54.8
Accounts payable
427.3
402.1
Accrued expenses
376.9
358.9
Income taxes payable
17.6
-
Total current liabilities
1,595.7
827.1
Long-term debt
814.2
1,226.5
Long-term operating lease liabilities
161.8
145.0
Pensions
40.1
83.3
Other liabilities
158.9
159.0
Total liabilities
2,770.7
2,440.9
Commitments and contingencies
Stockholders' deficit:
Preferred stock, $0.01 par value, 25,000,000 shares authorized, no shares issued or outstanding
Common stock, $0.01 par value, 200,000,000 shares authorized, 87,170,197 shares issued
0.9
0.9
Additional paid -in capital
1,155.2
1,133.7
Retained earnings
3,070.6
2,719.3
Accumulated other comprehensive loss
(90.6)
(88.1)
Treasury stock, at cost, 51,700,260 shares and 50,536,125 shares for 2022 and 2021, respectively
(4,339.2)
(4,034.8)
Total stockholders' deficit
(203.1)
(269.0)
Total liabilities and stockholders' deficit
$ 2,567.6 $
2,171.9
The accompanying notes are an integral part of these Consolidated Financial Statements.
34
LENNOX INTERNATIONAL INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(In millions, except per share data)
For the Years Ended December 31,
Net sales
Cost of goods sold
Gross profit
Operating expenses:
Selling, general and administrative expenses
Losses (gains) and other expenses, net
Restructuring charges
Loss from natural disasters, net of insurance recoveries
Income from equity method investments
Operating income
Pension settlements
Interest expense, net
Other expense (income), net
Income from continuing operations before income taxes
Provision for income taxes
Income from continuing operations
Discontinued operations:
Loss from discontinued operations before income taxes
Income tax benefit
Loss from discontinued operations
Net income
Earnings per share - Basic:
Income from continuing operations
Loss from discontinued operations
Net income
Earnings per share - Diluted.
Income from continuing operations
Loss from discontinued operations
Net income
Weighted Average Number of Shares Outstanding - Basic
Weighted Average Number of Shares Outstanding - Diluted
$ 4,718.4 $ 4,194.1 $ 3,634.1
3.433.7 3.005.7 9,5940
627.2
598.9
555.9
4.9
9.2
7.4
1.5
1.8
10.8
3.1
(5.1)
(11.8)
(15.6)
656.2
590.3
478.5
(0.2)
1.2
0.6
38.7
25.0
28.3
1.9
4.0
4.4
615.8
118.7
497.1
$ 497.1 $
560.1 445.2
96.1 88.1
464.0 357.1
(1.5)
(0.7)
(0.8)
$ 13.92
$
12.47
$
9.32
(0.02)
$ 13.92
$
12.47
$
9.30
$ 13.88
$
12.39
$
9.26
(0.02)
$ 13.88
$
12.39
$
9.24
35.7
37.2
38.3
35.8
37.5
38.6
The accompanying notes are an integral part of these Consolidated Financial Statements.
35
LENNOX INTERNATIONAL INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF COMPREHENSIVE (LOSS) INCOME
(In millions)
Net income
Other comprehensive income (loss):
Foreign currency translation adjustments
Net change in pension and post -retirement benefit liabilities
Net change in fair value of cash flow hedges
Reclassification of pension and post -retirement benefit losses into earnings
Pension settlements
Share of equity method investments other comprehensive income
Reclassification of cash flow hedge (gains) losses into earnings
Other comprehensive (income) loss before taxes
Tax benefit (expense)
Other comprehensive (loss) income, net of tax
Comprehensive income
For the Years Ended December 31,
enq,l InIn
$ 497.1 $
464.0 $
356.3
(10.2)
(7.3)
0.8
20.4
11.8
(8.7)
(9.9)
29.8
7.0
5.4
7.9
5.9
(0.2)
1.2
0.6
0.7
-
(1.2)
(9.7)
(26.9)
3.7
$ (3.5) $
16.5 $
8.1
1.0
(7.4)
(1.5)
(2.5)
9.1
6.6
N nnn r @
A^71 1 N
2L7 n
The accompanying notes are an integral part of these Consolidated Financial Statements.
36
LENNOX INTERNATIONAL INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' DEFICIT
For the Years Ended December 31, 2022, 2021 and 2020
(In millions, except per share data)
Accumulated
Treasury Stock at
Common
Additional
Other
Cost
Total
Stock
Paid -In
Retained
Comprehensive
Stockholders'
Issued
Capital
Earnings
Loss
Shares
Amount
Deficit
Balance as of December 31, 2019
0.9
1,093.5
2,148.7
(103.8)
48.6
(3,309.5)
(170.2)
Cumulative effect adjustment upon adoption of new accounting standard
(ASU 2016-13)
0
(1.3)
0
0
0
(1.3)
Net income
-
-
356.3
-
-
-
356.3
Dividends, $3.08 per share
-
-
(117.9)
-
-
-
(117.9)
Foreign currency translation adjustments
0.8
0.8
Pension and post -retirement liability changes, net of tax expense of $1.0
-
-
-
(1.2)
-
-
(1.2)
Share of equity method investments other comprehensive income
-
-
-
(1.2)
-
-
(1.2)
Stock -based compensation expense
-
24.3
-
-
-
24.3
Change in cash flow hedges, net of tax expense of $2.5
-
-
-
8.2
-
-
8.2
Treasury shares reissued for common stock
-
(4.6)
-
(0.3)
7.6
3.0
Treasury stock purchases
0.5
(117.9)
(117.9)
Balance as of December 31, 2020
0.9
1,113.2
2,385.8
(97.2)
48.8
(3,419.8)
(17.1)
Net income
-
-
464.0
-
-
-
464.0
Dividends, $3.53 per share
-
-
(130.5)
-
-
-
(130.5)
Foreign currency translation adjustments
-
-
-
(7.3)
-
-
(7.3)
Pension and post -retirement liability changes, net of tax expense of $7.0
-
-
13.9
-
13.9
Stock -based compensation expense
24.3
-
-
-
24.3
Change in cash flow hedges, net of tax expense of $0.4
-
2.5
2.5
Treasury shares reissued for common stock
(3.8)
-
(0.2)
7.1
3.3
Treasury stock purchases
1.9
(622.1)
(622.1)
Balance as of December 31, 2021
0.9
1,133.7
2,719.3
(88.1)
50.5
(4,034.8)
(269.0)
Net income
497.1
497.1
Dividends, $4.10 per share
-
(145.8)
-
-
(145.8)
Foreign currency translation adjustments
-
-
-
(10.2)
-
-
(10.2)
Pension and post -retirement liability changes, net of tax expense of $3.0
22.6
22.6
Share of equity method investments other comprehensive income
-
-
-
0.7
-
-
0.7
Stock -based compensation expense
-
21.8
-
-
-
-
21.8
Change in cash flow hedges, net of tax benefit of $4.0
-
(15.6)
-
-
(15.6)
Treasury shares reissued for common stock
-
(0.3)
-
-
(0.1)
3.9
3.6
Treasury stock purchases
1.3
(308.3)
(308.3)
Balance as of December 31, 2022
0.9
1,155.2
3,070.6
(90.6)
51.7
(4,339.2)
(203.1)
The accompanying notes are an integral part of these Consolidated Financial Statements
37
LENNOX INTERNATIONAL INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
For the Years Ended December 31, 2022, 2021 and 2020
(In millions)
2022
2021
2020
Cash flows from operating activities:
Net income
$
497.1
$ 464.0
$ 356.3
Adjustments to reconcile net income to net cash provided by operating activities:
Income from equity method investments
(5.1)
(11.8)
(15.6)
Dividends from affiliates
1.7
9.1
12.3
Restructuring charges, net of cash paid
1.0
1.1
3.4
Provision for credit losses
6.9
4.9
8.1
Unrealized losses (gains), net on derivative contracts
1.7
(0.6)
0.3
Stock -based compensation expense
21.8
24.3
24.3
Depreciation and amortization
77.9
72.4
72.6
Deferred income taxes
(15.2)
(5.4)
7.2
Pension expense
6.0
11.3
10.5
Pension contributions
(22.5)
(1.5)
(3.3)
Other items, net
(L1)
0.3
0.2
Changes in assets and liabilities:
Accounts and notes receivable
(112.4)
(68.8)
26.5
Inventories
(249.3)
(71.0)
110.3
Other current assets
(7.3)
(19.2)
5.3
Accounts payable
28.2
55.2
(31.7)
Accrued expenses
13.7
64.2
35.4
Income taxes payable and receivable, net
56.4
(26.5)
(5.7)
Leases, net
1.7
0.2
2.1
Other, net
1.1
13.3
(6.1)
Net cash provided by operating activities
302.3
515.5
612.4
Cash flows from investing activities:
Proceeds from the disposal of property, plant and equipment
1.6
0.9
1.0
Purchases ofproperty, plant and equipment
(101.1)
(106.8)
(78.5)
Purchases of short-term investments, net
(3.5)
(0.5)
(2.2)
Net cash used in investing activities
(103.0)
(106.4)
(79.7)
Cash flows from financing activities:
Short -tern debt payments
(4.6)
Short-term debt borrowings
4.6
Asset securitization borrowings
407.0
627.0
91.0
Asset securitization payments
(307.0)
(377.0)
(376.0)
Long-term debt payments
(12.9)
(12.3)
(10.8)
Long-term debt borrowings
600.0
Borrowings from credit facility
2,537.5
1,162.5
1,576.0
Payments on credit facility
(2,352.0)
(1,156.0)
(2,081.5)
Payments of deferred financing costs
-
2.4
(7.5)
Proceeds from employee stock purchases
3.6
3.3
3.0
Repurchases of common stock
(300.0)
(600.0)
(100.0)
Repurchases of common stock to satisfy employee withholding tax obligations
(8.3)
(22.1)
(17.9)
Cash dividends paid
(142.0)
(126.5)
(118.1)
Net cash used in financing activities
(174.1)
(498.7)
(441.8)
Increase (decrease) in cash and cash equivalents
25.2
(89.6)
90.9
Effect of exchange rates on cash and cash equivalents
(3.6)
(3.3)
(4.3)
Cash and cash equivalents, beginning of year
31.0
123.9
37.3
Cash and cash equivalents, end of year
$
52.6
$ 31.0
$ 123.9
Supplemental disclosures of cash flow information:
Cash paid during the period for:
Interest paid
$
35.4
$ 23.8
$ 25.3
Income taxes paid (net of refunds)
$
77.2
$ 128.5
$ 90.3
Insurance recoveries received
$
-
$ 6.6
$ -
The accompanying notes are an integral part of these Consolidated Financial Statements.
38
LENNOX INTERNATIONAL INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. Nature of Operations:
Lennox International Inc., a Delaware corporation, through its subsidiaries (referred to herein as "we," "our," "us," "LII," or the "Company"), is a
leading global provider of climate control solutions. We design, manufacture, market and service a broad range of products for the heating, ventilation, air
conditioning and refrigeration ("HVACR") markets and sell our products and services through a combination of direct sales, distributors and company -
owned parts and supplies stores. We operate in three reportable business segments: Residential Heating & Cooling, Commercial Heating & Cooling, and
Refrigeration. See Note 3 for financial information regarding our reportable segments.
2. Summary of Significant Accounting Policies:
Principles of Consolidation
The consolidated financial statements include the accounts of Lennox International Inc. and our majority -owned subsidiaries. All intercompany
transactions, profits and balances have been eliminated.
Cash and Cash Equivalents
We consider all highly liquid temporary investments with original maturity dates of three months or less to be cash equivalents. Cash and cash
equivalents consisted primarily of bank deposits.
Short term Investments
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.
Accounts and Notes Receivable
Accounts and notes receivable are shown in the accompanying Consolidated Balance Sheet, net of allowance for doubtful accounts. The allowance for
doubtful accounts is generally established during the period in which receivables are recognized and is based on the age of the receivables and
management's judgment on our ability to collect. Management considers the historical trends of write-offs and recoveries of previously written -off
accounts, the financial strength of customers and projected economic and market conditions. We determine the delinquency status of receivables
predominantly based on contractual terns and we write-off uncollectible receivables after management's review of our ability to collect, as noted above. We
have no significant concentrations of credit risk within our accounts and notes receivable.
Inventories
Inventory costs include material, labor, and capitalized overhead. Inventories of $465.5 million and $302.2 million as of December 31, 2022 and 2021,
respectively, were valued at the lower of cost or net realizable value using the last -in, first -out ("LIFO") cost method. The remainder of inventory is valued
at the lower of cost or net realizable value with cost determined primarily using either the first -in, first -out ("FIFO") or average cost methods.
We elected to use the LIFO cost method for our domestic manufacturing companies in 1974 and continued to elect the LIFO cost method for new
operations through the late 1980s. The types of inventory costs that use LIFO include raw materials, purchased components, work -in -process, repair parts
and finished goods. Since the late 1990s, we have adopted the FIFO cost method for all new domestic manufacturing operations (primarily acquisitions).
Our operating entities with a previous LIFO election continue to use the LIFO cost method. We use the FIFO cost method for our foreign -based
manufacturing facilities. See Note 9 for more information on our inventories.
Property, Plant and Equipment
Property, plant and equipment is stated at cost, net of accumulated depreciation. Expenditures that increase the utility or extend the useful lives of fixed
assets are capitalized while expenditures for maintenance and repairs are charged to expense as incurred.
39
Depreciation is computed using the straight-line method over the following estimated useful lives
Buildings and improvements:
Buildings and improvements
2 to 40 years
Leasehold improvements
1 to 39 years
Machinery and equipment:
Computer hardware
3 to 5 years
Computer software
3 to 10 years
Factory machinery and equipment
1 to 15 years
Research and development equipment
3 to 5 years
Vehicles
3 to 10 years
We periodically review long-lived assets for impairment as events or changes in circumstances indicate that the carrying amount of such assets might
not be recoverable. To assess recoverability, we compare the estimated expected future undiscounted cash flows identified with each long-lived asset or
related asset group to the carrying amount of such assets. If the expected future cash flows do not exceed the carrying value of the asset or assets being
reviewed, an impairment loss is recognized based on the excess of the carrying amount of the impaired assets over their fair value. See Note 9 for additional
information on our property, plant and equipment.
Goodwill
Goodwill represents the excess of cost over fair value of assets from acquired businesses. Goodwill is not amortized, but is reviewed for impairment
annually during the third quarter and whenever events or changes in circumstances indicate the asset may be impaired. See Note 9 for additional
information on our goodwill.
The provisions of the accounting standard for goodwill allow us to first assess qualitative factors to determine whether it is necessary to perform a
quantitative goodwill impairment test. As part of our qualitative assessment, we monitor economic, legal, regulatory and other factors, industry trends, our
market capitalization, recent and forecasted financial performance of our reporting units and the timing and nature of our restructuring activities for LII as a
whole and for each reporting unit.
If a quantitative goodwill impairment test is determined to be necessary, we estimate reporting unit fair values using a combination of the discounted
cash flow approach and a market approach. The discounted cash flows used to estimate fair value are based on assumptions regarding each reporting unit's
estimated projected future cash flows and the estimated weighted -average cost of capital that a market participant would use in evaluating the reporting unit
in a purchase transaction. The estimated weighted -average cost of capital is based on the risk -free interest rate and other factors such as equity risk
premiums and the ratio of total debt to equity capital. In performing these impairment tests, we take steps to ensure that appropriate and reasonable cash
flow projections and assumptions are used. We reconcile our estimated enterprise value to our market capitalization and determine the reasonableness of the
cost of capital used by comparing to market data. We also perform sensitivity analyses on the key assumptions used, such as the weighted -average cost of
capital and terminal growth rates. The market approach is based on objective evidence of market values.
Product Warranties
For some of our heating, ventilation and air conditioning ("HVAC") products, we provide warranty terms ranging from one to 20 years to customers for
certain components such as compressors or heat exchangers. For select products, we also provide limited lifetime warranties. A liability for estimated
warranty expense is recorded in cost of goods sold on the date that revenue is recognized. Our estimates of future warranty costs are determined by product
category. The number of units we expect to repair or replace is determined by applying an estimated failure rate, which is generally based on historical
experience, to the number of units that were sold and are still under warranty. In most cases, the estimated units to be repaired under warranty are multiplied
by the estimated cost of replacement parts to determine the estimated future warranty cost. We do not discount product warranty liabilities as the amounts
are not fixed and the timing of future cash payments is neither fixed nor reliably determinable. We also provide for specifically -identified warranty
obligations. Estimated future warranty costs are subject to adjustment depending on changes in actual failure rate and cost experience. Subsequent costs
incurred for warranty claims serve to reduce the accrued product warranty liability. See Note 5 for more information on our estimated future warranty costs.
40
Pensions and Post -retirement Benefits
We provide pension and post -retirement medical benefits to eligible domestic and foreign employees and we recognize pension and post -retirement
benefit costs over the estimated service life or average life expectancy of those employees. We also recognize the funded status of our benefit plans, as
measured at year-end by the difference between plan assets at fair value and the benefit obligation, in the Consolidated Balance Sheet. Changes in the
funded status are recognized in the year in which the changes occur through Accumulated other comprehensive loss ("AOCL"). Actuarial gains or losses
are amortized into net period benefit cost over the estimated service life of covered employees or average life expectancy of participants depending on the
plan.
The benefit plan assets and liabilities reflect assumptions about the long-range performance of our benefit plans. Should actual results differ from
management's estimates, revisions to the benefit plan assets and liabilities would be required. See Note 10 for information regarding those estimates and
additional disclosures on pension and post -retirement medical benefits.
Self -Insurance
Self-insurance expense and liabilities were actuarially determined based primarily on our historical claims information, industry factors, and trends. The
self-insurance liabilities as of December 31, 2022 represent the best estimate of the future payments to be made on reported and unreported losses for 2022
and prior years. The amounts and timing of payments for claims reserved may vary depending on various factors, including the development and ultimate
settlement of reported and unreported claims. To the extent actuarial assumptions change and claims experience rates differ from historical rates, our
liabilities may change. See Note 5 for additional information on our self -insured risks and liabilities.
Derivatives
We use futures contracts, forward contracts and fixed forward contracts to mitigate our exposure to volatility in metal commodity prices and foreign
exchange rates. We hedge only exposures in the ordinary course of business and do not hold or trade derivatives for profit. All derivatives are recognized in
the Consolidated Balance Sheet at fair value and the classification of each derivative instrument is based upon whether the maturity of the instrument is less
than or greater than 12 months. See Note 9 for more information on our derivatives.
Leases
We lease certain real and personal property under non -cancelable leases including real estate, IT equipment, fleet vehicles and manufacturing and
distribution equipment. At inception of the lease, we determine a lease exists if the contract conveys the right to control an identified asset for a period of
time in exchange for consideration. Control is considered to exist when the lessee has the right to obtain substantially all the economic benefits from the use
of an identified asset as well as the right to direct the use of the asset. If a contract is considered to be a lease, we recognize a lease liability based on the
present value of the future minimum lease payments and a right -of -use asset. For contracts that are 12 months or less, we do not to recognize a right -of -use
asset or liability. We do not separate non -lease components from the lease components to which they relate and account for the combined lease and non -
lease components as a single lease component.
Income Taxes
We recognize deferred tax assets and liabilities for the future tax consequences attributable to differences between the financial statement carrying
amounts of existing assets and liabilities and their respective tax bases and operating loss and tax credit carry forwards. Deferred tax assets and liabilities
are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or
settled. The effect of a change in tax rates on deferred tax assets and liabilities is recognized in income in the period that includes the enactment date.
Unrecognized tax benefits are accounted for as required by the Financial Accounting Standards Board ("FASB") Accounting Standards Codification
("ASC") Topic 740. See Note 12 for more information related to income taxes.
Revenue Recognition
Our revenue recognition practices for the sale of goods depend upon the shipping terms for each transaction. Shipping terms are primarily FOB
Shipping Point and, therefore, revenue is recognized for these transactions when products are shipped to customers and title and control passes. Certain
customers in our smaller operations, primarily outside of North America, have shipping terms where risks and rewards of ownership do not transfer until
the product is delivered to the customer. For these transactions, revenue is recognized on the date that the product is received and accepted by such
customers. We experience
41
returns for miscellaneous reasons and record a reserve for these returns at the time we recognize revenue based on historical experience. Our historical rates
of return are insignificant as a percentage of sales. We also recognize revenue net of sales taxes. We have elected to recognize the revenue and cost for
freight and shipping when control over the sale of goods passes to our customers. See Note 8 for more information on our revenue recognition practices.
Cost of Goods Sold
The principal elements of cost of goods sold are components, raw materials, factory overhead, labor, estimated costs of warranty expense, and freight
and distribution costs.
Selling, General and Administrative Expenses
SG&A expenses include payroll and benefit costs, advertising, commissions, research and development, information technology costs, and other selling,
general and administrative related costs such as insurance, travel, non -production depreciation, and rent.
Stock -Based Compensation
We recognize compensation expense for stock -based arrangements over the required employee service periods. We measure stock -based compensation
costs based on the estimated grant -date fair value of the stock -based awards that are expected to ultimately vest and we adjust expected vesting rates to
actual rates as additional information becomes known. For stock -based arrangements with performance conditions, we periodically adjust performance
achievement rates based on our best estimates of those rates at the end of the performance period. See Note 15 for more information.
Translation of Foreign Currencies
All assets and liabilities of foreign subsidiaries and joint ventures are translated into U.S. dollars using rates of exchange in effect at the balance sheet
date. Revenue and expenses are translated at weighted average exchange rates during the year. Unrealized translation gains and losses are included in
AOCL in the accompanying Consolidated Balance Sheets. Transaction gains and losses are included in Losses (gains) and other expenses, net in the
accompanying Consolidated Statements of Operations.
Use of Estimates
The preparation of financial statements requires us to make estimates and assumptions about future events. These estimates and the underlying
assumptions affect the amounts of assets and liabilities reported, disclosures about contingent assets and liabilities, and reported amounts of revenue and
expenses. Such estimates include the valuation of accounts receivable, inventories, goodwill, intangible assets and other long-lived assets, contingencies,
product warranties, and assumptions used in the calculation of income taxes, pension and post -retirement medical benefits, and stock -based compensation
among others. These estimates and assumptions are based on our best estimates and judgment.
We evaluate these estimates and assumptions on an ongoing basis using historical experience and other factors, including the current economic
environment. We believe these estimates and assumptions to be reasonable under the circumstances and will adjust such estimates and assumptions when
facts and circumstances dictate. Volatile equity, foreign currency and commodity markets and uncertain future economic conditions combine to increase the
uncertainty inherent in such estimates and assumptions. Future events and their effects cannot be determined with precision and actual results could differ
significantly from these estimates. Changes in these estimates resulting from continuing changes in the economic environment will be reflected in the
financial statements in future periods.
Impact of COVID-19 Pandemic
A novel strain of coronavirus ("COVID-19") has surfaced and spread around the world. The COVID-19 pandemic is creating supply chain disruptions
and higher employee absenteeism in our factories and distribution locations since 2020. We cannot predict whether any of our manufacturing, operational or
distribution facilities will experience any future disruptions, or how long such disruptions would last. It also remains unclear how various national, state,
and local governments will react if new variants of the virus spread. If the pandemic worsens or continues longer than presently expected, COVID-19 could
impact our results of operations, financial position and cash flows.
42
3. Reportable Business Segments:
Description of Segments
We operate in three reportable business segments of the HVACR industry. Our segments are organized primarily by the nature of the products and
services we provide. The following table describes each segment:
Segment Products or Services
Markets Served
Geographic Areas
Residential Heating
Furnaces, air conditioners, heat pumps, packaged heating and
Residential Replacement;
United States
& Cooling
cooling systems, indoor air quality equipment, comfort
Residential New Construction
Canada
control products, replacement parts and supplies
Commercial
Unitary heating and air conditioning equipment, applied
Light Commercial
United States
Heating & Cooling
systems, controls, installation and service of commercial
Canada
heating and cooling equipment, variable refrigerant flow
commercial products
Refrigeration(])
Condensing units, unit coolers, fluid coolers, air- cooled
Light Commercial;
United States
condensers, air handlers, process chillers, controls, and
Food Preservation;
Canada
compressorized racks
Non-Food/Industrial
Europe
0) In November 2022, we announced the decision to explore strategic alternatives for our European commercial HVAC and refrigeration businesses.
We will continue to invest in our Heatcraft Worldwide Refrigeration business which will become part of the Commercial Heating & Cooling segment
beginning in 2023 and the European portfolio will be presented with Corporate and Other beginning in 2023 until disposition. As we will manage the
businesses in this manner beginning in 2023, we will present the financial results of the revised segments beginning in 2023.
Segment Data
We use segment profit or loss as the primary measure of profitability to evaluate operating performance and to allocate capital resources. We define
segment profit or loss as a segment's income or loss from continuing operations before income taxes included in the accompanying Consolidated
Statements of Operations, excluding certain items. The reconciliation below details the items excluded.
Our corporate costs include those costs related to corporate functions such as legal, internal audit, treasury, human resources, tax compliance and senior
executive staff. Corporate costs also include the long-term, share -based incentive awards provided to employees throughout our business. We recorded
these share -based awards as Corporate costs because they are determined at the discretion of the Board of Directors and based on the historical practice of
doing so for internal reporting purposes.
Any intercompany sales and associated profit (and any other intercompany items) are eliminated from segment results. There were no significant
intercompany eliminations included in the results presented in the table below.
43
Net sales and segment profit (loss) by segment, along with a reconciliation of segment profit (loss) to Operating income, are shown below (in millions):
For the Years Ended December 31,
Net Sales (1)
Residential Heating & Cooling
Commercial Heating & Cooling
Refrigeration
Segment profit (loss) (2)
Residential Heating & Cooling
Commercial Heating & Cooling
Refrigeration
Corporate and other
Total segment profit
Reconciliation to Operating income:
Special product quality adjustments
Loss from natural disasters, net of insurance recoveries
Items in Losses (gains) and other expenses, net that are excluded from segment profit (loss) (2>
Restructuring charges
Operating income
2022 2021 2020
$ 3,198.3 $
2,775.6 $
2,361.5
900.7
864.8
800.9
619.4
553.7
471.7
$ 4,718.4 $
4,194.1 $
3,634.1
$ 596.9 $
540.3 $
428.5
80.9
110.9
136.9
78.8
49.1
32.8
(90.8)
(96.4)
(91.5)
665.8
603.9
506.7
-
(2.5)
1.0
3.1
8.1
14.3
13.3
1.5
1.8
10.8
(0 On a consolidated basis, no revenue from transactions with a single customer were 10% or greater of our consolidated net sales for any of the periods
presented.
c2� We define segment profit (loss) as a segment's operating income included in the accompanying Consolidated Statements of Operations, excluding:
• The following items in (Gains) losses and other expenses, net:
• Net change in unrealized (gains) losses on unsettled futures contracts,
• Environmental liabilities and special litigation charges,
• Charges incurred related to COVID-19 pandemic, and
• Other items, net,
• Special product quality adjustments
• Loss from natural disasters, net of insurance recoveries
• Restructuring charges, and
Total assets by segment are shown below (in millions):
Total Assets:
Residential Heating & Cooling
Commercial Heating & Cooling
Refrigeration
Corporate and other
Total assets
As of December 31,
2022
2021
2020
$ 1,456.4
$ 1,149.7 $
1,034.6
456.4
366.2
366.5
443.6
426.6
387.9
211.2
229.4
243.5
$ 2,567.6
$ 2,171.9 $
2,032.5
The assets in the Corporate and other segment primarily consist of cash, short-term investments and deferred tax assets. Assets recorded in the operating
segments represent those assets directly associated with those segments.
Total capital expenditures by segment are shown below (in millions):
44
For the Years Ended December 31,
2022
2021
2020
Capital Expenditures:
Residential Heating & Cooling
$
42.4
$
70.0
$
44.0
Commercial Heating & Cooling
21.5
4.3
5.9
Refrigeration
11.2
11.5
9.2
Corporate and other
26.0
21.0
19.4
Total capital expenditures
$
101.1
$
106.8
$
78.5
Depreciation and amortization expenses by segment are shown below (in millions):
For the Years Ended December 31,
2022
2021
2020
Depreciation and Amortization:
Residential Heating & Cooling
$
31.5
$
27.6
$
28.5
Commercial Heating & Cooling
12.9
13.2
13.5
Refrigeration
9.1
7.8
7.8
Corporate and other
24.4
23.8
22.8
Total depreciation and amortization
$
77.9
$
72.4
$
72.6
The equity method investments are shown below (in millions):
For the Years Ended December 31,
2022
2021
2020
Income from Equity Method Investments:
Residential Heating & Cooling
$
0.9
$
6.9
$
11.4
Commercial Heating & Cooling
0.2
1.2
2.3
Refrigeration
4.0
3.7
1.9
Total income from equity method investments
$
5.1
$
11.8
$
15.6
Geographic Information
Property, plant and equipment, net for each major geographic area in which we operate, based on the domicile of our operations, are shown below (in
millions):
As of December 31,
2022 2021 2020
Property, Plant and Equipment, net:
United States $ 408.8 $ 381.0 $ 352.9
Mexico 110.9 102.7 79.2
Canada 2.1 2.1 2.2
Other international
Total Property, plant and equipment, net
45
$ 548.9 $ 515.1 $ 464.3
4. Earnings Per Share:
Basic earnings per share are computed by dividing net income by the weighted -average number of common shares outstanding during the period.
Diluted earnings per share are computed by dividing net income by the sum of the weighted -average number of shares and the number of equivalent shares
assumed outstanding, if dilutive, under our stock -based compensation plans.
The computations of basic and diluted earnings per share for Income from continuing operations were as follows (in millions, except per share data):
For the Years Ended December 31,
Net income
Add: Loss from discontinued operations
Income from continuing operations
Weighted -average shares outstanding - basic
Add: Potential effect of diluted securities attributable to stock -based payments
Weighted -average shares outstanding - diluted
Earnings per share - Basic:
Income from continuing operations
Loss from discontinued operations
Net income
Earnings per share - Diluted.
Income from continuing operations
Loss from discontinued operations
Net income
$ 497.1
$
464.0
$
356.3
0.8
$ 497.1
$
464.0
$
357.1
35.7
37.2
38.3
0.1
0.3
0.3
35.8
37.5
38.6
$ 13.92
$
12.47
$
9.32
(0.02)
$ 13.92
$
12.47
$
9.30
$ 13.88
$
12.39
$
9.26
(0.02)
$ 13.88
$
12.39
$
9.24
There were 0.3 million securities in 2022 that were outstanding but not included in the diluted earnings per share calculation as the assumed exercise of
such rights would have been anti -dilutive.
5. Commitments and Contingencies:
Leases
We lease certain real and personal property under non -cancelable leases. Approximately 8 1 % of our right -of -use assets and lease liabilities relate to our
leases of real estate with the remaining amounts relating to our leases of IT equipment, fleet vehicles and manufacturing and distribution equipment.
46
The components of lease expense were as follows (in millions):
Finance lease cost:
Amortization of right -of -use assets
Interest on lease liabilities
Operating lease cost
Short-term lease cost
Variable lease cost
Total lease cost
Other information
Cash paid for amounts included in the measurement lease liabilities:
Operating cash flows from operating leases
Financing cash flows from finance leases
Right -of -use assets obtained in exchange for new finance lease liabilities
Right -of -use assets obtained in exchange for new operating lease liabilities
For the Years Ended December 31,
2022 2021 2020
$ 13.2 $ 11.9 $ 10.3
0.7 0.5 0.7
67.7 62.2 62.7
5.0 3.8 4.0
24.5 21.6 20.3
$ 111.1 $ 100.0 $ 98.0
$ 66.0
$ 61.8
$
61.6
$ 13.6
$ 12.3
$
10.8
$ 14.4
$ 14.6
$
15.4
$ 98.8
$ 61.8
$
67.6
As of December 31,
2022
2021
Finance lease right -of -use assetsf)
$
33.3 $
34.5
Operating lease right -of -use assets
$
219.9 $
196.1
Finance lease liability, current(2)
$
11.2 $
11.3
Finance lease liability, non-current(3)
$
28.3 $
29.0
Operating lease liability, current
$
63.3 $
54.8
Operating lease liability, non -current
$
161.8 $
145.0
Weighted -average remaining lease term - finance leases
3.6 years
3.9 years
Weighted -average remaining lease term - operating leases
5.1 years
4.5 years
Weighted -average discount rate - finance leases
1.92 %
1.14 %
Weighted -average discount rate - operating leases
3.44 %
2.62 %
(1) Recorded in Property; plant and equipments in Consolidated Balance Sheet
(2) Recorded in Current matuntics of long-term debt in Consohdated Balance Sheet
(3) Recorded in Long-term debt in Consolidated Balance Sheet
Future annual minimum lease payments and finance lease commitments as of December 31, 2022 were as follows (in millions):
Operating Leases
Finance Leases
2023
$ 70.0 $
11.6
2024
53.2
8.4
2025
36.9
5.8
2026
29.0
2.5
2027
18.9
0.3
Thereafter
40.1
11.7
Total minimum lease payments
$ 248.1 $
40.3
Less imputed interest
(23.0)
(0.8)
Present value of minimum payments
$ 225.1 $
39.5
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On March 1, 2019, we entered into an agreement with a financial institution to renew the lease of our corporate headquarters in Richardson, Texas for a
term of five years through March 1, 2024 (the "Lake Park Renewal"). The leased property consists of an office building of approximately 192,000 square
feet, land and related improvements. During the lease term, we are obligated to pay base rent in quarterly installments, payable in arrears. At the end of the
lease term, we must do one of the following: (i) purchase the property for $41.2 million; (ii) vacate the property and return it in good condition; (iii) arrange
for the sale of the leased property to a third party; or (iv) renew the lease under mutually agreeable terms. If we elect to sell the property to a third party and
the sales proceeds are less than the lease balance of $41.2 million, we must pay any such deficit to the financial institution. Any such deficit payment cannot
exceed 87% of the lease balance. The headquarters lease is classified as an operating lease and its future annual minimum lease payments are included in
the table above.
Our obligations under the Lake Park Renewal are secured by a pledge of our interest in the leased property. The Lake Park Renewal contains customary
lease covenants and events of default as well as events of default if (i) indebtedness of $75 million or more is not paid when due, (ii) there is a change of
control or (iii) we fail to comply with certain covenants incorporated from our existing Credit Agreement. We believe we were in compliance with these
financial covenants as of December 31, 2022.
Environmental
Environmental laws and regulations in the locations we operate can potentially impose obligations to remediate hazardous substances at our properties,
properties formerly owned or operated by us, and facilities to which we have sent or send waste for treatment or disposal. We are aware of contamination at
some facilities; however, we do not believe that any future remediation related to those facilities will be material to our results of operations. Total
environmental accruals are included Accrued expenses and Other liabilities on the accompanying Consolidated Balance Sheets. Future environmental costs
are estimates and may be subject to change due to changes in environmental remediation regulations, technology or site -specific requirements.
Product Warranties and Product Related Contingencies
We incur the risk of liability for claims related to the installation and service of heating and air conditioning products, and we maintain liabilities for
those claims that we self -insure. We are involved in various claims and lawsuits related to our products. Our product liability insurance policies have limits
that, if exceeded, may result in substantial costs that could have an adverse effect on our results of operations. In addition, warranty claims and certain
product liability claims are not covered by our product liability insurance.
Total product warranty liabilities are included in the following captions on the accompanying Consolidated Balance Sheets (in millions):
As of December 31,
2022 2021
Accrued expenses $ 41.3 $ 37.2
Other liabilities 101.4 97.0
Total product warranty liabilities $ 142.7 $ 134.2
48
The changes in product warranty liabilities related to continuing operations for the years ended December 31, 2022 and 2021 were as follows (in
millions):
Total warranty liability as of December 31, 2020
$ 119.8
Payments made in 2021
(31.6)
Changes resulting from issuance of new warranties
43.6
Changes in estimates associated with pre-existing liabilities
2.7
Changes in foreign currency translation rates and other
(0.3)
Total warranty liability as of December 31, 2021
$ 134.2
Payments made in 2022
(36.3)
Changes resulting from issuance of new warranties
50.5
Changes in estimates associated with pre-existing liabilities
(4.7)
Changes in foreign currency translation rates and other
(1.0)
Total warranty liability as of December 31, 2022
$ 142.7
We have incurred, and will likely continue to incur, product costs not covered by insurance or our suppliers' warranties, which are not included in the table
above. Also, to satisfy our customers and protect our brands, we have repaired or replaced installed products experiencing quality -related issues, and will
likely continue such repairs and replacements.
Self -Insurance
We use a combination of third -party insurance and self-insurance plans to provide protection against claims relating to workers'
compensation/employers' liability, general liability, product liability, auto liability, auto physical damage and other exposures. We use large deductible
insurance plans, written through third -parry insurance providers, for workers' compensation/employers' liability, general liability, product liability and auto
liability. We also carry umbrella or excess liability insurance for all third -party and self-insurance plans, except for directors' and officers' liability, property
damage and certain other insurance programs. For directors' and officers' liability, property damage and certain other exposures, we use third -party
insurance plans that may include per occurrence and annual aggregate limits. We believe the deductibles and liability limits for all of our insurance policies
are appropriate for our business and are adequate for companies of our size in our industry.
We maintain safety and manufacturing programs that are designed to remove risk, improve the effectiveness of our business processes and reduce the
likelihood and significance of our various retained and insured risks. In recent years, our actual claims experience has collectively trended favorably and, as
a result, both self-insurance expense and the related liability have decreased.
Total self-insurance liabilities were included in the following captions on the accompanying Consolidated Balance Sheets (in millions):
Accrued expenses
Other liabilities
Total self-insurance liabilities
Litigation
As of December 31,
2022 2021
3.0 $ 3.2
14.6 15.7
17.6 S 19.9
We are involved in a number of claims and lawsuits incident to the operation of our businesses. Insurance coverages are maintained and estimated costs
are recorded for such claims and lawsuits, including costs to settle claims and lawsuits, based on experience involving similar matters and specific facts
known.
It is management's opinion that none of these claims or lawsuits or any threatened litigation will have a material adverse effect, individually or in the
aggregate, on our financial condition, results of operations or cash flows. Claims and lawsuits, however, involve uncertainties and it is possible that their
eventual outcome could adversely affect our results of operations in a future period.
49
6. Stock Repurchases:
Our Board of Directors have authorized a total of $4 billion to repurchase shares of our common stock (collectively referred to as the "Share Repurchase
Plans"), including a $1.0 billion share repurchase authorization in July 2021. The Share Repurchase Plans allow us to repurchase shares from time to time
in open market transactions and in privately negotiated transactions based on business, market, applicable legal requirements and other considerations. The
Share Repurchase Plans do not require the repurchase of a specific number of shares and may be terminated at any time. As of December 31, 2022, $546
million of shares is available to repurchase shares under the Share Repurchase Plans.
We entered into multiple Fixed Dollar Accelerated Share Repurchase Transactions (the "ASR Agreements") to effect an accelerated stock buybacks of
the Company's common stock in 2022. Under the ASR Agreements, we paid banks $300.0 million and the banks delivered to us common stock
representing approximately 86% of the shares expected to be purchased under the ASR Agreement. After the ASR Agreements were completed, the banks
delivered the remaining shares under the arrangement. The banks delivered a total of 1.3 million shares of common stock repurchased under this ASR
Agreement.
We also repurchased less than 0.1 million shares for $8.3 million, 0.1 million shares for $22.1 million, and 0.1 million shares for $17.9 million for the
years ended December 31, 2022, 2021, and 2020, respectively, from employees who tendered their shares to satisfy minimum tax withholding obligation
upon the vesting of stock -based compensation awards.
7. Restructuring Charges:
We record restructuring charges associated with management -approved restructuring plans to reorganize or to remove duplicative headcount and
infrastructure within our businesses. Restructuring charges include severance costs to eliminate a specified number of employees, infrastructure charges to
vacate facilities and consolidate operations, contract cancellation costs and other related activities. The timing of associated cash payments is dependent
upon the type of restructuring charge and can extend over a multi -year period. Restructuring charges are not included in our calculation of segment profit
(loss), as more fully explained in Note 3.
We recorded $1.5 million of restructuring charges in 2022, $1.8 million 2021, and $10.8 million in 2020 from actions initiated in prior years including
the economic impact of COVID-19. There is not expected to be a material amount of costs expected to be incurred from existing restructuring actions in
future periods.
Restructuring accruals are included in Accrued expenses in the accompanying Consolidated Balance Sheets.
8. Revenue Recognition:
The following table disaggregates our revenue by business segment by geography to provide information as to the major sources of revenue. See Note 3
for additional description of our reportable business segments and the products and services being sold in each segment.
Primary Geographic Markets
United States
Canada
International
Total
Primary Geographic Markets
United States
Canada
International
Total
For the Year Ended December 31, 2022
Residential Heating & Commercial Heating &
Cooling Cooling
$ 2,957.1 $ 837.7
241.2 62.4
- 0.6
Refrigeration
$ 385.7
233.7
Consolidated
$ 4,180.5
303.6
234.3
3,198.3 $ 900.7 $ 619.4 $ 4,718.4
For the Year Ended December 31, 2021
Residential Heating & Commercial Heating &
Cooling Cooling
$ 2,532.4 $ 790.1
243.2 73.1
Refrigeration
$ 324.0
- 1.6 _
2,775.6 $ 864.8 $
50
229.7 _
553.7 $
Consolidated
3,646.5
316.3
231.3
4,194.1
For the Year Ended December 31, 2020
Residential Heating &
Commercial Heating &
Primary Geographic Markets
Cooling
Cooling Refrigeration
Consolidated
United States
$ 2,181.8
$ 721.1 $ 257.9 $
3,160.8
Canada
179.7
77.6
257.3
International
—
2.2 213.8
216.0
Total
$ 2,361.5
$ 800.9 $ 471.7 $
3,634.1
Our revenue recognition practices for the sale of goods depend upon the shipping terms for each transaction. Shipping terms are primarily FOB
Shipping Point and, therefore, revenue is recognized for these transactions when products are shipped to customers and title and control passes. Certain
customers in our smaller operations, primarily outside of North America, have shipping terms where risks and rewards of ownership do not transfer until
the product is delivered to the customer. For these transactions, revenue is recognized on the date that the product is received and accepted by such
customers. We experience returns for miscellaneous reasons and record a reserve for these returns at the time we recognize revenue based on historical
experience. Our historical rates of return are insignificant as a percentage of sales. We also recognize revenue net of sales taxes. We have elected to
recognize the revenue and cost for freight and shipping when control over the sale of goods passes to our customers.
For our businesses that provide services, revenue is recognized at the time services are completed. Our Commercial Heating & Cooling segment also
provides sales, installation, maintenance and repair services under fixed -price contracts. Revenue for services is recognized as the services are performed
under the contract based on the relative fair value of the services provided. We allocate a portion of the revenue for extended labor warranty obligations and
recognize the revenue over the term of the extended warranty. Revenue from extended warranties is insignificant. See Note 5 for more information on
product warranties.
Residential Heating & Cooling - We manufacture and market a broad range of furnaces, air conditioners, heat pumps, packaged heating and cooling
systems, equipment and accessories to improve indoor air quality, comfort control products, replacement parts and supplies and related products for both
the residential replacement and new construction markets in North America. These products are sold under various brand names and are sold either through
direct sales to a network of independent installing dealers, including through our network of Lennox stores or to independent distributors. For the years
ended December 31, 2022, 2021 and 2020, direct sales represented 70%, 73% and 75% of revenues, respectively, and sales to independent distributors
represented the remainder. Given the nature of our business, customer product orders are fulfilled at a point in time and not over a period of time.
Commercial Heating & Cooling - In North America, we manufacture and sell unitary heating and cooling equipment used in light commercial
applications, such as low-rise office buildings, restaurants, retail centers, churches and schools. These products are distributed primarily through
commercial contractors and directly to national account customers in the planned replacement, emergency replacement and new construction markets.
Revenue for the products sold is recognized at a point in time when control transfers to the customer, which is generally at time of shipment. Lennox
National Account Services provides installation, service and preventive maintenance for HVAC national account customers in the United States and
Canada. Revenue related to service contracts is recognized as the services are performed under the contract based on the relative fair value of the services
provided. For the years ended December 31, 2022, 2021 and 2020, equipment sales represented 82%, 82% and 85% of revenues, respectively, and the
remainder of our revenue was generated from our service business.
Refrigeration - We manufacture and market equipment for the global commercial refrigeration markets under the Heatcraft Worldwide Refrigeration
name. Our products are used in the food retail, food service, cold storage as well as non-food refrigeration markets. We sell these products to distributors,
installing contractors, engineering design firms, original equipment manufacturers and end -users. In Europe, we also manufacture and sell unitary heating
and cooling products and applied systems. Substantially all segment revenue was related to these types of equipment and systems and is recognized at a
point in time when control transfers to the customer, which is generally at time of shipment. Approximately 1% of segment revenue relates to services for
start-up and commissioning activities.
Variable Consideration - We engage in cooperative advertising, customer rebate, and other miscellaneous programs that result in payments or credits
being issued to our customers. We record these customer discounts and incentives as a reduction of sales when the sales are recorded. For certain
cooperative advertising programs, we also receive an identifiable benefit
51
(goods or services) in exchange for the consideration given, and, accordingly, record a ratable portion of the expenditure to SG&A expenses. All other
advertising, promotions and marketing costs are expensed as incurred.
Other Judgments and Assumptions - We apply the practical expedient in ASC 606-10-50-14 and do not disclose information about remaining
performance obligations that have original expected durations of one year or less. Applying the practical expedient in ASC 340-40-25-4, we recognize the
incremental costs of obtaining contracts as an expense when incurred if the amortization period of the assets that we otherwise would have recognized is
one year or less. These costs are included in SG&A expenses. ASC 606-10-32-18 allows us to not adjust the amount of consideration to be received in a
contract for any significant financing component if we expect to receive payment within twelve months of transfer of control of goods or services. We have
elected this expedient as we expect all consideration to be received in one year or less at contract inception. We have also elected not to provide the
remaining performance obligations disclosures related to service contracts in accordance with the practical expedient in ASC 606-10-55-18. We recognize
revenue in the amount to which the entity has a right to invoice and have adopted this election to not provide the remaining performance obligations related
to service contracts.
Contract Assets - We do not have material amounts of contract assets since revenue is recognized as control of goods is transferred or as services are
performed. There are a small number of installation services that may occur over a period of time, but that period of time is generally very short in duration
and right of payment does not exist until the installation is completed. Any contract assets that may arise are recorded in Other assets in our Consolidated
Balance Sheets.
Contract Liabilities - Our contract liabilities consist of advance payments and deferred revenue. Our contract liabilities are reported in a net position on
a contract -by -contract basis at the end of each reporting period. We classify advance payments and deferred revenue as current or noncurrent based on the
timing of when we expect to recognize revenue. Generally all contract liabilities are expected to be recognized within one year and are included in Accrued
expenses in our Consolidated Balance Sheet. The noncurrent portion of deferred revenue is included in Other liabilities in our Consolidated Balance Sheets.
Net contract assets (liabilities) consisted of the following:
Contract liabilities - current
Contract liabilities - noncurrent
Total
December 31, 2022 December 31, 2021
(9.6) (10.2)
(6.4) (5.5)
$ (16.0) $ (15.7)
For the years ended December 31, 2022, 2021, and 2020 we recognized revenue of $10.1 million, $3.6 million and $7.2 million related to our contract
liabilities at January 1, 2022, 2021 and 2020, respectively. Impairment losses recognized in our receivables and contract assets were de minimis in 2022,
2021 and 2020.
9. Other Financial Statement Details:
Inventories
The components of inventories are as follows (in millions):
Finished goods
Work in process
Raw materials and parts
Total
Excess of current cost over last -in, first -out cost
Total inventories, net
As of December 31,
2022 2021
534.6 $
310.8
8.9
12.4
328.7
262.1
872.2
585.3
(119.2)
(74.4)
753.0 $
510.9
The Company recorded a pre-tax gain of $0.7 million in 2020 from LIFO inventory liquidations. There were no pre-tax gains or losses in 2022 or 2021
from LIFO inventory liquidations. Reserves for obsolete and slow -moving inventories were $34.9 million and $26.5 million at December 31, 2022 and
December 31, 2021, respectively.
52
Goodwill
The changes in the carrying amount of goodwill in 2022 and 2021, in total and by segment, are summarized in the table below (in millions):
Segment:
Residential Heating & Cooling
Commercial Heating & Cooling
Refrigeration
Changes in
Balance at foreign
December 31, 2020 currency
(l) translation rates
$ 26.1 $ - $
61.1
99.7 (0.3)
$ 186.9 $ (0.3) $
Balance at
Changes in
Balance at
December 31,
foreign currency
December 31,
2021
translation rates
2022
26.1
$ -
$ 26.1
61.1
61.1
99.4
(0.3)
99.1
186.6
$ (0.3)
$ 186.3
The goodwill balances in the table above are presented net of accumulated impairment charges of $32.7 million, all of which relate to impairments in
periods prior to 2020.
A qualitative review of impairment indicators was performed in 2022 for the Residential Heating & Cooling, the Commercial Heating & Cooling, and
the Refrigeration segments. We did not record any goodwill impairments in 2022, 2021, or 2020.
Property, Plant and Equipment
Components of Property, plant and equipment, net were as follows (in millions):
Land
Buildings and improvements
Machinery and equipment
Finance leases
Construction in progress and equipment not yet in service
Total
Less accumulated depreciation
Property, plant and equipment, net
No impairment charges were recorded in 2022 or 2021.
53
As of December 31,
2022
2021
$ 24.1 $
24.0
321.6
285.9
964.7
946.5
66.5
63.5
92.8
84.0
1,469.7
1,403.9
(920.8)
(888.8)
$ 548.9 $
515.1
Accrued Expenses
The significant components of Accrued expenses are presented below (in millions):
Accrued rebates and promotions
Accrued compensation and benefits
Accrued warranties
Other
Accrued sales, use, property and VAT taxes
Accrued Freight
Accrued asbestos reserves
Deferred income
Derivative contracts
Accrued interest
Self insurance reserves
Total Accrued expenses
Derivatives
Objectives and Strategies for Using Derivative Instruments
As of December 31,
2022 2021
123.3
102.9
90.7 $
114.9
41.3
37.2
33.8
32.0
26.8
26.9
19.0
12.0
14.3
13.1
9.6
10.2
9.0
1.0
6.1
5.5
3.0
3.2
376.9 $
358.9
Commodity Price Risk. We utilize a cash flow hedging program to mitigate our exposure to volatility in the prices of metal commodities used in our
production processes. Our hedging program includes the use of futures contracts to lock in prices, and as a result, we are subject to derivative losses should
the metal commodity prices decrease and gains should the prices increase. We utilize a dollar cost averaging strategy so that a higher percentage of
commodity price exposures are hedged near -term with lower percentages hedged at future dates. This strategy allows for protection against near -term price
volatility while allowing us to adjust to market price movements over time.
Interest Rate Risk. A portion of our debt bears interest at variable interest rates, and as a result, we are subject to variability in the cash paid for interest.
To mitigate a portion of that risk, we may choose to engage in an interest rate swap hedging strategy to eliminate the variability of interest payment cash
flows. We are not currently hedged against interest rate risk.
Foreign Currency Risk. Foreign currency exchange rate movements create a degree of risk by affecting the U.S. dollar value of assets and liabilities
arising in foreign currencies. We seek to mitigate the impact of currency exchange rate movements on certain short-term transactions by periodically
entering into foreign currency forward contracts.
Cash Flow Hedges
We have commodity futures contracts and foreign exchange forward contracts designated as cash flows hedges that are scheduled to mature through
May 2024 and January 2024, respectively. We currently have cash flow hedge contracts with a notional amount of 54.5 million pounds of aluminum and
copper. Unrealized gains or losses from our cash flow hedges are included in AOCL and are expected to be reclassified into earnings within the next 17
months based on the prices of the commodities and foreign currencies at the settlement dates.
We recorded the following amounts related to our cash flow hedges in AOCL (in millions):
As of December 31,
2022 2021
Unrealized losses (gains), net on unsettled contracts $ 6.3 $ (13.4)
Income tax (benefit) expense (1.4) 2.7
Unrealized losses (gains) included in AOCL, net of tax $ 4.9 $ (10.7)
54
(1> Assuming commodity and foreign currency prices remain constant, we expect to reclassify $5.0 million of derivative losses into earnings within
the next 12 months.
Expenses included in our Consolidated Statements of Operations
Below is information about expenses included in Selling, general and administrative expenses in our Consolidated Statements of Operations (in
millions):
For the Years Ended December 31,
2022 2021 2020
Research and development $ 80.3 $ 76.1 $ 66.8
Advertising, promotions and marketing (1) 32.4 26.9 26.5
Cooperative advertising expenditures 28.1 27.6 22.2
0) Cooperative advertising expenditures were not included in these amounts.
Interest Expense, net
The components of Interest expense, net in our Consolidated Statements of Operations were as follows (in millions):
For the Years Ended December 31,
2022 2021 2020
Interest expense, net of capitalized interest $ 39.8 $ 26.0 $ 29.7
Less: Interest income 1.1 1.0 1.4
Interest expense, net $ 38.7 $ 25.0 $ 28.3
Losses (Gains) and Other Expenses, net
Losses (gains) and other expenses, net in our Consolidated Statements of Operations were as follows (in millions):
For the Years Ended December 31,
2022
2021 2020
Realized losses (gains) on settled future contracts
$ 0.1 $
(1.2) $
0.1
Foreign currency exchange gains
(1.3)
(2.2)
(3.6)
Loss (gain) on disposal of fixed assets
(1.0)
(0.2)
(0.2)
Other operating income
(1.0)
(1.5)
(2.2)
Net change in unrealized (gains) losses on unsettled fixtures contracts
0.4
-
(0.3)
Environmental liabilities and special litigation charges
7.5
9.6
5.3
Charges incurred related to COVID-19 pandemic
0.8
2.2
8.3
Other items, net
(0.6)
2.5
-
(Gains) losses and other expenses, net (pre-tax)
$ 4.9 $
9.2 $
7.4
10. Employee Benefit Plans:
Many of our defined benefit pension and profit sharing plans have been frozen and replaced with defined contribution plans. We have a liability for the
benefits earned under these inactive plans prior to the date the benefits were frozen. We also have several active defined benefit plans that provide benefits
based on years of service. Our defined contribution plans generally include both company and employee contributions which are based on predetermined
percentages of compensation earned by the employee.
In addition to freezing the benefits of our defined benefit pension plans, we have also eliminated nearly all of our post -retirement medical benefits.
Defined Contribution Plans
We recorded the following contributions to the defined contribution plans (in millions):
W1
For the Years Ended December 31,
2022 2021 2020
Contributions to defined contribution plans $ 22.7 $ 19.9 $ 17.8
Pension and Post -retirement Benefit Plans
Benefit Obligations, Fair Value of Plan Assets, Funded Status, and Balance Sheet Position
The following tables set forth amounts recognized in our financial statements and the plans' funded status for our pension and post -retirement benefit
plans (dollars in millions):
Pension Benefits
2022 2021
Accumulated benefit obligation $ 171.6 $ 266.1
Changes in projected benefit obligation:
Benefit obligation at beginning of year
$ 269.2 $
276.2
Service cost
3.8
6.1
Interest cost
6.2
5.1
Actuarial (gain) loss
(74.6)
(11.2)
Effect of exchange rates
(3.4)
(0.7)
Settlements
(21.7)
(2.1)
Benefits paid
(5.2)
(4.2)
Benefit obligation at end of year
$ 174.3 $
269.2
Changes in plan assets:
Fair value of plan assets at beginning of year
$
184.3
$
179.7
Actual return on plan assets
(45.4)
9.5
Employer contributions
22.5
1.5
Effect of exchange rates
(3.4)
(0.1)
Plan settlements
(21.7)
(2.1)
Benefits paid
(5.2)
(4.2)
Fair value of plan assets at end of year
131.1
184.3
Funded status / net amount recognized
$
(43.2)
$
(84.9)
Net amount recognized consists of:
Non -current assets
$
2.7
$
6.5
Current liability
(5.8)
(8.1)
Non -current liability
(40.1)
(83.3)
Net amount recognized
$
(43.2)
$
(84.9)
Plans with Benefit Obligations in Excess of Plan Assets
For the Years Ended December 31,
2022 2021
Pension plans with a benefit obligation in excess of plan assets:
Projected benefit obligation $ 152.1 $ 234.8
Accumulated benefit obligation 149.6 231.4
Fair value of plan assets 106.2 143.7
56
Net Periodic Benefit Cost
Our U.S.-based pension plans comprised approximately 84% of the
projected benefit obligation and 81% of plan assets as of December 31, 2022.
Pension Benefits
2022
2021 2020
Components of net periodic benefit cost as of December 31:
Service cost
$ 3.8
$ 6.1 $
5.5
Interest cost
6.2
5.1
6.6
Expected return on plan assets
(9.1)
(8.6)
(8.2)
Amortization of prior service costs
0.1
0.2
0.2
Recognized actuarial loss
5.3
7.7
5.8
Settlements
(0.2)
1.2
0.6
Other
(0.1)
(0.4)
-
Net periodic benefit cost
$ 6.0
$ 11.3 $
10.5
Amounts recognized in AOCL and Other Comprehensive Income
The following table sets forth amounts recognized in AOCL and Other comprehensive income (loss) in our financial statements for 2022 and 2021 (in
millions):
Amounts recognized in AOCL:
Prior service costs
Actuarial loss
Subtotal
Deferred taxes
Net amount recognized
Changes recognized in other comprehensive loss:
Current year actuarial gain
Effect of exchange rates
Amortization of prior service costs
Amortization of actuarial loss, including settlements and other
Total recognized in other comprehensive income (loss)
Total recognized in net periodic benefit cost and other comprehensive income
Pension Benefits
2022 2021
$ (0.4)
$
(0.5)
(57.7)
(83.1)
(58.1)
(83.6)
15.8
18.6
$ (42.3)
$
(65.0)
(19.4)
(12.2)
(0.9)
-
(0.1)
(0.2)
(5.1)
(8.5)
$ (25.5)
$
(20.9)
$ (19.5)
$
(9.6)
The estimated prior service costs and actuarial losses for pension benefits that will be amortized from AOCL in 2023 are $0.1 million and $1.2 million,
respectively.
Assumptions
The following tables set forth the weighted -average assumptions used to determine Benefit obligations and Net periodic benefit cost for the U.S.-based
plans in 2022 and 2021:
Pension Benefits
2022 2021
Weighted -average assumptions used to determine benefit obligations as of
December 31:
Discount rate 5.50 % 2.69 %
Rate of compensation increase 4.02 % 4.1 %
57
Pension Benefits
2022
2021
2020
Weighted -average assumptions used to determine net periodic benefit cost for
the years ended December 31:
Discount rate - service cost
2.53 %
1.85 %
2.89 %
Discount rate - interest cost
2.48 %
2.16 %
2.99 %
Expected long-term return on plan assets
6.50 %
6.50 %
6.50 %
Rate of compensation increase
4.13 %
4.13 %
4.23 %
The change in the discount rate for 2022 was the primary driver in the actuarial gain in the projected benefit obligation during the year.
The following tables set forth the weighted -average assumptions used to determine Benefit obligations and Net periodic benefit cost for the non-U.S.-
based plans in 2022 and 2021:
Pension Benefits
2022
2021
Weighted -average assumptions used to determine benefit obligations as of December 31:
Discount rate
4.72 %
1.99 %
Rate of compensation increase
3.11 %
3.14 %
Pension Benefits
2022
2021
2020
Weighted -average assumptions used to determine net periodic benefit cost for the years ended
December 31:
Discount rate - service cost
0.86 %
0.42 %
0.73 %
Discount rate - interest cost
2.07 %
1.51 %
2.3 %
Expected long-term return on plan assets
2.75 %
2.10 %
3.31 %
Rate of compensation increase
3.14 %
3.17 %
3.20 %
To develop the expected long-term rate of return on assets assumption for the U.S. plans, we considered the historical returns for each asset category, as
well as the target asset allocation of the pension portfolio and the effect of periodic balancing. These results were adjusted for the payment of reasonable
expenses of the plan from plan assets. This resulted in the selection of the 6.50% long-term rate of return on assets assumption. A similar process was
followed for the non-U.S.-based plans.
To select a discount rate for the purpose of valuing the plan obligations for the U.S. plans, we performed an analysis in which the projected cash flows
from defined benefit and retiree healthcare plans was matched with a yield curve based on the appropriate universe of high -quality corporate bonds that
were available. We used the results of the yield curve analysis to select the discount rate for each plan. The analysis was completed separately for each U.S.
pension and OPEB plan. A similar process was followed for the non-U.S.-based plans with sufficient corporate bond information. In other countries, the
discount rate was selected based on the approximate duration of plan obligations.
Assumed health care cost trend rates have an effect on the amounts reported for our healthcare plan. The following table sets forth the healthcare trend
rate assumptions used:
Assumed health care cost trend rates as of December 31:
Health care cost trend rate assumed for next year
Rate to which the cost rate is assumed to decline (the ultimate trend rate)
Year that the rate reaches the ultimate trend rate
2022 2021
6.50 % 6.00 %
5.00 % 5.00 %
2029 2025
Expected future benefit payments are shown in the table below (in millions):
58
For the Years Ended December 31,
2023 2024 2025 2026 2027 2028-2032
Pension benefits $ 11.1 $ 11.9 $ 7.6 $ 8.8 $ 22.9 $ 56.4
Composition of Pension Plan Assets
We believe asset returns can be optimized at an acceptable level of risk by adequately diversifying the plan assets between equity and fixed income. The
targeted allocation for fixed income and cash investments is 50% and the targeted allocation for equity investments is 50%. Our targeted exposure to
International equity including emerging markets is 15% while our exposure to domestic equity is 35%. Our U.S. pension plan represents 81%, our Canadian
pension plan 9%, and our United Kingdom ("U.K.") pension plan 10% of the total fair value of our plan assets as of December 31, 2022.
Our U.S. pension plans' weighted -average asset allocations as of December 31, 2022 and 2021, by asset category, were as follows:
Plan Assets as of December 31,
Asset Category:
2022 2021
U.S. equity
31.3 %
36.1 %
International equity
18.7 %
15.5 %
Fixed income
49.2 %
48.2 %
Money market/cash
0.8 %
0.2 %
Total
100.0 %
100.0 %
Our U.S. pension plans' assets were invested according to the following targets:
Asset Category:
U.S. equity
International equity
Fixed income
Target
35.0 %
15.0 %
50.0 %
Our Canadian pension plans were invested in fixed income securities and equities. Our U.K. pension plan was invested in fixed income securities,
including corporate and government bonds.
59
The fair values of our pension plan assets, by asset category, were as follows (in millions):
Fair
Value Measurements as of December 31, 2022
Quoted Prices in Active
Markets for Identical
Significant Other Significant Unobservable
Assets
Observable Inputs Inputs
(Levell)
(Level2) (Level 3)
Total
Asset Category:
Cash and cash equivalents $
0.9 $
- $ - $
0.9
Commingled pools / Collective Trusts:
U.S. equity (')
-
33.3 -
33.3
International equity
-
19.8 -
19.8
Fixed income (3)
-
52.5 -
52.5
Balanced pension trust: (4)
International equity
-
3.3 -
3.3
Fixed income
-
8.3 -
8.3
Pension fund:
Fixed income 0)
-
13.0 -
13.0
Total $
0.9 $
130.2 $ - $
131.1
Fair Value Measurements as of December 31, 2021
Quoted Prices in Active
Markets for Identical
Significant Other Significant Unobservable
Assets
Observable Inputs Inputs
(Levell)
(Level2) (Level 3)
Total
Asset Category:
Cash and cash equivalents
$ 0.4
$ - $ -
$ 0.4
Commingled pools / Collective Trusts:
U.S. equity (')
-
51.8 -
51.8
International equity (2)
-
22.2 -
22.2
Fixed income (3)
-
69.3 -
69.3
Balanced pension trust: (4)
International equity
4.4 -
4.4
Fixed income
-
12.6 -
12.6
Pension fund:
Fixed income (s)
-
23.6 -
23.6
Total
$ 0.4
$ 183.9 $ -
$ 184.3
60
Additional information about assets measured at Net Asset Value ("NAV") per share (in millions):
As of December 31, 2022
Redemption Frequency
Fair Value
(if currently eligible)
Redemption Notice Period
Asset Category:
Commingled pools / Collective Trusts:
U.S. equity 0)
$
33.3
Daily
5 days
International equity (2)
19.8
Daily
5 days
Fixed income (3)
52.5
Daily
5 days
Balanced pension trust: �4)
International equity
3.3
Daily
3-5 days
Fixed income
8.3
Daily
3-5 days
Pension fund:
Fixed income 0)
13.0
Daily
1 - 3 days
Total
$
130.2
As of December 31, 2021
Redemption Frequency
Fair Value
(if currently eligible)
Redemption Notice Period
Asset Category:
Commingled pools / Collective Trusts:
U.S. equity (')
$
51.8
Daily
5 days
International equity (2)
22.2
Daily
5 days
Fixed income 0)
69.3
Daily
5-15 days
Balanced pension trust: (4)
International equity
4.4
Daily
3-5 days
Fixed income
12.6
Daily
3-5 days
Pension fund:
Fixed income cs)
23.6
Daily
1 - 3 days
Total
$
183.9
(1) This category includes investments primarily in U.S. equity securities that include large, mid and small capitalization companies.
(2) This category includes investments primarily in international equity securities that include large, mid and small capitalization companies in large
developed markets as well as emerging markets equities.
(3) This category includes investments in U.S. investment grade and high yield fixed income securities, international fixed income securities and
emerging markets fixed income securities.
The investment objectives of the plan are to provide long-term capital growth and income by investing primarily in a well -diversified, balanced
(4) portfolio of Canadian common stocks, bonds and money market securities. The plan also holds a portion of its assets in international equities, a
portion of which may be invested in U.S. securities.
This category includes investments in U.K. government index-linked securities (index-linked gilts) that have maturity periods of 5 years or longer
(5) with a derivatives overlay and investment grade corporate bonds denominated in sterling. The plan also holds a portion of its assets in international
instruments, a portion of which may be invested in U.S. securities.
The majority of our commingled pool/collective trusts, mutual funds, balanced pension trusts and pension funds are managed by professional investment
advisors. The NAVs per share are furnished in monthly and/or quarterly statements received from the investment advisors and reflect valuations based upon
their pricing policies. We assessed the fair value classification of these investments as Level 2 for commingled pool/collective trusts, balanced pension
trusts and pension funds based on an examination of their pricing policies and the related controls and procedures. The fair values we report are based on
the pool, trust or fund's NAV per share. The NAVs per share are calculated periodically (daily or no less than one time per month) as the aggregate value of
each pool or trust's underlying assets divided by the number of units owned. See Note 16 for information about our fair value hierarchies and valuation
techniques.
G'fl
11. Joint Ventures and Other Equity Investments:
We participate in two joint ventures, the largest located in the U.S. and the other in Mexico, that are engaged in the manufacture and sale of
compressors, unit coolers and condensing units. We exert significant influence over these affiliates based upon our respective 25% and 50% ownership, but
do not control them due to venture partner participation. Accordingly, these joint ventures have been accounted for under the equity method and their
financial position and results of operations are not consolidated.
The combined balance of equity method investments included in Other assets, net totaled (in millions):
As of December 31,
Equity method investments
We purchase compressors from our U.S. joint venture for use in certain of our products. The amounts of purchases included in Cost of goods sold in the
Consolidated Statements of Operations were as follows (in millions):
Purchases of compressors from joint venture
12. Income Taxes:
For the Years Ended December 31,
2022 2021 2020
$ 156.2 $ 141.7 $ 123.1
Our Provision for income taxes from continuing operations consisted of the following (in millions):
Current:
Federal
State
Foreign
Total current
Deferred:
Federal
State
Foreign
Total deferred
Total provision for income taxes
For the Years Ended December 31,
$ 104.0 $
72.0 $
61.7
21.6
17.0
14.1
7.8
13.4
4.8
133.4
102.4
80.6
(13.9)
(2.6)
(0.7)
(3.1)
(1.5)
1.1
2.3
(2.2)
7.1
(14.7)
(6.3)
7.5
$ 118.7 $
96.1 $
88.1
Income from continuing operations before income taxes was comprised of the following (in millions):
Domestic $
Foreign _
Total $
62
For the Years Ended December 31,
2022 2021 2020
340.2 $ 307.8 $ 268.4
275.6 252.3 176.8
615.8 $ 560.1 $ 445.2
The difference between the income tax provision from continuing operations computed at the statutory federal income tax rate and the financial
statement Provision for income taxes is summarized as follows (in millions):
For the Years Ended December 31,
2022
2021 2020
Provision at the U.S. statutory rate of 2 1 %
$ 129.3 $
117.6 $
93.5
Increase (reduction) in tax expense resulting from:
State income tax, net of federal income tax benefit
14.6
12.1
10.8
Tax credits, net of unrecognized tax benefits
(8.0)
(9.3)
(7.8)
Change in unrecognized tax benefits
0.2
0.2
0.2
Change in valuation allowance
7.8
Foreign taxes at rates other than U.S. statutory rate
(47.4)
(43.6)
(33.6)
Deemed inclusions
10.0
7.7
9.2
Global intangible low -taxed income
23.9
18.8
10.3
Change in rates from the Tax Act & other law changes
0.1
0.1
0.7
Excess tax benefits from stock -based compensation
(0.6)
(5.7)
(4.2)
Miscellaneous other
(3.4)
(1.8)
1.2
Total provision for income taxes
$ 118.7 $
96.1 $
88.1
Deferred income taxes reflect the tax consequences on future years of temporary differences between the tax basis of assets and liabilities and their
financial reporting basis and depending on the classification of the asset or liability generating the deferred tax. The deferred tax provision for the periods
shown represents the effect of changes in the amounts of temporary differences during those periods.
Deferred tax assets (liabilities) were comprised of the following (in millions):
As of December 31,
2022
2021
Gross deferred tax assets:
Warranties
$ 34.9
$ 32.9
Loss carryforwards (foreign, U.S. and state)
29.6
28.5
Post -retirement and pension benefits
10.2
15.6
Inventory reserves
9.3
7.1
Receivables allowance
6.0
4.5
Compensation liabilities
5.9
9.5
Legal reserves
10.5
12.1
Tax credits, net of federal effect
11.9
11.5
Research and development capitalization
17.9
Other
7.1
9.6
Total deferred tax assets
143.3
131.3
Valuation allowance
(37.9)
(37.3)
Total deferred tax assets, net of valuation allowance
105.4
94.0
Gross deferred tax liabilities:
Depreciation
(58.9)
(58.7)
Intangibles
(15.6)
(15.5)
Insurance liabilities
(1.4)
(1.4)
Other
(2.0)
(7.1)
Total deferred tax liabilities
(77.9)
(82.7)
Net deferred tax assets
$ 27.5
$ 11.3
63
As of December 31, 2022 and 2021, we had $21.5 million and $20.3 million in tax -effected foreign net operating loss carryforwards, respectively. The
deferred tax asset valuation allowance relates primarily to loss carryforwards. The remainder of the valuation allowance relates to state tax credits.
In assessing whether a deferred tax asset will be realized, we consider whether it is more likely than not that some portion or all of the deferred tax asset
will not be realized. We consider the reversal of existing taxable temporary differences, projected future taxable income and tax planning strategies in
making this assessment. Based upon the level of historical taxable income and projections for future taxable income over the periods in which the deferred
tax assets are deductible, we believe it is more likely than not we will realize the benefits of these deductible differences, net of the existing valuation
allowances, as of December 31, 2022.
No provision was made for income taxes which may become payable upon distribution of our foreign subsidiaries' earnings. An actual repatriation in
the future from our non-U.S. subsidiaries could still be subject to foreign withholding taxes and U.S. state taxes, but we expect any amounts to be
immaterial.
We are currently in the Bridge program for our U.S. federal income taxes under the Internal Revenue Service's Compliance Assurance Program for 2022
and 2021. As a result, our returns for those years will not be examined. However, we are subject to examination by numerous other taxing authorities in the
U.S. and in foreign jurisdictions. We have no material uncertain tax provisions recorded as of December 31, 2022. We are generally no longer subject to
U.S. federal, state and local, or non-U.S. income tax examinations by taxing authorities for years prior to 2015.
13. Lines of Credit and Financing Arrangements:
The following tables summarize our outstanding debt obligations and their classification in the accompanying Consolidated Balance Sheets (in
millions):
Current maturities of long-term debt:
Asset securitization program
Finance lease obligations
Senior unsecured notes
Debt issuance costs
Total current maturities of long-term debt
Long -Term Debt:
Asset securitization program
Finance lease obligations
Credit agreement
Senior unsecured notes
Debt issuance costs
Total long-term debt
Total debt
As of December 31,
2022 2021
350.0 $
11.2 11.3
350.0
(0.6) —
710.6 $ 11.3
$ —
$ 250.0
28.3
29.0
192.0
6.5
600.0
950.0
(6.1)
(9.0)
$ 814.2
$ 1,226.5
$ 1,524.8
$ 1,237.8
As of December 31, 2022, the aggregate amounts of required principal payments on total debt excluding finance lease obligations (see Note 5) were
as follows (in millions):
2023 $ 700.0
2024 —
2025 300.0
2026 192.0
2027 300.0
Thereafter —
64
Short -Term Debt
Foreign Obligations
Through several of our foreign subsidiaries, we have facilities available to assist in financing seasonal borrowing needs for our foreign locations. As of
December 31, 2022 or 2021, we did not have any outstanding short-term foreign obligations. Proceeds and repayments from these facilities were $0.0
million, $0.0 million and $4.6 million during the years ended December 31, 2022, 2021 and 2020, respectively.
Long -Term Debt
Asset Securitization Program
Under the Asset Securitization Program ("ASP"), we are eligible to sell beneficial interests in a portion of our trade accounts receivable to a financial
institution for cash. The ASP contains a provision whereby we retain the right to repurchase all of the outstanding beneficial interests transferred. As a
result of the repurchase right, the transfer of the receivables under the ASP is not accounted for as a sale. Accordingly, the cash received from the transfer of
the beneficial interests in our trade accounts receivable is reflected as secured borrowings in the accompanying Consolidated Balance Sheet and proceeds
received are included in Cash flows from financing activities in the accompanying Consolidated Statements of Cash Flows. Our continued involvement
with the transferred assets includes servicing, collection and administration of the transferred beneficial interests. The accounts receivable securitized under
the ASP are high -quality domestic customer accounts that have not aged significantly. The receivables represented by the retained interest that we service
are exposed to the risk of loss for any uncollectible amounts in the pool of receivables transferred under the ASP.
We renewed the ASP in November 2021, extending its tern to November 2023 and increasing the maximum securitization amount to a range from
$300.0 million to $450.0 million, depending on the period. The maximum capacity under the ASP is the lesser of the maximum securitization amount or
100% of the net pool balance less allowances, as defined by the ASP. Eligibility for securitization is limited based on the amount and quality of the
qualifying accounts receivable and is calculated monthly. The eligible amounts available and beneficial interests sold were as follows (in millions):
Eligible amount available under the ASP on qualified accounts receivable
Less: Beneficial interest transferred
Remaining amount available
As of December 31,
2022 2021
$ 350.0 $ 335.6
(350.0) (250.0)
$ — $ 85.6
We pay certain discount fees to use the ASP and to have the facility available to us. These fees relate to both the used and unused portions of the
Securitization. The used fee is based on the beneficial interest sold and calculated on either the average LIBOR rate or floating commercial paper rate
determined by the purchaser of the beneficial interest, plus a program fee of 0.70%. The average rates as of December 31, 2022 and 2021 were 5.17% and
0.82%, respectively. The unused fee is based on 101% of the maximum available amount less the beneficial interest transferred and is calculated at rate
ranging between 0.25% and 0.35%, depending on available borrowings, throughout the term of the agreement. We recorded these fees in Interest expense,
net in the accompanying Consolidated Statements of Operations.
The ASP contains certain restrictive covenants relating to the quality of our accounts receivable and cross -default provisions with our Credit Agreement
(as defined below), senior unsecured notes and any other indebtedness we may have over $75.0 million. The administrative agent under the ASP is also a
participant in our Credit Agreement. The participating financial institutions have investment grade credit ratings. As of December 31, 2022, we believe we
were in compliance with all covenant requirements.
Credit Agreement
In July 2021, we entered into a new Credit Agreement (the "Credit Agreement') with JPMorgan Chase Bank, N.A., as administrative agent, and the
other lenders party thereto, which refinanced and replaced the Seventh Amended and Restated Credit Facility.
The Credit Agreement consists of a $750.0 million unsecured revolving credit facility that matures in July 2026. We had outstanding borrowings of
$192.0 million as well as $2.0 million committed to standby letters of credit as of December 31, 2022. Subject to covenant limitations, $556.0 million was
available for future borrowings. The revolving credit facility includes
65
a subfacility for swingline loans of up to $65.0 million. The Credit Agreement will expire and outstanding loans will be required to be repaid in July 2026,
unless maturity is extended by the lenders pursuant to two one-year extension options that we may request under the Credit Agreement.
Below is a summary of the weighted average interest rate for both December 31, 2022 and 2021:
Weighted average borrowing rate
As of December 31,
2022 2021
5.57 % 1.38 %
The Credit Agreement is guaranteed by certain of our subsidiaries and contains customary covenants applicable to us and its subsidiaries including
limitations on indebtedness, liens, dividends, stock repurchases, mergers and sales of all or substantially all of its assets. In addition, the Credit Agreement
contains a financial covenant requiring us to maintain, as of the last day of each fiscal quarter for the four prior fiscal quarters, a Total Net Leverage Ratio
of no more than 3.50 to 1.00 (or, at our election, on up to two occasions following a material acquisition, 4.00 to 1.00).
The Credit Agreement contains customary events of default. These events of default include nonpayment of principal or interest, breach of covenants or
other restrictions or requirements, default on certain other indebtedness or receivables securitizations (cross default), and bankruptcy. A cross default under
our Credit Agreement could occur if:
• We fail to pay any principal or interest when due on any other indebtedness or receivables securitization exceeding $75.0 million; or
• We are in default in the performance of, or compliance with any term of any other indebtedness or receivables securitization in an aggregate
principal amount exceeding $75.0 million or any other condition exists which would give the holders the right to declare such indebtedness due
and payable prior to its stated maturity.
Each of our major debt agreements contains provisions by which a default under one agreement causes a default in the others (a "cross default"). If a
cross default under the Credit Agreement, our senior unsecured notes, our lease of our corporate headquarters in Richardson, Texas (recorded as an
operating lease), or our ASP were to occur, it could have a wider impact on our liquidity than might otherwise occur from a default of a single debt
instrument or lease commitment.
If any event of default occurs and is continuing, the administrative agent, or lenders with a majority of the aggregate commitments may require the
administrative agent to, terminate our right to borrow under our Credit Agreement and accelerate amounts due under our Credit Agreement (except for a
bankruptcy event of default, in which case such amounts will automatically become due and payable and the lenders' commitments will automatically
terminate). As of December 31, 2022, we believe we were in compliance with all covenant requirements.
Senior Unsecured Notes
We issued two series of senior unsecured notes on July 30, 2020 for $300.0 million each, which will mature on August 1, 2025 (the "2025 Notes") and
August 1, 2027 (the "2027 Notes") with interest being paid semi-annually on February and August at 1.35% and 1.70% respectively, per annum. We also
issued $350.0 million of senior unsecured notes in November 2016 (the "2023 Notes," and together with the 2025 Notes and the 2027 Notes, the "Notes")
which will mature on November 15, 2023 with interest being paid semi-annually on May 15 and November 15 at 3.00% per annum.
All the Notes are guaranteed, on a senior unsecured basis, by certain of our subsidiaries that guarantee indebtedness under our Credit Agreement. The
indenture governing the Notes contains covenants that, among other things, limit our ability and the ability of the subsidiary guarantors to: create or incur
certain liens; enter into certain sale and leaseback transactions; and enter into certain mergers, consolidations and transfers of substantially all of our assets.
The indenture also contains a cross default provision which is triggered if we default on other debt of at least $75 million in principal which is then
accelerated, and such acceleration is not rescinded within 30 days of the notice date. As of December 31, 2022, we believe we were in compliance with all
covenant requirements.
14. Comprehensive Income:
The following table provides information on items not reclassified in their entirety from AOCL to Net Income in the accompanying Consolidated
Statements of Operations (in millions):
66
AOCL Component
Gains/(Losses) on cash flow hedges:
Derivative contracts
Income tax expense
Net of tax
Defined Benefit Plan Items:
For the Years Ended December 31,
Affected Line Item(s) in the Consolidated
2022 2021 Statements of Operations
Cost of goods sold and
$ 9.7 $ 26.9 Losses (gains) and other expenses, net.
(2.2) (6.2) Provision for income taxes
$ 7.5 $ 20.7
Cost of goods sold; Selling, general,
administrative expenses and Other (income)
Pension and post -retirement benefits costs $
(5.4) $ (7.9)
expense, net
Pension settlements
0.2 (1.2)
Pension settlements
Income tax benefit
1.3 2.2
Provision for income taxes
Net of tax $
(3.9) $ (6.9)
Total reclassifications from AOCL $
3.6 $ 13.8
The following tables provide information on changes in AOCL, by component (net of tax), for the years ended December 31, 2022 and
2021 (in
millions):
Gains (Loss) on Share of equity method
Foreign Currency
Cash Flow investments other Defined Benefit Translation
Hedges comprehensive income
Plan Items Adjustments Total
AOCL
Balance as of December 31, 2021 $
10.7 $ (1.2) $
(68.8) $ (28.8) $
(88.1)
Other comprehensive (loss) income before reclassifications
(8.1) 0.7
18.7 (10.2)
1.1
Amounts reclassified from AOCL
(7.5) -
3.9 -
(3.6)
Net other comprehensive (loss) income
(15.6) 0.7
22.6 (10.2)
(2.5)
Balance as of December 31, 2022 $
(4.9) $ (0.5) $
(46.2) $ (39.0) $
(90.6)
Gains (Losses) Share of equity method
Foreign Currency
on Cash Flow investments other
Defined Benefit Translation
Hedges comprehensive income
Plan Items Adjustments Total AOCL
Balance as of December 31, 2020
$ 8.2 $ (1.2)
$ (82.7) $ (21.5) $
(97.2)
Other comprehensive income (loss) before reclassifications
23.2
7.0 (7.3)
22.9
Amounts reclassified from AOCL
(20.7) -
6.9 -
(13.8)
Other comprehensive income (loss) before reclassifications
2.5 -
13.9 (7.3)
9.1
Balance as of December 31, 2021
$ 10.7 $ (1.2)
$ (68.8) $ (28.8) $
(88.1)
15. Stock -Based Compensation:
Stock -based compensation expense related to continuing operations was included in Selling, general and administrative expenses in the accompanying
Consolidated Statements of Operations as follows (in millions):
Compensation expense')
For the Years Ended December 31,
2022 2021 2020
$ 21.8 $ 24.3 $ 24.3
0) Stock -based compensation expense was recorded in our Corporate and other business segment.
67
Incentive Plan
Under the Lennox International Inc. 2019 Equity and Incentive Compensation Plan, we are authorized to issue awards for 1.7 million shares of common
stock. The plan provides for various long-term incentive awards, including performance share units, restricted stock units and stock appreciation rights. A
description of these long-term incentive awards and related activity within each award category is provided below. As of December 31, 2022, there were 1.5
million shares available for future issuance.
Performance Share Units
Performance share units are granted to certain employees at the discretion of the Board of Directors with a three-year performance period beginning
January 1st of each year. Upon meeting the performance and vesting criteria, performance share units are converted to an equal number of shares of our
common stock. Performance share units vest if, at the end of the three-year performance period, at least the threshold performance level has been attained.
To the extent that the payout level attained is less than 100%, the difference between 100% and the units earned and distributed will be forfeited. Eligible
participants may also earn additional units of our common stock, which would increase the potential payout up to 200% of the units granted, depending on
LII's performance over the three-year performance period.
Performance share units are classified as equity awards. Compensation expense is recognized on an earnings curve over the period and is based on the
expected number of units to be earned and the fair value of the stock at the date of grant. The fair value of units is calculated as the average of the high and
low market price of the stock on the date of grant discounted by the expected dividend rate over the service period. The number of units expected to be
earned will be adjusted in future periods as necessary to reflect changes in the estimated number of award to be issued and, upon vesting, the actual number
of units awarded. Our practice is to issue new shares of common stock or utilize treasury stock to satisfy performance share unit distributions.
The following table provides information on our performance share units:
For the Years Ended December 31,
2022 2021
2020
Compensation expense for performance share units (in millions)
$ 6.9 $ 10.8
$ 8.9
Weighted -average fair value of grants, per share
$ 237.68 $ 314.27
$ 265.96
Payout ratio for shares paid
126 % 100 %
133 %
A summary of the status of our undistributed performance share units as of
December 31, 2022, and changes during the year then ended, is presented
below (in thousands, except per share data):
Weighted- Average
Grant Date Fair
Shares
Value per Share
Undistributed performance share units as of December 31, 2021
149.2
$ 246.84
Granted
51.5
$ 237.68
Adjustment to shares paid based on payout ratio
7.4
245.06
Distributed
(54.4)
$ 204.64
Forfeited
(29.0)
$ 262.82
Undistributed performance share units as of December 31, 2022 cl)
124.7
$ 257.55
(1) Undistributed performance share units include approximately 93.9 thousand units with a weighted -average grant date fair value of $261.65 per share
that had not yet vested and 30.8 thousand units that have vested but were not yet distributed.
As of December 31, 2022, we had $18.8 million of total unrecognized compensation cost related to non -vested performance share units that is expected
to be recognized over a weighted -average period of 2.4 years years. Our weighted -average estimated forfeiture rate for these performance share units was
10.9% as of December 31, 2022.
The total fair value of performance share units distributed and the resulting tax deductions to realized tax benefits were as follows (in millions):
68
Fair value of performance share units distributed
Realized tax benefits from tax deductions
Restricted Stock Units
For the Years Ended December 31,
2022 2021 2020
6.1 $ 10.8 $ 15.1
1.5 $ 2.7 $ 0.7
Restricted stock units are issued to attract and retain key employees. Generally, at the end of a three-year retention period, the units will vest and be
distributed in shares of our common stock to the participant. Our practice is to issue new shares of common stock or utilize treasury stock to satisfy
restricted stock unit vestings. Restricted stock units are classified as equity awards. The fair value of units granted is the average of the high and low market
price of the stock on the date of grant discounted by the expected dividend rate over the service period. Units are amortized to compensation expense
ratably over the service period.
The following table provides information on our restricted stock units (in millions, except per share data):
Compensation expense for restricted stock units
Weighted -average fair value of grants, per share
For the Years Ended December 31,
2022 2021 2020
11.0 $ 8.7 $ 10.4
240.87 $ 315.70 $ 265.96
A summary of our non -vested restricted stock units as of December 31, 2022 and changes during the year then ended is presented below (in thousands,
except per share data):
Non -vested restricted stock units as of December 31, 2021
Granted
Vested
Forfeited
Non -vested restricted stock units as of December 31, 2022 (1)
Weighted- Average
Grant Date Fair
Shares
Value per Share
135.1
$
277.85
58.8
$
240.87
(37.3)
$
250.45
(25.6)
$
268.59
131.0
$
270.86
cl) As of December 31, 2022, we had $24.7 million of total unrecognized compensation cost related to non -vested restricted stock units that is expected to
be recognized over a weighted -average period of 2.4 years. Our estimated forfeiture rate for restricted stock units was 13.3% as of December 31, 2022.
The total fair value of restricted stock units vested and the resulting tax deductions to realized tax benefits were as follows (in millions):
For the Years Ended December 31,
2022 2021 2020
Fair value of restricted stock units vested
Realized tax benefits from tax deductions
Stock Appreciation Rights
9.7 $ 11.0 $ 15.0
2.4 2.7 2.7
Stock appreciation rights are issued to certain key employees. Each recipient is given the "right' to receive compensation, paid in shares of our common
stock, equal to the future appreciation of our common stock price. Stock appreciation rights generally vest in one-third increments beginning on the first
anniversary date after the grant date and expire after seven years. Our practice is to issue new shares of common stock or utilize treasury stock to satisfy the
exercise of stock appreciation rights.
The following table provides information on our stock appreciation rights (in millions, except per share data):
69
Compensation expense for stock appreciation rights
Weighted -average fair value of grants, per share
For the Years Ended December 31,
2022 2021 2020
$ 3.9 $ 4.8 $ 5.0
$ 64.54 $ 70.50 $ 55.21
Compensation expense for stock appreciation rights is based on the fair value on the date of grant, estimated using the Black-Scholes-Merton valuation
model, and is recognized over the service period. We used historical stock price data to estimate the expected volatility. We determined that the recipients of
stock appreciation rights can be combined into one employee group that has similar historical exercise behavior and we used our historical pattern of award
exercises to estimate the expected life of the awards for the employee group. The risk -free interest rate was based on the zero -coupon U.S. Treasury yield
curve with a maturity equal to the expected life of the awards at the time of grant.
The fair value of the stock appreciation rights granted in 2022, 2021 and 2020 were estimated on the date of grant using the following assumptions:
2022 2021 2020
Expected dividend yield
2.01 % 1.69 % 1.64 %
Risk -free interest rate
3.88 % 0.88 % 0.27 %
Expected volatility
29.90 % 29.80 % 29.70 %
Expected life (in years)
4.18 4.35 3.95
A summary of our stock appreciation rights as of December 31, 2022, and changes during the year then ended, is presented below (in thousands, except
per share data):
Weighted -Average
Exercise Price per
Shares Share
Outstanding stock appreciation rights as of December 31, 2021
478.3 $ 241.61
Granted
98.1 $ 259.56
Exercised
(42.7) $ 170.48
Forfeited
(45.8) $ 280.78
Outstanding stock appreciation rights as of December 31, 2022
487.9 $ 247.77
Exercisable stock appreciation rights as of December 31, 2022
324.6 $ 231.24
The following table summarizes information about stock appreciation rights outstanding as of December 31, 2022 (in millions, except per share data and
years; shares in thousands):
Stock Appreciation Rights Outstanding
Stock Appreciation Rights Exercisable
Weighted -Average Remaining Aggregate
Weighted -Average Remaining Aggregate
Range of Exercise Prices Shares Contractual Term (in years) Intrinsic Value
Shares (1) Contractual Life (in years) Intrinsic Value
$124.97 to $214.63 175.7 2.12 $ 7.7
175.7 2.12 $ 7.7
$257.08 to $278.00 147.9 4.42 $ -
126.9 4.33 $ -
$259.56 to $328.65 164.3 6.59 $ -
22.1 6.00 $ -
(1) Share amounts are rounded but the balance accurately reflects the actual amount of exercisable stock appreciation rights as of December 31, 2022.
As of December 31, 2022, we had $10.6 million of unrecognized compensation cost related to non -vested stock appreciation rights that is expected to be
recognized over a weighted -average period of 2.8 years. Our estimated forfeiture rate for stock appreciation rights was 12.6% as of December 31, 2022.
The total intrinsic value of stock appreciation rights exercised and the resulting tax deductions to realize tax benefits were as follows (in millions):
70
Intrinsic value of stock appreciation rights exercised
Realized tax benefits from tax deductions
Employee Stock Purchase Plan
For the Years Ended December 31,
2022 2021 2020
3.5 $ 31.2 $ 26.7
0.9 $ 7.7 $ 6.7
On May 24, 2022, the Company commenced a new Employee Stock Purchase Plan to succeed the prior agreement from 2012. Under the 2022
Employee Stock Purchase Plan ("ESPP"), all employees who meet certain service requirements are eligible to purchase our common stock through payroll
deductions at the end of three month offering periods. The purchase price for such shares is 95% of the fair market value of the stock on the last day of the
offering period. A maximum of 1.0 million shares is authorized for purchase until issuance of all shares available under the plan, unless terminated earlier at
the discretion of the Board of Directors. Employees purchased approximately 16,100 shares under the ESPP during the year ended December 31, 2022.
Approximately 0.8 million shares remain available for purchase under the ESPP as of December 31, 2022.
16. Fair Value Measurements:
Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the
measurement date. Fair value is based upon the transparency of inputs to the valuation of an asset or liability as of the measurement date and requires
consideration of our creditworthiness when valuing certain liabilities. Our framework for measuring fair value is based on the following three -level
hierarchy for fair value measurements:
Level I - Quoted prices for identical instruments in active markets at the measurement date.
Level 2 - Quoted prices for similar instruments in active markets; quoted prices for identical or similar instruments in markets that are not active;
and model -derived valuations in which all significant inputs and significant value drivers are observable in active markets at the
measurement date and for the anticipated term of the instrument.
Level 3 - Valuations derived from valuation techniques in which one or more significant inputs or significant value drivers are unobservable inputs
that reflect the reporting entity's own assumptions about the assumptions market participants would use in pricing the asset or liability
developed based on the best information available in the circumstances.
Where available, the fair values were based upon quoted prices in active markets. However, if quoted prices were not available, then the fair values were
based upon quoted prices for similar assets or liabilities or independently sourced market parameters, such as credit default swap spreads, yield curves,
reported trades, broker/dealer quotes, interest rates and benchmark securities. For assets and liabilities without observable market activity, if any, the fair
values were based upon discounted cash flow methodologies incorporating assumptions that, in our judgment, reflect the assumptions a marketplace
participant would use. Valuation adjustments to reflect either parry's creditworthiness and ability to pay were incorporated into our valuations, where
appropriate, as of December 31, 2022 and 2021, the measurement dates.
The methodologies used to determine the fair value of our financial assets and liabilities as of December 31, 2022 were the same as those used as of
December 31, 2021.
Fair values are estimates and are not necessarily indicative of amounts for which we could settle such instruments currently nor indicative of our intent
or ability to dispose of or liquidate them.
Assets and Liabilities Carried at Fair Value on a Recurring Basis
Derivatives, classified as Level 2, were primarily valued using estimated future cash flows based on observed prices from exchange -traded derivatives.
We also considered the counterparty's creditworthiness, or our own creditworthiness, as appropriate. Adjustments were recorded to reflect the risk of credit
default, but they were insignificant to the overall value of the derivatives. Refer to Note 9 for more information related to our derivative instruments. Refer
to Note 10 for more information related to the fair value assumptions related to our pension assets and liabilities.
71
Other Fair Value Disclosures
The carrying amounts of Cash and cash equivalents, Short-term investments, Accounts and notes receivable, net, Accounts payable, Other current
liabilities, and Short-term debt approximate fair value due to the short maturities of these instruments. The carrying amount of our Credit Agreement in
Long-term debt also approximates fair value due to its variable -rate characteristics.
The fair value of our senior unsecured notes in Long-term debt was based on the amount of future cash flows using current market rates for debt
instruments of similar maturities and credit risk. The following table presents the fair value for our senior unsecured notes in Long-term debt (in millions):
Quoted Prices in Active Markets for Similar Instruments (Level 2):
Senior unsecured notes
72
As of December 31,
2022 2021
878.0 $ 959.2
Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure
None.
Item 9A. Controls and Procedures
Disclosure Controls and Procedures
As required by Rule 13a-15 under the Exchange Act, we carried out an evaluation, under the supervision and with the participation of our current
management, including our Chief Executive Officer and Chief Financial Officer, of the effectiveness of our disclosure controls and procedures as of the end
of the period covered by this report. There are inherent limitations to the effectiveness of any system of disclosure controls and procedures, including the
possibility of human error and circumvention or overriding of the controls and procedures. Accordingly, even effective disclosure controls and procedures
can only provide reasonable assurance of achieving their control objectives. Based on that evaluation, our Chief Executive Officer and Chief Financial
Officer have concluded that, as of December 31, 2022, 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.
Management's Annual Report on Internal Control Over Financial Reporting
See "Management's Report on Internal Control Over Financial Reporting" included in Item 8 "Financial Statements and Supplementary Data."
Attestation Report of the Independent Registered Public Accounting Firm
See "Report of Independent Registered Public Accounting Firm" included in Item 8 "Financial Statements and Supplementary Data."
Changes in Internal Control Over Financial Reporting
There were no changes during the year ended December 31, 2022 in our internal control over financial reporting that have materially affected, or are
reasonably likely to materially affect, our internal control over financial reporting.
Item 9B. Other Information
None.
PART III
Item 10. Directors, Executive Officers and Corporate Governance
Incorporated herein by reference from the Company's definitive proxy statement, which will be filed no later than 120 days after December 31, 2022.
Also, refer to Part I, Item 1 "Business - Information about our Executive Officers " of this Annual Report on Form 10-K, which identifies our executive
officers and is incorporated herein by reference.
Item 11. Executive Compensation
Incorporated herein by reference from the Company's definitive proxy statement, which will be filed no later than 120 days after December 31, 2022.
Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters
Incorporated herein by reference from the Company's definitive proxy statement, which will be filed no later than 120 days after December 31, 2022.
Also, refer to Note 15 in the Notes to the Consolidated Financial Statements for additional information about our equity compensation plans.
73
Item 13. Certain Relationships and Related Transactions and Director Independence
Incorporated herein by reference from the Company's definitive proxy statement, which will be filed no later than 120 days after December 31, 2022.
Item 14. Principal Accounting Fees and Services
Our independent registered public accounting firm is KPMG LLP, Dallas, TX, Auditor Firm ID: 185.
Incorporated herein by reference from the Company's definitive proxy statement, which will be filed no later than 120 days after December 31, 2022.
PART IV
Item 15. Exhibits and Financial Statement Schedules
Financial Statements
The following financial statements are included in Part II, Item 8 of the Annual Report on Form 10-K:
• Report of Independent Registered Public Accounting Firm (KPMG LLP, Dallas, TX, Auditor Firm ID: 185)
• Consolidated Balance Sheets as of December 31, 2022 and 2021
• Consolidated Statements of Operations for the Years Ended December 31, 2022, 2021 and 2020
• Consolidated Statements of Comprehensive Income for the Years Ended December 31, 2022, 2021 and 2020
• Consolidated Statements of Stockholders' Deficit for the Years Ended December 31, 2022, 2021 and 2020
• Consolidated Statements of Cash Flows for the Years Ended December 31, 2022, 2021 and 2020
• Notes to the Consolidated Financial Statements for the Years Ended December 31, 2022, 2021 and 2020
Financial Statement 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, 2022, 2021 and 2020 (see Schedule II immediately following the signature page of this Annual Report on Form 10-K).
Financial statement schedules not included in this Annual Report on Form 10-K have been omitted because they are not applicable or the required
information is shown in the Consolidated Financial Statements or Notes thereto.
Exhibits
A list of the exhibits required to be filed or furnished as part of this Annual Report on Form 10-K is set forth in the Index to Exhibits, which
immediately precedes such exhibits, and is incorporated herein by reference.
74
INDEX TO EXHIBITS
3.1 Restated Certificate of Incorporation of Lennox International Inc. ("LII") (filed herewith).
3.2 Amended and Restated Bylaws of LII (filed herewith).
4.1 Indenture. dated as of May 3.2010 between LII and U.S. Bank National Association, as trustee (filed as Exhibit 4.3 to LII's Post -Effective
Amendment No. 1 to Registration �tatement on S-3 (Registration No. 333-155796) filed on May 3. 2010 and incornorated herein by
reference).
4.2 Sixth Supplemental Indenture dated as of November 3.2016. among LII. each other exist i Guarantor under the Indenture. dated as of May
3. 2010. as subsequently sunplemented. and U.S. Bank National Association. as trustee (file as Exhibit 4.2 to LII's Current Report on Form
8-K filed on November 3.2016 and incorporated herein by reference).
4.3 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 herein by reference).
4.4 Ninth Su _ lemental Indenture. dated as of July 30. 2020. amo a LII. each existi . �u t er the Indenture. dated as of May 3 2010.
PP �g a,ar� ] u�
as subsequently supplemented. and U.S. Bank National Association. as trustee (file as Exhibit 4. to LII's Current Report on Form A-K filed
on July 30.2020 and incorporated herein by reference),
4.5 Form of 1.350% Notes due 2025 (filed as Exhibit A in Exhibit 4.2 to LII's Current Report on Form 8-K filed on July 30.2020 and
incorporated herein by reference).
4.6 Form of 1.700% Notes due 2027 (filed as Exhibit B in Exhibit 4.2 to LII's Current Report on Form 8-K filed on July 30.2020 and
incorporated herein by reference).
4.7 Tenth Supplemental Indenture, dated as of July 14, 2021, among LII, each existing G zarantorr under the Indenture, dated as of May 3, 2010,
as subsequently sunnlemented. and U.S. Bank National Association, as trustee (filed erewith).
4.8 Description of Securities (filed herewith).
10.1 Credit Agreement dated as of July 14, 2021, among Lennox In ern t]. n 1 Inc., a Delaware cgrmoration, the Banks 12arty thereto, and
JPMorgan Chase �ank. N.A.. as Administrative Agent (filed as�x ibit 10.1 to LII's Current Report on Form 8-K filed on July 15. 2021 and
incornorated herein by reference).
10.2 Guaranty Agreement, dated as of July 14. 2021. among the guarantors party thereto and JPMorgan Chase Bank. N.A.. as Administrative
Agent (filed as Exhibit 10.2 to LII's Current Report on Form 8-K filed on July 15, 2021 and incorporated herein by reference).
10.3 Amendment No. 11 to Amended and Restated Receivables Purchase Agreement. dated as of November 12. 2021. among. LPAC Corr7i� as the
Seller. Lennox Industries Inc.. as the Master Servicer. Lennox International Inc.. Victory Receivables Corporation. as a Purchaser. MLG
Bank. Ltd.. formerly known as The Bank of Tokyo -Mitsubishi UFJ. Ltd.. a,� minis�.rative gent for the Investors the, pu chaser .gent for the
MUFG Purchaser Groun and a MUFG Liquidity Bank. Wells Fargo Bank. N. ..as the nurchaser agent for the WX Purchaser Group and a
WFB Liquidity Bank. and PNC Bank. N.A., as the purchaser agent for the PNC Purchaser Grout) and a PNC Liquidity Bank. including
attachments (filed as Exhibit 10.1 to LII's Current Renort on Form 8-K filed on November 12. 2021 and incomorated herein by referencel.
10.4* Lennox Ipterpatign�l Inc. 2019 Eauitv and Incentive Compensation Plan (filed as Exhibit 10.1 to LII's Current Report on Form 8-K filed on
May 24. 22001199 and mcomorated herein by reference).
10.5* Form of Loppg-T�++ JJnnP rive Award Agreement for U.S. Employees - dice Pre , de. t nd Aljpve (for use under the 2019 Incentive Plan)
(filed as Exhibitl0.18 to LII's Annual Report on Form 10-K filed on February ��. 2�2� and incorporated herein by reference).
10.6* Form of Long -Term Incentive Award Agreement for Non-U.S. Emnlovees - Vice President and Above (for use under the 2019 Incentive
Plan) (filed as Exhibit 10.3 to LII's Ouarterlv Report on Form 10-0 filed on October 25. 2021 and incorporated herein by reference).
10.7* Form of Restricted Stock Unit Award Agreement for Non-Emolovee Directors (for use under the 2019 Incentive Plan) (filed as Exhibit 10.19
to LII's Annual Report on Form 10-K filed on February 18.2020 and incorporated herein by reference).
10.8* Form of Short -Term Incentive Program for Lennox International Inc. and its Subsidiaries (filed as Exhibit 10.20 to LII's Annual Report on
Form 10-K filed on February 18.2020 and incorporated herein by reference).
10.9* Lennox International Inc. Profit Sharing Restoration Plan. as amended and restated as of Janua�v 1, 2009 (filed as Exhibit 10.3 to LII's
Current Report on Form 8-K filed on December 17. 2008 and incorporated herein by referencel.,
10.10* Lennox International Inc. Supplemental Retirement Plan, as amended and restated as of January 1.2009 (filed as Exhibit 10.2 to LII's
Current Report on Form 8-K filed on December 17. 2008 and incorporated herein by reference).,
75
10.11 * Amendment Number One to the Lennox International Inc. Supplemental Retirement Plan, as amended and restated as of January 1, 2009,
dated December 28, 2018 (filed as Exhibit 10.23 to LII's Annual Report on Form 10-K filed on February 19, 2019 and incorporated herein
by reference),
10.12* Lennox Irltgatiq� l Inc. Supplemental Restoration Retirement Plan. effective as of January 1. 2019. dated December 28. 2018 (filed as
Exhibit l00 2244 to s Annual Report on Form 10-K filed on February 19. 2019 and incomorated herein by reference).
10.13 * 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 Apri16. 1999 and incorporated herein by reference),
10.14* Form of Em lov�ent i![ ement entered into between LII and qe ain xecutix officers of LII (filed as Exhibit 10.30 to LII's Annual Report
on Form 10-� filed on�ebruary 27. 2007 and incorporated herein by re�erence).
10.15* Form of Amendment to Employment Agreement entered into between LII and certain executive officers of LII (filed as Exhibit 10.2 to LII's
Current Report on Form 8-K filed on December 12, 2007 and incorporated herein by reference),
10.16* Lennox It terna31jI Inc. Directors' Retirement Plan (as Amended and Restated as of January 1. 2010) (filed as Exhibit 10.1 to LII's Current
Report onorm 8-K filed on December 16. 2009 and mcomorated herein by reference).
10.17* Retention Agreement, dated July 12, 2021, between Lennox International Inc. and Douglas L. Young -(filed as Exhibit 10.1 to LII's Current
Report on Form 8-K filed on July 14, 2021 and incorporated herein by reference),
10.18* Form of Award �jg cement. dated December 10 2021. between Lennox Ipt r�atignPI Inc. and certain] n metexecutive officers (filed as
Exhibit 10.1 to LII s Current Report on Form 8-% filed on December 14, 2� 1 and mcomorateJ fierem �v reference).
10.19* Lennox International Inc. Change in Control Severance Plan (filed as Exhibit 10.1 to LII's Current Report on Form 8-K filed on December
12, 2022 and incorporated herein by reference),
21.1 Subsidiaries of LII (filed herewith).
22.1 List of Guarantor Subsidiaries (filed herewith).
23.1 Consent of KPMG LLP (filed herewith).
31.1 Certification of the principal executive officer (filed herewith),
31.2 Certification of the nrincival financial officer (filed herewith).
32.1 Certification of the principal executive officer and the principal financial officer pursuant to 18 U.S.C. Section 1350 (furnished herewith).
101 SCH Inline XBRL Taxonomy Extension Schema Document
101 CAL Inline XBRL Taxonomy Extension Calculation Linkbase Document
101 LAB Inline XBRL Taxonomy Extension Label Linkbase Document
101 PRE Inline XBRL Taxonomy Extension Presentation Linkbase Document
101 DEF Inline XBRL Taxonomy Extension Definition Linkbase Document
104 Cover Page Interactive Data File (formatted as inline XBRL and contained in Exhibit 101)
* Management contract or compensatory plan or arrangement
76
Item 16. Form 10-KSummary
None
77
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
LENNOX INTERNATIONAL INC.
By: /s/ Alok Maskara
Alok Maskara
Chief Executive Officer
February 21, 2023
Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the
registrant in the capacities and on the dates indicated.
SIGNATURE
TITLE
DATE
/s/ ALOK MASKARA
Chief Executive Officer
February 21, 2023
Alok Maskara
(Principal Executive Officer)
/s/ JOSEPH W. REITMEIER
Executive Vice President and Chief Financial Officer
February 21, 2023
Joseph W. Reitmeier
(Principal Financial Officer)
/s/ CHRIS A. KOSEL
Vice President, Controller and Chief Accounting Officer
February 21, 2023
Chris A. Kosel
(Principal Accounting Officer)
/s/ TODD J. TESKE
Chairman of the Board of Directors
February 21, 2023
Todd J. Teske
/s/ SHERRY L. BUCK
Director
February 21, 2023
Sherry L. Buck
/s/ JANET K. COOPER
Director
February 21, 2023
Janet K. Cooper
/s/ JOHN W. NORRIS, III
Director
February 21, 2023
John W. Norris, III
/s/ KAREN H. QUINTOS
Director
February 21, 2023
Karen. H. Quintos
/s/ KIM K.W. RUCKER
Director
February 21, 2023
Kim K.W. Rucker
/s/ GREGORY T. SWIENTON
Director
February 21, 2023
Gregory T. Swienton
/s/ SHANE D. WALL
Director
February 21, 2023
Shane D. Wall
78
LENNOX INTERNATIONAL INC.
SCHEDULE H - VALUATION AND QUALIFYING ACCOUNTS AND RESERVES
For the Years Ended December 31, 2022, 2021 and 2020
(In millions)
Balance at Additions
beginning of charged to cost Balance at end
year and expenses Write-offs Recoveries Other of year
2020
Allowance for doubtful accounts $ 6.1 $ 8.1 $ (4.2) $ 1.2 $ (1.6) $ 9.6
2021
Allowance for doubtful accounts $ 9.6 $ 0.3 $ (0.4) $ 1.2 $ — $ 10.7
2022
Allowance for doubtful accounts $ 10.7 $ 6.9 $ (0.4) $ — $ (1.7) $ 15.5
79
Exhibit 3.1
RESTATED CERTIFICATE OF INCORPORATION
OF
LENNOX INTERNATIONAL INC.
Lennox International Inc., a corporation organized and existing under the laws of the State of Delaware, hereby certifies as
follows:
1. The name of the corporation is Lennox International Inc. The Certificate of Incorporation of the corporation was
filed with the Secretary of State of the State of Delaware on August 13, 1991.
2. Pursuant to Sections 242 and 245 of the General Corporation Law of Delaware, this Restated Certificate of
Incorporation restates and integrates and amends the provisions of the Restated Certificate of Incorporation of the corporation.
3. The text of the Restated Certificate of Incorporation is hereby restated and amended to read in its entirety as
follows:
FIRST: The name of the corporation (the "Corporation") is Lennox International Inc.
SECOND: The address of the Corporation's registered office in the State of Delaware is 1209 Orange Street, in the
City of Wilmington, County of New Castle 19801. The name of its registered agent at such address is The Corporation
Trust Company.
THIRD: The purpose of the Corporation is to engage in any lawful act or activity for which corporations may be
organized under the General Corporation Law of Delaware ("DGCL").
FOURTH:
(a) The total number of shares of stock that the Corporation shall have authority to issue is Two Hundred
Twenty -Five Million (225,000,000) consisting of Two Hundred Million (200,000,000) shares of Common Stock, par value
one cent ($.01) per share, and Twenty -Five Million (25,000,000) shares of Preferred Stock, par value one cent ($.01) per
share.
(b) The designations, voting powers, preferences and relative, participating, optional or other special rights, and
qualifications, limitations or restrictions of the above classes of stock are as follows:
(1) Subject to the limitations hereinafter contained and to the requirements of the laws of the State of
Delaware, authority is hereby vested in the Board of Directors of the corporation to issue from time to time said
Twenty -Five Million (25,000,000) shares of Preferred Stock in one or more series, with such voting powers, full or
limited, or no voting powers, and such designations, preferences and relative, participating, optional or other
special rights, and qualifications, limitations or restrictions thereof, as shall be stated in the resolution or
resolutions providing for the issuance of such stock adopted by the Board of Directors. Without limiting the
generality of the foregoing, in the resolution or resolutions providing for the issuance of such shares of each
particular series of Preferred Stock, subject to the limitations hereinafter contained
NAI-1526349057v1
and to the requirements of the laws of the State of Delaware, the Board of Directors is also expressly authorized:
(i) to fix the distinctive serial designation of the shares of any such series;
(ii) to fix the consideration for which the shares of any such series are to be issued;
(iii) to fix the rate or amount per annum, if any, at which the holders of the shares of any such
series shall be entitled to receive dividends, the dates on which such dividends shall be payable, whether
the dividends shall be cumulative or noncumulative, and if cumulative, to fix the date or dates from which
such dividends shall be cumulative;
(iv) to fix the price or prices at which, the times during which, and the other terms, if any, upon
which the shares of any such series may be redeemed;
(v) to fix the rights, if any, which the holders of shares of any such series have in the event of
dissolution or upon distribution of the assets of the Corporation;
(vi) to determine whether the shares of any such series shall be made convertible into or
exchangeable for other securities of the Corporation, including shares of the Common Stock of the
Corporation or shares of any other series of the Preferred Stock of the Corporation, now or hereafter
authorized, or any new class of preferred stock of the Corporation hereafter authorized, the price or prices
or the rate or rates at which conversion or exchange may be made, and the terms and conditions upon
which any such conversion right or exchange right shall be exercised;
(vii) to determine whether a sinking fund shall be provided for the purchase or redemption of
shares of any series and, if so, to fix the terms and amount or amounts of such sinking fund;
(viii) to determine whether the shares of any such series shall have voting rights, and, if so, to fix
the voting rights of the shares of such series; and
(ix) to fix such other preferences and rights, privileges and restrictions applicable to any such
series as may be permitted by law.
(2) Subject to the prior rights of the holders of any shares of Preferred Stock, the holders of the Common
Stock shall be entitled to receive, to the extent permitted by law, such dividends as may be declared from time to
time by the Board of Directors.
(3) In the event of any voluntary or involuntary liquidation, dissolution, distribution of assets or winding
up of the Corporation, after the holders of the Preferred Stock then outstanding, if any, shall have received the full
preferential amounts to which such holders may be entitled upon such voluntary or involuntary liquidation,
dissolution, distribution of assets or winding up, the
2 NAI-1526349057v1
holders of Common Stock shall be entitled, to the exclusion of such holders of the Preferred Stock then
outstanding, to receive all the remaining assets of the Corporation of whatever kind available for distribution to
stockholders, ratably in proportion to the number of shares of Common Stock held by them respectively. A
consolidation, merger or reorganization of the Corporation with any other corporation or corporations, or a sale of
all or substantially all of the assets of the Corporation, shall not be considered a dissolution, liquidation or winding
up of the Corporation within the meaning of the immediately preceding sentence.
(4) Except as may otherwise be required by law, the Bylaws of the corporation or this Certificate of
Incorporation, each holder of Common Stock shall be entitled to one vote for each share of Common Stock held of
record in the name of such stockholder on all matters voted upon by the stockholders, including the election of
directors.
FIFTH: The Corporation is to have perpetual existence.
SIXTH:
(a) Except as may be otherwise provided by law or in this Certificate of Incorporation, the business and affairs of
the Corporation shall be managed under the direction of the Board of Directors. The following provisions are inserted for
the management of the business and for the conduct of the affairs of the Corporation and for the purpose of creating,
defining, limiting and regulating the powers of the Corporation and its directors and stockholders:
(1) The number of directors of the Corporation shall be fixed from time to time by, or in the manner
provided in, the Bylaws of the Corporation.
(2) Elections of directors need not be by written ballot except to the extent provided in the Bylaws of the
Corporation.
(3) In furtherance and not in limitation of the powers conferred by the laws of the State of Delaware, the
Board of Directors of the Corporation is expressly authorized:
(i) to adopt, amend or repeal the Bylaws of the Corporation, subject to this Certificate of
Incorporation and the power of the stockholders, at the time entitled to vote, to alter, amend or repeal
Bylaws made by the Board of Directors;
(ii) to authorize and issue obligations of the Corporation, secured or unsecured, and to include
therein such provisions as to redemption, conversion or other terms thereof as the Board of Directors in its
sole discretion may determine, and to authorize the mortgaging or pledging, as security therefor, of any
property of the Corporation, real or personal, including after -acquired property;
(iii) to determine whether any, and if any, what part, of the net prof its of the Corporation or of its
surplus shall be declared in dividends and paid to the stockholders, and to direct and determine the use and
disposition of such net profits or such surplus; and
3 NAI-1526349057v1
(iv) from time to time, without the vote or assent of the stockholders, to issue additional shares of
authorized Common Stock.
In addition to the powers and authorities herein or by law expressly conferred upon it, the Board of Directors may
exercise all such powers and do all such acts and things as may be exercised or done by the Corporation, subject,
nevertheless, to the provisions of the laws of the State of Delaware, of this Certificate of Incorporation and of the Bylaws
of the Corporation.
(b) The Board of Directors shall be divided into three classes, designated Class I, Class II and Class III, as nearly
equal in number as the then total number of directors constituting the whole Board permits. If the number of directors is
changed, any increase or decrease shall be apportioned by the Board of Directors among the three classes so that the
number in each class shall be as nearly equal as possible. The term of office of each class shall expire at the third annual
meeting of stockholders for election of directors following the election of such class, except that the initial term of office
of the Class I directors shall expire at the annual meeting of stockholders in 1996, the initial term of office of the Class II
directors shall expire at the annual meeting of stockholders in 1997 and the initial term of office of the Class III directors
shall expire at the annual meeting of stockholders in 1998. At each annual meeting of the stockholders of the Corporation,
the successors of the class of directors whose term expires at such meeting shall be elected to hold office for a term
expiring as of the third succeeding annual meeting.
(c) A director may be removed from office only for cause and by the affirmative vote of the holders of not less
than eighty percent (80%) of all the outstanding shares of stock of the Corporation entitled to vote generally in the election
of directors at a special meeting of stockholders called expressly for that purpose.
SEVENTH: All preemptive rights of shareholders are hereby denied, so that no shares of capital stock of the
Corporation of any class whether now or hereafter authorized and no other security of the Corporation shall carry with it
and no holder or owner of any share or shares of capital stock of the Corporation of any class whether now or hereafter
authorized or of any other security of the Corporation shall have any preferential or preemptive right to acquire additional
shares of capital stock of the Corporation of any class whether now or hereafter authorized or of any other security of the
Corporation.
All cumulative voting rights are hereby denied, so that none of the capital stock of the Corporation of any class
whether now or hereafter authorized or of any other security of the Corporation shall carry with it and no holder or owner
of any share or shares of capital stock of the Corporation of any class whether now or hereafter authorized or of any other
security of the Corporation shall have any right to cumulative voting in the election of directors or for any other purpose.
EIGHTH: A director of the Corporation shall not be liable to the Corporation or its stockholders for monetary
damages for breach of fiduciary duty as a director, except to the extent such exemption from liability or limitation thereof
is not permitted under the DGCL as the same exists or may hereafter be amended. Any repeal or modification of this
ARTICLE EIGHTH shall not adversely affect any right or protection of a director of the Corporation existing hereunder
with respect to any act or omission occurring prior to such repeal or modification.
4 NAI-1526349057v1
NINTH: Except as otherwise provided in this Certificate of Incorporation, any action required or permitted to be
taken by the stockholders of the Corporation must be effected at a duly called annual or special meeting of stockholders of
the Corporation and may not be effected by consent in writing by such stockholders. A special meeting of stockholders
may be called only by the Board of Directors pursuant to a resolution adopted by the affirmative vote of a majority of the
entire Board of Directors or by the Chairman of the Board of Directors, a Vice Chairman of the Board of Directors or the
President. The stockholders of the Corporation shall have the power to adopt, amend or repeal the Bylaws of the
Corporation at any annual or special meeting by the affirmative vote of holders of not less than eighty percent (80%) of
the combined voting power of the outstanding shares of stock of the Corporation entitled to vote generally in the election
of directors, voting together as a single class.
TENTH: Whenever a compromise or arrangement is proposed between the Corporation and its creditors or any
class of them and/or between the Corporation and its stockholders or any class of them, any court of equitable jurisdiction
within the State of Delaware may, on the application in a summary way of the Corporation or of any creditor or
stockholder thereof or on the application of any receiver or receivers appointed for the Corporation under the provisions of
Section 291 of Title 8 of the Delaware Code or on the application of trustees in dissolution or of any receiver or receivers
appointed for the Corporation under the provisions of Section 279 of Title 8 of the Delaware Code, order a meeting of the
creditors or class of creditors, and/or of the stockholders or class of stockholders of the Corporation, as the case may be, to
be summoned in such manner as the said court directs. If a majority in number representing three -fourths in value of the
creditors or class of creditors, and/or of the stockholders or class of stockholders of the Corporation, as the case may be,
agree to any compromise or arrangement and to any reorganization of the Corporation as a consequence of such
compromise or arrangement, the said compromise or arrangement and the said reorganization shall, if sanctioned by the
court to which the said application has been made, be binding on all the creditors or class of creditors, and/or on all the
stockholders or class of stockholders, of the Corporation, as the case may be, and also on the Corporation.
ELEVENTH:
(a) The affirmative vote of the holders of not less than eighty percent (80%) of the voting power of the
Corporation shall be required for the approval or authorization of any "Business Combination" (as hereinafter defined);
provided, however, that the eighty percent (80%) voting requirement shall not be applicable, and the provisions of
Delaware law and of this Certificate of Incorporation relating to the percentage of stockholder approval, if any, shall apply
to any such Business Combination if:
(1) The Continuing Directors (as hereinafter defined) of the Corporation by a two-thirds vote have
expressly approved the Business Combination either in advance of or subsequent to the acquisition of outstanding
shares of Common Stock of the Corporation that caused the Related Person (as hereinafter defined) involved in the
Business Combination to become a Related Person; or
(2) If (A) the aggregate amount of the cash and the fair market value of the property, securities or other
consideration to be received in the Business Combination by holders of the Common Stock of the Corporation,
other than the Related Person involved in the Business Combination, is not less than the "Highest Per Share Price"
(as hereinafter defined) (with appropriate adjustments for recapitalizations, reclassifications, stock splits, reverse
stock splits and stock
5 NAI-1526349057v1
dividends) paid by the Related Person in acquiring any of its holdings of the Corporation's Common Stock, all as
determined by two-thirds of the Continuing Directors; and (B) if necessary, a proxy statement complying with the
requirements of the Securities Exchange Act of 1934, as amended, shall have been mailed at least thirty (30) days
prior to any vote on the Business Combination, to all stockholders of the Corporation for the purpose of soliciting
stockholder approval of the Business Combination. The proxy statement shall contain at the front thereof, in a
prominent place, the position of the Continuing Directors as to the advisability (or inadvisability) of the Business
Combination and, if deemed appropriate by two-thirds of the Continuing Directors, the opinion of an investment
banking firm selected by two-thirds of the Continuing Directors as to the fairness of the terms of the Business
combination, from the point of view of the holders of the outstanding shares of capital stock of the Corporation
other than the Related Person involved in the Business Combination.
(b) For purposes of this ARTICLE ELEVENTH:
(1) The term "Business Combination" shall mean (A) any merger, consolidation or share exchange of the
Corporation or any of its subsidiaries into or with a Related Person, in each case irrespective of which corporation
or company is the surviving entity; (B) any sale, lease, exchange, mortgage, pledge, transfer or other disposition to
or with a Related Person (in a single transaction or a series of related transactions) of all or a Substantial Part (as
hereinafter defined) of the assets of the Corporation (including without limitation any securities of a subsidiary of
the Corporation) or a Substantial Part of the assets of any of its subsidiaries; (C) any sale, lease, exchange,
mortgage, pledge, transfer or other disposition to or with the Corporation or to or with any of its subsidiaries (in a
single transaction or series of related transactions) of all or a Substantial Part of the assets of a Related Person; (D)
the issuance or transfer of any securities of the Corporation or any of its subsidiaries by the Corporation or any of
its subsidiaries to a Related Person (other than an issuance or transfer of securities which is effected on a pro rata
basis to all stockholders of the Corporation); (E) any reclassification of securities (including any reverse stock
split), recapitalization, or any other transaction involving the Corporation or any of its subsidiaries, that would
have the effect of increasing the voting power of a Related Person; (F) the adoption of any plan or proposal for the
liquidation or dissolution of the Corporation proposed by or on behalf of a Related Person; (G) the acquisition by
or on behalf of a Related Person of shares constituting a majority of the voting power of the Corporation; and (H)
the entering into of any agreement, contract or other arrangement providing for any of the transactions described in
this definition of Business combination.
(2) The term "Related Person" shall mean any individual, corporation, partnership or other person or
entity, other than the Corporation or any of its subsidiaries or any benefit plan or trust (or any trustee thereof),
which, as of the record date for the determination of stockholders entitled to notice of and to vote on any Business
Combination, or immediately prior to the consummation of such transaction, together with its "Affiliates" and
"Associates" (each as defined in Rule 12b-2 of the Regulations under the Securities Exchange Act of 1934 as in
effect at the date of the adoption of this ARTICLE ELEVENTH by the stockholders of the Corporation
(collectively and as so in effect, the "Exchange Act")), are `Beneficial Owners" (as defined in Rule 13d-3 of the
Exchange Act) in the aggregate of 10% or more of the outstanding shares of Common Stock of the Corporation,
and any Affiliate or Associate of any such individual,
6 NAI-1526349057v1
corporation, partnership or other person or entity. Notwithstanding the definition of `Beneficial Owners" in this
subparagraph 2, any Common Stock of the Corporation that any Related Person has the right to acquire pursuant to
any agreement, or upon exercise of conversion rights, warrants or options, or otherwise, shall be deemed
beneficially owned by the Related Person.
(3) The term "Substantial Part" shall mean more than 10% of the fair market value, as determined by
two-thirds of the continuing Directors, of the total consolidated assets, or assets representing more than 10% of the
earning power, of the Corporation and its subsidiaries taken as a whole, as of the end of its most recent fiscal year
ending prior to the time the determination is being made.
(4) In the event of a Business Combination in which the Corporation is the surviving corporation, the
term "other consideration to be received" shall include, without limitation, Common Stock or other capital stock of
the Corporation retained by stockholders of the Corporation other than Related Persons or parties to such Business
Combination.
(5) The term "Continuing Directors" shall mean a director who either (i) was a member of the Board of
Directors of the Corporation immediately prior to the time that the Related Person involved in a Business
Combination became a Related Person, or (ii) was designated (before his or her initial election as a director) as a
Continuing Director by two-thirds of the then Continuing Directors.
(6) A Related Person shall be deemed to have acquired a share of the Common Stock of the Corporation
at the time when such Related Person became the Beneficial Owner thereof. With respect to the shares owned by
Affiliates, Associates or other person whose ownership is attributed to a Related Person under the foregoing
definition of Related Person, the price paid for said shares shall be deemed to be the higher of (i) the price paid
upon the acquisition thereof by the Affiliate, Associate or other person, or (ii) the market price of the shares in
question at the time when the Related Person became the Beneficial Owner thereof.
(7) The term "Highest Per Share Price" shall mean the highest price determined by two-thirds of the
Continuing Directors to have been paid at any time by the Related Person for any share or shares of Common
Stock. In determining the Highest Per Share Price, all purchases by the Related Person shall be taken into account
regardless of whether the shares were purchased before or after the Related Person became a Related Person. The
Highest Per Share Price shall include any brokerage commission, transfer taxes and soliciting dealers' fees paid by
the Related Person with respect to the shares of Common Stock of the Corporation acquired by the Related Person.
TWELFTH: To the extent not prohibited by law, the Corporation by action of its Board of Directors may purchase
shares of any class of stock issued by it from any holder or holders thereof.
THIRTEENTH: The Corporation by action of its Board of Directors may create and issue, from time to time,
whether or not in connection with the issuance and sale of any shares of stock or other securities of the Corporation,
rights, warrants and options entitling the holders thereof to purchase from the Corporation shares of any class or classes of
its capital stock or other securities or property of the Corporation, or shares or other securities or property of any successor
in interest of the Corporation, at such times,
,7 NAI-1526349057v1
in such amounts, to such persons, for such consideration, if any, and upon such other terms and conditions as the Board of
Directors may deem advisable.
FOURTEENTH: The Corporation reserves the right to amend, alter, change or repeal any provision contained in
this Certificate of Incorporation, in the manner now or hereafter prescribed by statute, and all rights conferred upon
stockholders herein are granted subject to this reservation; provided, however, that notwithstanding anything contained in
the Certificate of Incorporation to the contrary, the affirmative vote of holders of not less than eighty percent (80%) of the
combined voting power of the outstanding shares of stock of the Corporation entitled to vote generally in the election of
directors, voting together as a single class, shall be required to alter, amend, adopt any provision inconsistent with or
repeal ARTICLE SIXTH, ARTICLE SEVENTH, ARTICLE EIGHTH, ARTICLE NINTH, ARTICLE ELEVENTH or this
ARTICLE FOURTEENTH; provided, further, that such eighty percent (80%) vote shall not be required for any such
alteration, amendment, adoption of any provision inconsistent with or repeal of ARTICLE ELEVENTH which is
recommended to stockholders by two-thirds of the Continuing Directors and such alteration, amendment, adoption of
inconsistent provision or repeal shall require the vote, if any, required under the applicable provisions of the DGCL and
this Certificate of Incorporation.
FIFTEENTH: No sale, assignment, transfer or other disposition of shares of Common Stock of the Corporation by
any stockholder, whether voluntary or by operation of law or by gift or otherwise, shall be effective unless and until there
is compliance with the following terms and conditions of this ARTICLE FIFTEENTH:
(a) Any stockholder who desires to sell all or any part of such stockholder's shares of Common Stock of the
Corporation pursuant to a bona fide offer to purchase such shares from a third party, including, without limitation, another
stockholder of the Corporation, shall, as a condition precedent to such stockholder's right to do so, by notice in writing
delivered to the Chairman of the Board of the Corporation at the Corporation's principal executive offices, inform the
Corporation of such stockholder's intention to sell all or any part of such stockholder's shares of Common Stock and the
identity of the third party to whom, and the terms pursuant to which, such shares are proposed to be sold, and shall by
such notice offer the shares that such stockholder desires to sell for sale to the Corporation at the price per share at which,
and the terms pursuant to which, such stockholder proposes to sell such shares to such third party. The Corporation shall
have a period of fifteen (15) days after such notice is received by it within which to indicate its election to exercise its
right to purchase, at such price and on such terms, all or any portion of such shares. The Corporation may elect by notice
in writing to such stockholder given within such fifteen (15)-day period to purchase all or any portion of such shares, and
the shares selected by the Corporation for purchase must be sold at such price and on such terms and transferred to the
Corporation by such stockholder. Delivery of such shares and payment therefor shall be made at the principal executive
offices of the Corporation within ten (10) days after notice of the election to purchase is given by the Corporation to such
stockholder. Any of such shares offered by such stockholder to the Corporation and not selected for purchase by the
Corporation may then be sold by such stockholder to such third party at a price and upon terms no more favorable than
those set forth in the notice of offer delivered to the Corporation; provided, however, that any such sale must be completed
within forty-five (45) days after the date such notice of offer was received by the Corporation; and provided fuuther that
such third party shall receive and hold such shares subject to all the terms and conditions of this ARTICLE FIFTEENTH.
If such sale to such third party is not completed within such forty-five (45)-day period, such stockholder shall continue to
hold such shares subject to all the terms and conditions of this ARTICLE FIFTEENTH and may not consummate a sale
8 NAI-1526349057v1
without again complying with the provisions of this paragraph (a). Notwithstanding the foregoing provisions of this
paragraph (a), if the purchase price (or any portion thereof) of the shares proposed to be sold by such stockholder to such
third party consists of a consideration other than cash, then the purchase price payable by the Corporation under this
paragraph (a) for any shares proposed to be sold for such noncash consideration which are selected for purchase by the
Corporation shall be a cash purchase price per share in an amount equal to the Applicable Market Value (as defined in
paragraph (d) of this ARTICLE FIFTEENTH) of the Common Stock as of the date the notice of offer relating to such
shares was received by the Corporation.
(b) The terms and conditions of this ARTICLE FIFTEENTH shall not apply to any disposition by any
stockholder of all or any part of such stockholder's shares of Common Stock of the Corporation by will or pursuant to the
laws of descent and distribution, or by gift, to or for the benefit of such stockholder's spouse, father, mother or adopted or
natural lineal descendants (and if such transfer is in trust, the trustee, upon termination of the trust, may transfer such
shares to such beneficial owner); provided, however, that the transferee of such shares shall receive and hold such shares
subject to all the terms and conditions of this ARTICLE FIFTEENTH.
(c) Dispositions by stockholders of shares of Common Stock of the Corporation other than as provided for under
paragraphs (a) and (b) of this ARTICLE FIFTEENTH, whether voluntary or by operation of law or by gift or otherwise,
shall be subject to a right of first refusal in favor of the corporation, which right of first refusal shall entitle the
Corporation to purchase, in accordance with the procedures specified in paragraph (a) of this ARTICLE FIFTEENTH
(including without limitation the delivery to the Corporation of a notice of offer), all or any portion of the shares that are
the subject of such disposition; provided, however, that the purchase price payable by the Corporation for any shares
selected for purchase by the Corporation pursuant to the exercise by it of such right of first refusal shall be a cash purchase
price per share in an amount equal to the Applicable Market Value of the Common Stock as of the date the notice of offer
relating to such shares was received by the Corporation. The transferee of any such shares not so selected for purchase by
the Corporation shall receive and hold such shares subject to all the terms and conditions of this ARTICLE FIFTEENTH.
(d) As used in this ARTICLE FIFTEENTH, the term "Applicable Market Value" shall mean the fair market value
of a share of Common Stock of the Corporation as most recently fixed and determined (prior to the date of the event
giving rise to the use and application of such term) by independent consultants to the Corporation selected and appointed
by the Board of Directors of the Corporation for the purpose of ascertaining Applicable Market Value. Such independent
consultants shall fix and determine the fair market value of a share of Common Stock of the Corporation on a quarterly
basis following the end of each calendar quarter. In ascertaining such value, such consultants shall consider the latest
available financial statements and financial information of the Corporation, projections and internal information relating to
the Corporation prepared by its management and furnished to such consultants for the purpose of their analysis, publicly
available information concerning other companies and the trading markets for certain other companies' securities and all
other information such consultants believe relevant to their inquiry. The value of a share of Common Stock shall be
discounted to reflect, as and to the extent deemed appropriate by the independent consultants, the minority nature of any
individual's shareholding and the lack of a public market for the Common Stock and consequent illiquidity.
(e) The restrictions on transfer set forth in this ARTICLE FIFTEENTH shall terminate and be of no further force
or effect in the event the Common Stock of the
9 NAI-1526349057v1
Corporation becomes publicly traded on an established securities market. Nothing contained in this ARTICLE
FIFTEENTH shall be deemed to limit the scope or effect of any other restrictions on transfer which may be imposed on
shares of Common Stock of the Corporation pursuant to the terms of any employee benefit plan, arrangement or program
of the Corporation or any of its subsidiaries or any agreement between the Corporation and an employee of the
Corporation or any of its subsidiaries.
4. This Restated Certificate of Incorporation shall become effective at the close of business, Dallas, Texas time, on
the day on which it shall be filed in the office of the Secretary of State of the State of Delaware.
10
NAI-1526349057v1
Exhibit 3.2
AMENDED AND RESTATED BYLAWS
OF
LENNOX INTERNATIONAL INC.
(A DELAWARE CORPORATION)
as of
December 13, 2013
ARTICLE I.
OFFICES
Section 1. Reeistered Office. The registered office of Lennox International Inc. (the "Corporation") in the State of
Delaware shall be at 2711 Centerville Road, Suite 400, in the City of Wilmington, County of New Castle, and the registered agent
in charge thereof shall be Corporation Service Company.
Section 2. Other Offices. The Corporation may also have an office or offices, and keep the books and records of the
Corporation, except as may otherwise be required by law, at such other place or places, either within or without the State of
Delaware, as the Board of Directors may from time to time determine or the business of the Corporation may require.
ARTICLE II.
MEETINGS OF STOCKHOLDERS
Section 1. Place of Meeting. All meetings of the stockholders shall be held at the principal executive offices of the
Corporation or at such other places, either within or without the State of Delaware, as may from time to time be fixed by the
Board of Directors, the Chairman of the Board, or the President. Notwithstanding the foregoing, the Board of Directors may, in its
sole discretion, determine that a meeting of stockholders will not be held at any place, but may instead be held by means of
remote communications, subject to such guidelines and procedures as the Board of Directors may adopt from time to time. The
Board of Directors may cancel or reschedule to an earlier or later date any previously scheduled annual or special meeting of
stockholders.
Section 2. Annual Meetinga. The annual meetings of stockholders for the election of directors and for the transaction
of such other business as may properly come before the meeting shall be held on such date and at such time and place as may
from time to time be established by the Board of Directors, the Chairman of the Board, or the President.
Section 3. Special Meetinga. Except as otherwise required by law, special meetings of the stockholders for any
purpose or purposes may be called only by (i) the Board of Directors, (ii) the Chairman of the Board, or (iii) the President. Only
such business as is specified in the notice of any special meeting of the stockholders shall come before such meeting.
Section 4. Notice of Meetinga. Except as otherwise provided in this Section 4 or by law, written notice of each
meeting of the stockholders, whether annual or special, shall be given, either by personal delivery or by mail, not less than ten
(10) nor more than sixty (60) days before the date of the meeting, or may be sent by electronic transmission as provided in
Section 232 of the General Corporation Law of the State of Delaware (the "DGCL"), to each stockholder of
NAI-1526349195v1
record entitled to notice of the meeting, unless the meeting is called for the purpose of acting on an agreement of merger or
consolidation involving the Corporation or for the purpose of authorizing the sale, lease or exchange of all or substantially all of
the property and assets of the Corporation, in which case the notice of the meeting shall be given at least twenty (20) days prior to
the date of the meeting. If mailed, such notice shall be deemed given when deposited in the United States mail, postage prepaid,
directed to the stockholder at such stockholder's address as it appears on the records of the Corporation and, if sent electronically,
it shall be deemed effective as provided in Section 232 of the DGCL. Each such notice shall state the place, date and hour of the
meeting, the record date for determining the stockholders entitled to vote at the meeting (if such date is different from the record
date for determining the stockholders entitled to notice of the meeting), the means of remote communications, if any, by which
stockholders and proxy holders may be deemed to be present in person and vote at such meeting, and, in the case of a special
meeting, the purpose or purposes for which the meeting is called. Notice of any meeting of stockholders shall not be required to
be given to any stockholder who shall waive notice thereof as provided in Article X of these Bylaws. Notice of adjournment of a
meeting of stockholders need not be given if the time and place to which it is adjourned are announced at such meeting, unless the
adjournment is for more than thirty (30) days or, after adjournment, a new record date is fixed for the adjourned meeting.
Whenever notice is required to be given by these Bylaws or by law to any stockholder the giving of such notice to such
person shall not be required if (i) notice of two consecutive annual meetings of the stockholders, and all notices of meetings to
such person during the period between such two consecutive annual meetings, or (ii) all, and at least two, payments (if sent by
first class mail) of dividends or interest on securities during a twelve-month period, have been mailed addressed to such person at
such person's address as shown on the records of the Corporation and have been returned undeliverable. Any action or meeting
which shall be taken or held without notice to such person shall have the same force and effect as if such notice had been duly
given. If any such person shall deliver to the Corporation a written notice setting forth such person's then current address, the
requirement that notice be given to such person shall be reinstated.
Section 5. Quorum. Except as otherwise provided by law or the Certificate of Incorporation or these Bylaws, the
holders of a majority of the outstanding shares of each class of stock entitled to be voted, present in person or represented by
proxy, shall constitute a quorum for the transaction of business at any meeting of the stockholders. For purposes of the foregoing,
two or more classes or series of stock shall be considered a single class if the holders thereof are entitled to vote together as a
single class at the meeting. The stockholders present or represented at a duly organized meeting may continue to transact business
until adjournment, notwithstanding the withdrawal of enough stockholders such that less than a quorum remains present at the
meeting.
Section 6. Adjournments. In the absence of a quorum, the holders of a majority of the outstanding shares of stock
entitled to vote at the meeting, present in person or represented by proxy, may adjourn the meeting from time to time. If it appears
that such quorum is not present or represented at any meeting, the chairman of the meeting may adjourn the meeting from time to
time, without notice other than announcement at the meeting, until a quorum shall be present or represented, subject to giving
notice of the adjourned meeting if required by Section 4 above. At any such adjourned meeting at which a quorum is present, any
business may be transacted which might have been transacted at the meeting as originally called.
Section 7. Order of Business. At each meeting of the stockholders, the Chairman of the Board, or in the absence of the
Chairman of the Board, the President, shall act as chairman. The order of business at each such meeting shall be as determined by
the chairman of the meeting. The chairman of the meeting shall have the right and authority to prescribe such rules,
2 NAI-1526349195v1
regulations and procedures and to do all such acts and things as are necessary or desirable for the proper conduct of the meeting,
including, without limitation, the establishment of procedures for the maintenance of order and safety, limitations on the time
allotted to questions or comments on the affairs of the Corporation, restrictions on entry to such meeting after the time prescribed
for the commencement thereof and the opening and closing of the voting polls.
Section 8. List of Stockholders. It shall be the duty of the Secretary or other officer of the Corporation who has charge
of the stock ledger of the Corporation to prepare and make, at least ten (10) days before each meeting of stockholders, a complete
list of the stockholders entitled to vote thereat, arranged in alphabetical order, and showing the address of each stockholder and
the number of shares registered in such stockholder's name. Such list shall be produced and kept available at the times and places
required by law.
Section 9. Voting.
(a) Except as otherwise provided by law or in the Certificate of Incorporation, each stockholder of record shall
be entitled at each meeting of the stockholders to one vote for each share of stock which has voting power upon the matter in
question, registered in such stockholder's name on the books of the Corporation:
(i) on the date fixed pursuant to Section 6 of Article VII of these Bylaws as the record date for the
determination of stockholders entitled to notice of and to vote at such meeting; or
(ii) if no such record date shall have been so fixed, then at the close of business on the day next
preceding the date on which notice of such meeting is given, or, if notice is waived, at the close of business on the day next
preceding the day on which the meeting is held.
Each stockholder entitled to vote at any meeting of stockholders may authorize another person or persons to act for
such stockholder by a proxy signed by such stockholder or such stockholder's attorney -in -fact or by any other means which
constitutes a valid grant of a proxy under the DGCL. Any such proxy relating to a meeting of stockholders shall be delivered to
the secretary of such meeting at or prior to the time designated for holding such meeting but, in any event, not later than the time
designated in the order of business for so delivering such proxies. No such proxy shall be voted or acted upon after three (3) years
from its date, unless the proxy provides for a longer period. A duly executed proxy shall be irrevocable if it states that it is
irrevocable and if, and only as long as, it is coupled with an interest sufficient in law to support an irrevocable power. A
stockholder may revoke any proxy which is not irrevocable by attending the meeting and voting in person or by filing an
instrument in writing revoking the proxy or another duly executed proxy bearing a later date than the original proxy with the
Secretary of the Corporation.
Unless required by law or determined by the chairman of the meeting to be advisable, the vote on any matter,
including the election of directors, need not be by written ballot. In the case of a vote by written ballot, each ballot shall be signed
by the stockholder voting, or by such stockholder's proxy, and shall state the number of shares voted.
(b) At each meeting of the stockholders, all matters, other than the election of directors, submitted to the
stockholders at any meeting (except as otherwise required by the rules and regulations of the New York Stock Exchange, the
Certificate of Incorporation, these Bylaws or law) shall be decided by the affirmative vote of a majority of the shares of stock
present in person or represented by proxy at the meeting and entitled to vote thereon.
3 NAI-1526349195v1
(c) Except as provided in these Bylaws, each director shall be elected by the affirmative vote of the majority of
the votes cast with respect to that director's election at any meeting for the election of directors at which a quorum is present,
provided that if at the close of the notice periods set forth in Section 3 of Article III, the chairman of the meeting of stockholders
(as described therein) determines that the number of persons properly nominated to serve as directors of the Corporation exceeds
the number of directors to be elected (a "Contested Election"), the directors shall be elected by a plurality of the votes of the
shares represented at the meeting and entitled to vote on the election of directors. For purposes of these Bylaws, a majority of
votes cast shall mean that the number of shares voted "for" a director's election exceeds the number of votes cast "against" that
director's election.
The Governance Committee of the Board of Directors has established procedures under which a director who does
not receive a majority of the votes cast in a non -Contested Election shall offer to tender his or her resignation to the Board of
Directors. The Governance Committee will make a recommendation to the Board of Directors as to whether to accept or reject the
tendered resignation, or whether other action should be taken. The Board of Directors will act on the tendered resignation, taking
into account the Governance Committee's recommendation, and publicly disclose (by a press release, a filing with the Securities
and Exchange Commission or other broadly disseminated means of communication) its decision regarding the tendered
resignation and the rationale behind the decision within 90 days from the date of the certification of the election results. The
Governance Committee in making its recommendation and the Board of Directors in making its decision may each consider any
factors or other information that they consider appropriate and relevant. The director who tenders his or her resignation will not
participate in the recommendation of the Governance Committee or the decision of the Board of Directors with respect to his or
her resignation.
If a director's resignation is accepted by the Board of Directors pursuant to these Bylaws, or if a nominee for
director is not elected and the nominee is not an incumbent director, then the Board of Directors may fill the resulting vacancy
pursuant to the provisions of Article III, Section 13 or may decrease the size of the Board of Directors pursuant to the provisions
of Article III, Section 2.
Section 10. Inspectors. Except as otherwise provided by law, either the Board of Directors or, in the absence of a
designation of inspectors by the Board of Directors, the chairman of any meeting of stockholders shall appoint one or more
inspectors to act at any meeting of stockholders and to make a written report thereof. Such inspectors shall perform such duties as
shall be specified by the DGCL, the Board of Directors or the chairman of the meeting and take any oath and sign any document
required by the DGCL. Inspectors need not be stockholders. No director or nominee for the office of director shall be appointed
such an inspector. The Board of Directors may designate one or more persons as alternate inspectors to replace any inspector who
fails to act. If no inspector or alternate is able to act at a meeting of stockholders, the chairman of the meeting will appoint one or
more inspectors to act at the meeting.
Section 11. Action Without a Meeting. Except as otherwise provided in the Certificate of Incorporation, any action
required by law to be taken at any annual or special meeting of the stockholders, or any action which may be taken at any annual
or special meeting of the stockholders, may not be effected by consent in writing in lieu of a meeting by such stockholders.
Section 12. Notice of Stockholder Proposals.
(a) Business to be Conducted at Annual Meeting. At a meeting of the stockholders, only such business shall be
conducted, and only such proposals shall be acted
4 NAI-1526349195v1
upon, as shall have been properly brought before the meeting. To be properly brought before a meeting, business or a proposal
must (i) be specified in the notice of meeting (or any supplement thereto) given by or at the direction of the Board of Directors or
the persons calling the meeting as herein provided, (ii) otherwise be properly brought before the meeting by or at the direction of
the Board of Directors or (iii) otherwise (1) be properly requested to be brought before the meeting by a stockholder of record
entitled to vote in the election of directors generally, and (2) constitute a proper subject to be brought before such meeting. For the
avoidance of doubt, clause (iii) will be the exclusive means for a stockholder to submit business before an annual meeting or
special meeting of stockholders (other than proposals properly made in accordance with Rule 14a-8 under the Securities
Exchange Act of 1934 (such act, and the Rules and Regulations promulgated thereunder, the "Exchange Act") and included in the
notice of meeting given by or at the direction of the Board of Directors).
(b) Timely Notice. For business or a proposal to be properly brought before a meeting of stockholders, any
stockholder who intends to bring any matter (other than the election of directors) before a meeting of stockholders and is entitled
to vote on such matter must deliver written notice of such stockholder's intent to bring such matter before the meeting of
stockholders, either by personal delivery or by United States mail, postage prepaid, to the Secretary of the Corporation. Such
notice must be received by the Secretary: (i) with respect to an annual meeting of stockholders, not less than sixty (60) days nor
more than ninety (90) days in advance of such meeting; and (ii) with respect to any special meeting of stockholders, not later than
the close of business on the tenth day following the date on which notice of such meeting is first given to stockholders; provided,
however, that in the event that less than seventy (70) days notice or prior public disclosure of the date of the annual meeting of
stockholders is given or made to the stockholders, to be timely, notice of a proposal delivered by the stockholder must be received
by the Secretary not later than the close of business on the tenth day following the day on which notice of the date of the annual
meeting of stockholders was mailed or such public disclosure was made to the stockholders.
(c) Required Form for Stockholder Proposal. A stockholder's notice to the Secretary shall set forth as to each
matter the stockholder (the "Proposing Person") proposes to bring before the meeting of stockholders:
(i) a brief description and the text (including the text of any resolutions proposed for consideration) of
the business or proposal desired to be brought before the meeting, the reasons for conducting such business at the meeting and the
detailed reasons why the implementation of such business or proposal would be in the best interest of the Corporation and all its
stockholders;
(ii) the name and address, as they appear on the Corporation's books, of the Proposing Person;
(iii) the class or series of stock and number of shares of such class or series of stock which are, directly
or indirectly, owned of record or beneficially owned (within the meaning of Rule 13d-3 under the Exchange Act) by such
Proposing Person except that such Proposing Person shall in all events be deemed to beneficially own any shares or any class or
series of the Corporation's securities as to which such Proposing Person has a right to acquire beneficial ownership immediately
or only after passage of time;
(iv) a representation (1) that the Proposing Person is a holder of record of stock of the Corporation
entitled to vote at the annual meeting and intends to appear at the annual meeting to bring such business before the annual
meeting and (2) as to whether the Proposing Person intends to deliver a proxy statement and form of proxy to holders of at least
the percentage of shares of the Corporation entitled to vote and required to approve the proposal;
5 NAI-1526349195v1
(v) a description of any (1) option, warrant, convertible security, stock appreciation right or similar
right or interest (including any derivative securities, as defined under Rule 16a-1 under the Exchange Act), whether or not
presently exercisable, with an exercise or conversion privilege or a settlement payment or mechanism at a price related to any
class or series of stock of the Corporation or with a value derived in whole or in part from the value of any class or series of stock
of the Corporation, whether or not such instrument or right is subject to settlement in whole or in part in the underlying class or
series of stock of the Corporation or otherwise, directly or indirectly held of record or owned beneficially by such Proposing
Person and (2) each other direct or indirect right or interest that may enable such Proposing Person to profit or share in any profit
derived from, or to manage the risk or benefit from, any increase or decrease in the value of the Corporation's stock, in each case
regardless of whether (x) such right or interest conveys any voting rights in such security to such Proposing Person, (y) such right
or interest is required to be, or is capable of being, settled through delivery of such security, or (z) such Proposing Person may
have entered into other transactions that hedge the economic effect of any such right or interest (any such right or interest referred
to in this clause (v) being a "Derivative Interest");
(vi) any proxy, contract, arrangement, understanding or relationship pursuant to which the Proposing
Person has a right to vote any shares of the Corporation or which has the effect of increasing or decreasing the voting power of
such Proposing Person;
(vii) any rights directly or indirectly held of record or beneficially by the Proposing Person to dividends
on the shares of the Corporation that are separated or separable from the underlying shares of the Corporation;
(viii) any performance -related fees (other than an asset -based fee) to which the Proposing Person may be
entitled as a result of any increase or decrease in the value of shares of the Corporation or Derivative Interests;
(ix) any other information relating to such Proposing Person that would be required to be disclosed in a
proxy statement or other filing required pursuant to Section 14(a) of the Exchange Act to be made in connection with a general
solicitation of proxies or consents by such Proposing Person in support of the business proposed to be brought before the meeting,
and
(x) any material interest of the Proposing Person in such business, including a description in reasonable
detail of all agreements, understandings and arrangements between the Proposing Person and any other person or entity related in
any way to the proposal.
The Proposing Person shall also provide the information described in clauses (i) through (x) above for any person
or entity Acting in Concert (as defined below) with the Proposing Person. "Acting in Concert" means a situation where the
Proposing Person or another entity or person knowingly acts (whether or not pursuant to an express agreement, arrangement or
understanding) in concert with, or towards a common goal relating to the management, governance or control of the Corporation
or any of its securities in parallel with the Proposing Person or other person or entity where: (1) each person or entity is conscious
of the other person's or entity's conduct or intent and this awareness is an element of the decision -making process and (2) at least
one additional factor suggests that such persons or entities intend to act in concert or in parallel, which such additional factors
may include, without limitation, exchanging information, attending meetings, conducting discussions, or making or soliciting
invitations to act in concert or in parallel.
No business shall be conducted at a meeting of stockholders except in accordance with the procedures set forth in
this Section 12. The Board of Directors may reject any
6 NAI-1526349195v1
stockholder proposal submitted for consideration at a meeting of stockholders which is not made in accordance with the terms of
this Section 12 or which is not a proper subject for stockholder action in accordance with provisions of applicable law.
Alternatively, if the Board of Directors fails to consider the validity of any such stockholder proposal, the chairman of a meeting
shall, if the facts warrant, determine and declare to the meeting that (i) the business proposed to be brought before the meeting is
not a proper subject therefor and/or (ii) such business was not properly brought before the meeting in accordance with the
provisions hereof. The Board of Directors or, as the case may be, the chairman of the meeting shall have absolute authority to
decide questions of compliance with the foregoing procedures and the Board of Directors' or, as the case may be, the chairman's
ruling thereon shall be final and conclusive. This provision shall not prevent the consideration and approval or disapproval at the
annual meeting of stockholders of reports of officers, directors and committees of the Board of Directors, but, in connection with
such reports, no new business shall be acted upon at such meeting unless stated, filed and received as herein provided.
If the Proposing Person does not appear at the meeting to represent its proposal, such proposal will be disregarded
(even if proxies have been solicited, obtained or delivered). The Proposing Person shall update and supplement the information
contained in the notice so that the information is true and correct at all times up to the date of the meeting (including any date as
to which the meeting is recessed, adjourned or postponed) and shall deliver such update and supplement to the Secretary of the
Corporation at the principal executive offices of the Corporation as promptly as possible.
ARTICLE III.
BOARD OF DIRECTORS
Section 1. General Powers. The business and affairs of the Corporation shall be managed by or under the direction of
the Board of Directors, which may exercise all such powers of the Corporation and do all such lawful acts and things as are not by
law or by the Certificate of Incorporation of the Corporation directed or required to be exercised or done by the stockholders.
Section 2. Number. Oualifications and Election. The exact number of directors which shall constitute the whole Board
of Directors shall be fixed from time to time by resolution of the Board of Directors; provided, however, that the number so fixed
shall not be less than three nor more than fifteen; and provided further that no decrease in the number of directors constituting the
Board of Directors shall have the effect of shortening the term of any incumbent director.
Each director shall be at least twenty-one (21) years of age. Directors need not be stockholders of the Corporation.
The Board of Directors is specifically authorized to divide the Board of Directors into three classes, as authorized by the
DGCL and the Certificate of Incorporation, designated Class I, Class II and Class III, as nearly equal in number as the then total
number of directors constituting the whole Board permits. The term of office of each class shall expire at the third annual meeting
of stockholders for election of directors following the election of such class, except that the initial term of office of the Class I
directors shall expire at the annual meeting of stockholders in 1996, the initial term of office of the Class II directors shall expire
at the annual meeting of stockholders in 1997 and the initial term of office of the Class III directors shall expire at the annual
meeting of stockholders in 1998. At each annual meeting of stockholders, directors of the class whose term then expires shall be
elected for a full term of three (3) years to succeed the
,7 NAI-1526349195v1
directors of such class so that the term of office of the directors of one class shall expire in each year.
The stockholders of the Corporation are expressly prohibited from cumulating their votes in any election of directors of
the Corporation. Each director shall hold office until his or her successor is elected and qualified or until his or her earlier
resignation or removal.
Section 3. Notification of Nominations. Except for directors elected pursuant to the provisions of Section 13 of this
Article III, only individuals nominated for election to the Board of Directors pursuant to and in accordance with the provisions of
this Section 3 may be elected to and may serve upon the Board of Directors of the Corporation. Nominations for the election of
directors may be made by the Board of Directors or by any stockholder entitled to vote in the election of directors generally.
Subject to the foregoing, only a stockholder of record entitled to vote in the election of directors (the "Nominating Person") may
nominate one or more persons for election as directors at a meeting of stockholders and only if written notice of the Nominating
Person's intent to make such nomination or nominations has been given, either by personal delivery or by United States mail,
postage prepaid, to the Secretary of the Corporation and has been received by the Secretary: (i) with respect to an election to be
held at an annual meeting of stockholders, not less than sixty (60) days nor more than ninety (90) days in advance of such
meeting; and (ii) with respect to an election to be held at a special meeting of stockholders for the election of directors, not later
than the close of business on the tenth day following the date on which notice of such meeting is first given to stockholders;
provided, however, that in the event that less than seventy (70) days' notice or prior public disclosure of the date of the meeting of
stockholders is given or made to stockholders, to be timely, notice of a nomination delivered by such stockholder must be
received by the Secretary not later than the close of business on the tenth day following the day on which notice of the date of the
meeting of stockholders was mailed or such public disclosure was made to the stockholders.
Each such notice shall set forth:
(a) the name, age, business address and residence address, and the principal occupation or employment of the
Nominating Person and any nominee proposed in such notice;
(b) the name and address of the Nominating Person as the same appears in the Corporation's stock ledger;
(c) a representation that the Nominating Person is a holder of record of stock of the Corporation entitled to
vote at such meeting and intends to appear in person or by proxy at the meeting to nominate the person or persons specified in the
notice, and the number of shares of stock of the Corporation which are beneficially owned by the Nominating Person and by any
such nominee, person or persons (including any shares as to which the Nominating Person and nominee has a right to acquire
beneficial ownership, whether exercisable immediately or only after passage of time);
(d) a description of all arrangements or understandings between the Nominating Person and each nominee and
any other person or persons (naming such person or persons) pursuant to which the nomination or nominations are to be made by
the stockholder;
(e) all the information required by Article II, Section 12 of these Bylaws as if the Nominating Person and
nominee was a Proposing Person, including any information related to a person or entity Acting in Concert (except that
"Nominating Person" and "nominee" shall be substituted for "Proposing Person" in all applicable places in such Section and any
references to "business" or "proposal" in such Section 12 will be deemed to be a reference to the "nomination" contemplated by
this Article III, Section 3) and
8 NAI-1526349195v1
(f) such other information regarding each nominee proposed by such stockholder as would be required to be
included in a proxy statement filed pursuant to the proxy rules of the Securities and Exchange Commission soliciting proxies for
the election of such nominee, had the Corporation been subject to such proxy rules and had the nominee been nominated, or
intended to be nominated, by the Board of Directors.
At the request of the Board of Directors, any person nominated for election as a director shall furnish to the Secretary the
information required by this Section 3 to be set forth in a Nominating Person's notice of nomination which pertains to the
nominee, as well as any other information reasonably requested related to the nominee's qualifications and eligibility.
To be effective, each notice of intent to make a nomination given hereunder shall be accompanied by the written consent
of each nominee to serve as a director of the Corporation if elected. In addition, any nominee must provide a written
representation and agreement (in the form provided by the Secretary upon written request) that the proposed nominee (1) is not
and will not become a party to (x) any agreement, arrangement or understanding with, and has not given any commitment or
assurance to, any person or entity as to how the proposed nominee, if elected as a director of the Corporation, will act or vote on
any issue or question (a "Voting Commitment") that has not been disclosed to the Corporation or (y) any Voting Commitment that
could limit or interfere with the proposed nominee's ability to comply, if elected as a director of the Corporation, with the
proposed nominee's fiduciary duties under applicable law, (2) is not and will not become a party to any agreement, arrangement
or understanding with any person or entity other than the Corporation with respect to any direct or indirect compensation,
reimbursement or indemnification in connection with service or action as a director that has not been disclosed therein, and (3) if
elected as a director of the Corporation, the proposed nominee would be in compliance and will comply, with all applicable
corporate governance, ethics, conflict of interest, confidentiality and stock ownership and trading policies and guidelines of the
Corporation.
The chairman of the meeting shall, if the facts warrant, determine and declare to the meeting that a nomination was not
properly brought before the meeting in accordance with the provisions hereof and, if (s)he should so determine, (s)he shall declare
to the meeting that such nomination was not properly brought before the meeting and shall not be considered. The chairman of a
meeting of stockholders shall have absolute authority to decide questions of compliance with the foregoing procedures and such
chairman's ruling thereon shall be final and conclusive.
If the Nominating Person does not appear at the meeting to represent its proposal, such proposal will be disregarded (even
if proxies have been solicited, obtained or delivered). The Nominating Person shall update and supplement the information
contained in the notice so that the information is true and correct at all times up to the date of the meeting (including any date as
to which the meeting is recessed, adjourned or postponed) and shall deliver such update and supplement to the Secretary of the
Corporation at the principal executive offices of the Corporation as promptly as possible.
Section 4. Ouorum and Manner of Acting. Except as otherwise provided by law or these Bylaws, (i) a majority of the
entire Board of Directors shall constitute a quorum for the transaction of business at any meeting of the Board of Directors and
(ii) the vote of a majority of the directors present at any meeting at which there is a quorum shall be the act of the Board of
Directors unless the Certificate of Incorporation or these Bylaws require a vote of a greater number. In the absence of a quorum, a
majority of the directors present may adjourn the meeting to another time and place. At any adjourned meeting at which a quorum
is present, any business that might have been transacted at the meeting as originally called may be transacted.
9 NAI-1526349195v1
Section 5. Place of Meeting. The Board of Directors may hold its meetings at such place or places within or without
the State of Delaware as the Board of Directors may from time to time determine or as shall be specified or fixed in the respective
notices or waivers of notice thereof.
Section 6. Annual Meetings. The first meeting of each newly elected Board of Directors shall be held for the purpose
of organization and the transaction of any other business, without notice, immediately following the annual meeting of
stockholders, and at the same place, unless such time or place shall be changed by the Board of Directors.
Section 7. Regular Meetings. Regular meetings of the Board of Directors shall be held at such times and places as the
Board of Directors shall from time to time by resolution determine. If any day fixed for a regular meeting shall be a legal holiday
under the laws of the place where the meeting is to be held, the meeting that would otherwise be held on that day shall be held at
the same hour on the next succeeding business day.
Section 8. Snecial Meetings. Special meetings of the Board of Directors shall be held whenever called by the
Chairman of the Board or the President or by any two or more directors.
Section 9. Notice of Meetings. Notice of annual and regular meetings of the Board of Directors or of any adjourned
meeting thereof need not be given. Notice of each special meeting of the Board of Directors shall be mailed to each director,
addressed to such director at such director's residence or usual place of business, not later than the third day before the day on
which the meeting is to be held or shall be sent to such director at such place by facsimile transmission, telegram or telex or be
given personally or by telephone, not later than the day before the meeting is to be held, or may be sent by electronic transmission
(which shall be deemed effective as set forth in Section 232 of the DGCL), but notice need not be given to any director who shall
waive notice thereof as provided in Article X of these Bylaws. Every such notice shall state the time and place but need not state
the purpose of the meeting.
Section 10. Participation in Meetings by Means of Communication Equipment. Unless otherwise restricted by the
Certificate of Incorporation or these Bylaws, any one or more members of the Board of Directors or any committee thereof may
participate in any meeting of the Board of Directors or of any such committee by means of conference telephone or similar
communications equipment by means of which all persons participating in the meeting can hear each other, and such participation
shall constitute presence in person at such meeting.
Section 11. Action Without a Meeting. Unless otherwise restricted by the Certificate of Incorporation or these Bylaws,
any action required or permitted to be taken at any meeting of the Board of Directors or of any committee thereof may be taken
without a meeting, if all members of the Board of Directors or of any such committee consent thereto in writing and the writing or
writings are filed with the minutes of proceedings of the Board of Directors or of such committee.
Section 12. Resignations: Removal. Any director of the Corporation may at any time resign by giving written notice to
the Board of Directors, the Chairman of the Board, the President or the Secretary of the Corporation, such resignation to specify
whether it will be effective at a particular time, upon receipt by the Secretary, or as determined by the Board of Directors. If no
such specification is made, it shall be deemed effective as determined by the Board of Directors. When one (1) or more directors
shall resign from the Board of Directors, effective at a future date, a majority of the directors then in office including those who
have so resigned, shall have power to fill such vacancy or vacancies, the vote thereon to take effect when such resignation or
resignations shall become effective, and each director so chosen shall hold
10 NAI-1526349195v1
office for the unexpired portion of the term of the director whose place shall be vacated and until his successor shall have been
duly elected and qualified. Unless otherwise provided in the Certificate of Incorporation, a director may be removed from office
only for cause and by the affirmative vote of the holders of not less than eighty percent (80%) of all the outstanding shares of
stock of the Corporation entitled to vote generally in the election of directors at a special meeting of stockholders called expressly
for that purpose.
Section 13. Vacancies. Unless otherwise provided in the Certificate of Incorporation or these Bylaws, vacancies on the
Board of Directors and newly created directorships resulting from any increase in the authorized number of directors may be
filled by a majority of the directors then in office, even though less than a quorum, or by a sole remaining director, and the
directors so chosen shall hold office until the next annual election of the class for which such directors shall have been chosen,
and until their successors are duly elected and shall qualify, unless sooner displaced. A vacancy in the Board of Directors shall be
deemed to exist under this Section in the case of the death, removal or resignation of any director, or if the stockholders fail at any
meeting of stockholders at which directors are to be elected to elect the number of directors then constituting the whole Board of
Directors. If there are no directors in office then an election of directors may be held in the manner provided by the statutes.
Section 14. Comnensation. Each director who shall not at the time also be a salaried officer or employee of the
Corporation or any of its subsidiaries (an "outside director"), in consideration of such person serving as a director, shall be
entitled to receive from the Corporation such amount per annum and such fees for attendance at meetings of the Board of
Directors or of committees of the Board of Directors, or both, as the Board of Directors shall from time to time determine. In
addition, each outside director shall be entitled to receive from the Corporation reimbursement for the reasonable expenses
incurred by such person in connection with the performance of such person's duties as a director. Nothing contained in this
Section 14 shall preclude any director from serving the Corporation or any of its subsidiaries in any other capacity and receiving
compensation therefor.
Section 15. Interested Directors. No contract or transaction between the Corporation and one or more of its directors or
officers, or between the Corporation and any other corporation, partnership, association or other organization in which one or
more of its directors or officers are directors or officers, or have a financial interest, shall be void or voidable solely for this
reason, or solely because the director or officer is present at or participates in the meeting of the Board of Directors or committee
thereof which authorizes the contract or transaction, or solely because such person's or persons' votes are counted for such
purpose, if. (i) the material facts as to such person's relationship or interest and as to the contract or transaction are disclosed or
are known to the Board of Directors or the committee, and the Board of Directors or committee in good faith authorizes the
contract or transaction by the affirmative votes of a majority of the disinterested directors, even though the disinterested directors
be less than a quorum; or (ii) the material facts as to such person's relationship or interest and as to the contract or transaction are
disclosed or are known to the stockholders entitled to vote thereon, and the contract or transaction is specifically approved in
good faith by vote of the stockholders; or (iii) the contract or transaction is fair as to the Corporation as of the time it is
authorized, approved or ratified by the Board of Directors, a committee thereof or the stockholders. Common or interested
directors may be counted in determining the presence of a quorum at a meeting of the Board of Directors or of a committee which
authorizes the contract or transaction.
I I NAI-1526349195v1
ARTICLE IV.
COMMITTEES
Section 1. Committees. The Board of Directors may, by resolution passed by a majority of the Board of Directors,
designate committees, each committee to consist of one or more of the directors of the Corporation. The Board of Directors may
designate one or more directors as alternate members of any committee, who may replace any absent or disqualified member at
any meeting of the committee. Upon the absence or disqualification of a member of a committee, if the Board of Directors has not
designated one or more alternates (or if such alternate(s) are then absent or disqualified), the member or members thereof present
at any meeting and not disqualified from voting, whether or not such member or members constitute a quorum, may unanimously
appoint another member of the Board of Directors to act at the meeting in the place of any such absent or disqualified member or
alternate. Any such committee, to the extent provided in the resolution of the Board of Directors, shall have and may exercise all
the powers and authority of the Board of Directors in the management of the business and affairs of the Corporation, and may
authorize the seal of the Corporation to be affixed to all papers that may require it; but no such committee shall have the power or
authority in reference to: (a) amending the Certificate of Incorporation (except that a committee may, to the extent authorized in
the resolution or resolutions providing for the issuance of shares of stock adopted by the Board of Directors as provided in
Section 151(a) of the DGCL fix the designations and any of the preferences or rights of such shares relating to dividends,
redemption, dissolution, any distribution of assets of the Corporation or the conversion into, or the exchange of such shares for,
shares of any other class or classes or any other series of the same or any other class or classes of stock of the Corporation or fix
the number of shares of any series of stock or authorize the increase or decrease of the shares of any series); (b) adopting an
agreement of merger or consolidation under Section 251 or Section 252 of the DGCL; (c) recommending to the stockholders the
sale, lease or exchange of all or substantially all of the Corporation's property and assets; (d) recommending to the stockholders a
dissolution of the Corporation or a revocation of a dissolution; or (e) amending the Bylaws of the Corporation. Unless the
resolution appointing such committee or the Certificate of Incorporation expressly so provides, no such committee shall have the
power or authority to declare a dividend or to authorize the issuance of stock or to adopt a certificate of ownership and merger
pursuant to Section 253 of the DGCL.
Section 2. Procedure. Ouorum. Meetings. Each committee shall have such name as may be determined from time to
time by resolution adopted by the Board of Directors. A majority of any committee of the Board of Directors shall constitute a
quorum for the transaction of business at any meeting, may determine its action and fix the time and place of its regular and
special meetings by resolution or otherwise (unless the Board of Directors shall otherwise provide) and the vote of a majority of
the members thereof present at any meeting at which a quorum is present shall be the act of such committee. Each committee
shall keep minutes of its meetings and report to the Board of Directors when required. The Board of Directors shall have the
power at any time to change the membership of, to fill all vacancies in and to discharge any such committee, either with or
without cause. Special meetings of any committee of the Board of Directors shall be called at the request of any member thereof.
Notice of each special meeting of any committee of the Board of Directors shall be sent by mail, facsimile transmission,
electronically (as provided in Section 232 of the DGCL), telegram, telex or telephone, or be delivered personally, to each member
thereof not later than the day before the day on which the meeting is to be held, but notice need not be given to any member who
shall waive notice thereof as provided in Article X of these Bylaws. Any regular or special meeting of any committee of the
Board of Directors shall be a legal meeting without any notice thereof having been given if all the members thereof shall be
present thereat. Notice of any adjourned meeting of any committee of the Board of Directors need not be given. Each committee
of the Board of
12 NAI-1526349195v1
Directors may adopt such rules and regulations not inconsistent with the law, the Certificate of Incorporation or these Bylaws for
the conduct of its meetings as such committee deems proper.
ARTICLE V.
OFFICERS
Section 1. Number. Term of Office. The officers of the Corporation shall be elected by the Board of Directors and
shall be a Chairman of the Board, President or one or more Vice Presidents as may be determined from time to time by the Board
of Directors (and in the case of each such Vice President, with such descriptive title, if any, including that of Executive Vice
President, as the Board of Directors shall deem appropriate), a Treasurer, a Secretary and such other officers or agents with such
titles and such duties as the Board of Directors may from time to time determine, each to have such authority, functions or duties
as in these Bylaws provided or as the Board of Directors may from time to time determine, and each to hold office for such term
as may be prescribed by the Board of Directors and until such person's successor shall have been elected and shall qualify, or
until such person's death or resignation, or until such person's removal in the manner hereinafter provided. The Chairman of the
Board shall be elected from among the directors. One person may hold the offices and perform the duties of any two or more of
said officers; provided, however, that no officer shall execute, acknowledge or verify any instrument in more than one capacity if
such instrument is required by law, the Certificate of Incorporation or these Bylaws to be executed, acknowledged or verified by
two or more officers. The Board of Directors may from time to time authorize any officer to appoint and remove any such other
officers and agents and to prescribe their powers and duties.
Section 2. Removal. Any officer may be removed, either with or without cause, by the Board of Directors at any
meeting thereof, or, except in the case of any officer elected by the Board of Directors, by any committee or superior officer upon
whom such power may be conferred by the Board of Directors.
Section 3. Resignation. Any officer may at any time resign by giving written notice to the Board of Directors, the
Chairman of the Board, the President or the Secretary of the Corporation. Any such resignation shall take effect at the date of
delivery of such notice or at any later date specified therein, and, unless otherwise specified therein, the acceptance of such
resignation shall not be necessary to make it effective.
Section 4. Vacancies. A vacancy in any office because of death, resignation, removal or any other cause may be filled
for the unexpired portion of the term in the manner prescribed in these Bylaws for election to such office.
Section 5. Chairman of the Board. The Chairman of the Board shall have general supervision and direction of the
business and affairs of the Corporation, subject to the control of the Board of Directors. The Chairman of the Board shall, if
present, preside at meetings of the stockholders and meetings of the Board of Directors. The Chairman of the Board shall perform
such other duties as the Board of Directors may from time to time determine. The Chairman of the Board may sign and execute in
the name of the Corporation deeds, mortgages, bonds, contracts or other instruments authorized by the Board of Directors or any
committee thereof empowered to authorize the same.
Section 6. President. The President shall, if present and in the absence of the Chairman of the Board, preside at
meetings of the stockholders and meetings of the Board of Directors. The President shall counsel with and advise the Chairman of
the Board and perform such other duties as the Board of Directors, any committee thereof or the Chairman of the Board may from
time to time determine. The President may sign and execute in the name of the
13 NAI-1526349195v1
Corporation deeds, mortgages, bonds, contracts or other instruments authorized by the Board of Directors or any committee
thereof empowered to authorize the same.
Section 7. Vice Presidents. Each Vice President shall have such powers and duties as shall be prescribed by the
Chairman of the Board, the President or the Board of Directors or any committee thereof. Any Vice President may sign and
execute in the name of the Corporation deeds, mortgages, bonds, contracts or other instruments authorized by the Board of
Directors or any committee thereof empowered to authorize the same.
Section 8. Treasurer. The Treasurer shall perform all duties incident to the office of Treasurer and such other duties as
from time to time may be assigned to the Treasurer by the Chairman of the Board, the President, the Board of Directors or a
committee thereof. The Board may require the Treasurer to give security for the faithful performance of such person's duties.
Section 9. Secretary. It shall be the duty of the Secretary to act as secretary at all meetings of the Board of Directors
and of the stockholders and to record the proceedings of such meetings in a book or books kept for that purpose; the Secretary
shall see that all notices required to be given by the Corporation are duly given and served; the Secretary shall be custodian of the
seal of the Corporation (if one is adopted) and shall affix the seal or cause it to be affixed to all certificates of stock of the
Corporation (unless the seal of the Corporation on such certificates shall be a facsimile, as hereinafter provided) and to all
documents, the execution of which on behalf of the Corporation under its seal is duly authorized in accordance with the
provisions of these Bylaws; the Secretary shall have charge of the stock ledger books and also of the other books, records and
papers of the Corporation and shall see that the reports, statements and other documents required by law are properly kept and
filed; and the Secretary shall in general perform all duties incident to the office of Secretary and such other duties as from time to
time may be assigned to such person by the Chairman of the Board, the President or the Board of Directors or a committee
thereof.
Section 10. Assistant Treasurers and Assistant Secretaries. If elected, the Assistant Treasurers and Assistant Secretaries
shall perform such duties as shall be assigned to them by the Treasurer and Secretary, respectively, or by the Chairman of the
Board, the President or the Board of Directors or a committee thereof. The Board may require any Assistant Treasurer to give
security for the faithful performance of such person's duties.
ARTICLE VI.
INDEMNIFICATION
Section 1. General. Each person who at any time shall serve or shall have served as a Director or officer of the
Corporation, or any person who, while a director or officer of the Corporation, is or was serving at the request of the Corporation
as a director or officer of another corporation, partnership, joint venture, trust or other enterprise, shall be entitled to (a)
indemnification and (b) the advancement of expenses incurred by such person from the Corporation as, and to the fullest extent,
permitted by Section 145 of the DGCL or any successor statutory provision, as from time to time amended. The Corporation may
indemnify any other person, to the same extent and subject to the same limitations specified in the immediately preceding
sentence, by reason of the fact that such other person is or was an employee or agent of the Corporation or another corporation,
partnership, joint venture, trust or other enterprise. The foregoing right of indemnification and advancement of expenses provided
shall not be deemed exclusive of any other rights to which any person seeking indemnification or advancement of expenses may
be entitled under any agreement, vote of stockholders or disinterested directors of the Corporation or otherwise, both as to action
in such person's official capacity and as to action in another capacity while holding such office. All rights to
14 NAI-1526349195v1
indemnification under this Article shall be deemed to be provided by a contract between the Corporation and the director, officer,
employee or agent who served in such capacity at any time while this Article and other relevant provisions of the DGCL and
other applicable law, if any, are in effect. Any repeal or modification of this Article shall not affect any rights or obligations then
existing. Without limiting the provisions of this Article, the Corporation is authorized from time to time, without further action by
the stockholders of the Corporation, to enter into agreements with any director or officer of the Corporation providing such rights
of indemnification as the Corporation may deem appropriate, up to the maximum extent permitted by law. Any agreement entered
into by the Corporation with a director may be authorized by the other directors, and such authorization shall not be invalid on the
basis that similar agreements may have been or may thereafter be entered into with other directors.
Section 2. Insurance. The Corporation may purchase and maintain insurance on behalf of any person who is or was a
director, officer, employee or agent of the Corporation, or is or was a director, officer, employee or agent of another corporation,
partnership, joint venture, trust or other enterprise, against any liability asserted against such person and incurred by such person
in any such capacity, or arising out of such person's status as such, whether or not the Corporation would have had the power to
indemnify such person against such liability under the applicable provisions of this Article VI or the DGCL.
ARTICLE VII.
CAPITAL STOCK
Section 1. Certificates for Shares. Shares of the Corporation's stock may be certificated or uncertificated, as provided
under the DGCL, and shall be entered in the books of the Corporation and registered as they are issued. Any certificates
representing shares of stock of the Corporation, whenever authorized by the Board of Directors, shall be in such form as shall be
approved by the Board of Directors and shall be signed by, or in the name of, the Corporation by the Chairman of the Board or the
President or a Vice President and by the Secretary or an Assistant Secretary or the Treasurer or an Assistant Treasurer of the
Corporation, and sealed with the seal of the Corporation (if one has been adopted), which may be by a facsimile thereof. Any or
all such signatures may be facsimiles. Although any officer, transfer agent or registrar who has signed or whose facsimile
signature has been placed upon a certificate ceases to be such officer, transfer agent or registrar before such certificate is issued, it
may nevertheless be issued by the Corporation with the same effect as if such officer, transfer agent or registrar were still such at
the date of issue.
The stock ledger and blank share certificates shall be kept by the Secretary or a transfer agent or by a registrar or by any
other officer or agent designated by the Board of Directors.
Section 2. Transfer of Shares. Transfer of shares of stock of the Corporation shall be made only on the books of the
Corporation by the holder thereof, or by such holder's attorney thereunto authorized by a power of attorney duly executed and
filed with the Secretary of the Corporation or a transfer agent or registrar for such stock, if any, with such proof of the authenticity
of signature as the Corporation or its transfer agent may reasonably require and the payment of all taxes thereon. If the shares are
certificated, such transfer shall be made by the surrender of the certificate or certificates for such shares properly endorsed or
accompanied by a duly executed stock transfer power. If the shares are uncertificated, such transfer shall be made upon proper
instructions from the holder of the uncertificated shares. The person in whose name shares stand on the books of the Corporation
shall be deemed the owner thereof for all purposes as regards the Corporation; provided, however, that whenever any transfer of
shares shall be made for collateral security and both the transferee and transferor shall request the Corporation to do so, and
written notice thereof shall be given to the Secretary or to such transfer agent or
15 NAI-1526349195v1
registrar, such fact shall be stated in the entry of the transfer. No transfer of shares shall be valid as against the Corporation, its
stockholders and creditors for any purpose until it shall have been entered in the stock records of the Corporation by an entry
showing from and to whom transferred.
Section 3. Address of Stockholders. Each stockholder shall designate to the Secretary or transfer agent or registrar of
the Corporation an address at which notices of meetings and all other corporate notices may be served or mailed to such person,
and, if any stockholder shall fail to designate such address, corporate notices may be served upon such person by mail directed to
such person at such person's post office address, if any, as the same appears on the share record books of the Corporation or at
such person's last known post office address.
Section 4. Lost. Destroved and Mutilated Certificates. The holder of any certificated share of stock of the Corporation
shall immediately notify the Corporation of any loss, theft, destruction or mutilation of the certificate therefor. Upon the surrender
of the mutilated certificate or, in the case of loss, theft or destruction of the certificate, upon satisfactory proof of such loss, theft
or destruction, the Corporation may issue to such holder (i) a new certificate or certificates for shares or (ii) uncertificated shares
in place of any certificate or certificates previously issued by the Corporation. The Board of Directors, or a committee designated
thereby, may, in its discretion and as a condition precedent to the issuance of a new certificate or certificates or uncertificated
shares, require the owner of such lost, stolen or destroyed certificate or certificates, or such person's legal representative, to give
the Corporation a bond in such sum and with such surety or sureties as it may direct to indemnify the Corporation and said
transfer agents and registrars against any claim that may be made on account of the alleged loss, theft or destruction of any such
certificate or the issuance of such new certificate or certificates or uncertificated shares.
Section 5. Regulations. The Board of Directors may make such additional rules and regulations as it may deem
expedient concerning the issue and transfer of shares of stock of the Corporation and may make such rules and take such action as
it may deem expedient concerning the issue of new certificates or uncertificated shares in lieu of certificates claimed to have been
lost, stolen, destroyed or mutilated.
Section 6. Fixing Record Date for Determination of Stockholders of Record. In order that the Corporation may
determine the stockholders entitled to notice of or to vote at any meeting of stockholders or any adjournment thereof, the Board of
Directors may fix a record date, which record date shall not precede the date upon which the resolution fixing the record date is
adopted by the Board of Directors, and which record date shall not be more than sixty nor less than ten (10) days before the date
of such meeting. A determination of stockholders of record entitled to notice of or to vote at a meeting of stockholders shall apply
to any adjournment of the meeting; provided, however, that the Board of Directors may fix a new record date for the adjourned
meeting and shall be required to do so as provided in Article II, Section 4.
In order that the Corporation may determine the stockholders entitled to receive payment of any dividend or other
distribution or allotment of any rights or entitled to exercise any rights in respect of any change, conversion or exchange of stock,
or for the purpose of any other lawful action, the Board of Directors may fix a record date, which record date shall not precede the
date upon which the resolution fixing the record date is adopted by the Board of Directors, and which record date shall be not
more than sixty (60) days prior to such action. If no record date is fixed, the record date for determining stockholders for any such
purpose shall be at the close of business on the day on which the Board of Directors adopts the resolution relating thereto.
16 NAI-1526349195v1
ARTICLE VIII.
SEAL
The Board of Directors may provide a corporate seal, which, if adopted, shall be in the form of a circle and shall bear the
full name of the Corporation and the words "Corporate Seal Delaware" or such other words or figures as the Board of Directors
may approve and adopt. The seal may be used by causing it or a facsimile thereof to be impressed or affixed or in any other
manner reproduced.
ARTICLE IX.
FISCAL YEAR
The twelve-month period ending at midnight on December 31 in each year shall be the fiscal year of the Corporation.
ARTICLE X.
WAIVER OF NOTICE
Whenever any notice whatsoever is required to be given by these Bylaws, by the Certificate of Incorporation or by law,
the person entitled thereto may, either before or after the meeting or other matter in respect of which such notice is to be given,
waive such notice in writing, which writing shall be filed with or entered upon the records of the meeting or the records kept with
respect to such other matter, as the case may be, and in such event such notice need not be given to such person and such waiver
shall be deemed equivalent to notice. Neither the business to be transacted at, nor the purpose of, any meeting of the stockholders,
the Board of Directors or any committee of the Board of Directors need be specified in any waiver of notice of such meeting.
Attendance of a person at a meeting shall constitute a waiver of notice of such meeting, except when the person attends a meeting
for the express purpose of objecting, at the beginning of the meeting, to the transaction of any business because the meeting is not
lawfully called or convened.
ARTICLE XI.
AMENDMENTS
To the extent permitted by law and the Certificate of Incorporation, these Bylaws may be altered, amended or repealed or
new bylaws may be adopted by the Board of Directors at any annual, regular or special meeting of the Board of Directors.
Notwithstanding the foregoing, the stockholders of the Corporation entitled to vote may adopt, amend or repeal these Bylaws, to
the extent permitted by law and the Certificate of Incorporation.
ARTICLE XII.
MISCELLANEOUS
Section 1. Execution of Documents. The Board of Directors or any committee thereof shall designate the officers,
employees and agents of the Corporation who shall have power to execute and deliver deeds, contracts, mortgages, bonds,
debentures, notes, checks, drafts and other orders for the payment of money and other documents for and in the name of the
Corporation and may authorize such officers, employees and agents to delegate such power (including authority to redelegate) by
written instrument to other officers, employees or agents of
17 NAI-1526349195v1
the Corporation. Such delegation may be by resolution or otherwise and the authority granted shall be general or confined to
specific matters, all as the Board of Directors or such committee may determine. In the absence of such designation referred to in
the first sentence of this Section 1, the officers of the Corporation shall have the power to execute and deliver the documents and
to delegate and redelegate the power referred to above, to the extent incident to the normal performance of their duties.
Section 2. Deposits. All funds of the Corporation not otherwise employed shall be deposited from time to time to the
credit of the Corporation or otherwise as the Board of Directors or any committee thereof or any officer of the Corporation to
whom power in that respect shall have been delegated by the Board of Directors or any such committee shall select.
Section 3. Checks. All checks, drafts and other orders for the payment of money out of the funds of the Corporation,
and all notes or other evidence of indebtedness of the Corporation, shall be signed on behalf of the Corporation in such manner as
shall from time to time be determined by resolution of the Board of Directors or of any committee thereof. In the absence of such
resolution referred to in the immediately preceding sentence, the officers of the Corporation shall have such power so referred to,
to the extent incident to the normal performance of their duties.
Section 4. Proxies in Resnect of Stock or Other Securities of Other Comorations. The Board of Directors or any
committee thereof shall designate the officers of the Corporation who shall have authority from time to time to appoint an agent
or agents of the Corporation to exercise in the name and on behalf of the Corporation the powers and rights that the Corporation
may have as the holder of stock or other securities in any other corporation, and to vote or consent in respect of such stock or
securities; such designated officers may instruct the person or persons so appointed as to the manner of exercising such powers
and rights; and such designated officers may execute or cause to be executed in the name and on behalf of the Corporation and
under its corporate seal, or otherwise, such written proxies, powers of attorney or other instruments as they may deem necessary
or proper in order that the Corporation may exercise its said powers and rights. In the absence of such designation referred to in
the first sentence of this Section 4, the officers of the Corporation shall have such power so referred to, to the extent incident to
the normal performance of their duties.
Section 5. Number and Gender of Words. When the context so requires in these Bylaws, words of gender shall
include either or both genders and the singular number shall include the plural.
18 NAI-1526349195v1
Exhibit 4.7
TENTH SUPPLEMENTAL INDENTURE
This TENTH SUPPLEMENTAL INDENTURE, dated as of July 14, 2021 (this "Tenth Supplemental Indenture"), is among Lennox
International Inc., a Delaware corporation (the "Company"), Heatcraft Technologies Inc., a Delaware corporation ("HTI"), Lennox National
Account Services Inc., a California corporation ("Account Services"), Lennox Procurement Company Inc., a Delaware corporation
("LPCI"), Lennox Services LLC, a Delaware limited liability company ("LS LLC" and, together with HTI, Account Services and LPCI, the
"New Guarantors"), Advanced Distributor Products LLC, a Delaware limited liability company ("ADP"), Allied Air Enterprises LLC, a
Delaware limited liability company ("Allied Air"), Heatcraft Inc., a Delaware corporation ("Heatcraft"), Heatcraft Refrigeration Products
LLC, a Delaware limited liability company ("HItP"), Lennox Global LLC, a Delaware limited liability company ("Global"), Lennox
Industries Inc., a Delaware corporation ("Industries"), Lennox National Account Services LLC, a Florida limited liability company
("National Account"), LGL Australia (US) Inc., a Delaware corporation ("LGL Australia"), LGL Europe Holding Co., a Delaware
corporation ("LGL Europe" and, together with ADP, Allied Air, Heatcraft, HRP, Global, Industries, National Account and LGL Australia,
collectively, the "Existing Guarantors"; the Existing Guarantors, together with the New Guarantors, collectively, the "Guarantors"), and
U.S. Bank National Association, as Trustee under the Indenture referred to below.
RECITALS
WHEREAS, the Company, the Existing Guarantors and the Trustee are parties to an Indenture, dated as of May 3, 2010 (the "Base
Indenture"), as supplemented by the First Supplemental Indenture, dated as of May 6, 2010, the Second Supplemental Indenture, dated as of
March 28, 2011, the Third Supplemental Indenture, dated as of October 27, 2011, the Fourth Supplemental Indenture, dated as of December
10, 2013, the Fifth Supplemental Indenture, dated as of August 30, 2016, the Sixth Supplemental Indenture, dated as of November 3, 2016
(the "Sixth Supplemental Indenture"), the Seventh Supplemental Indenture, dated as of January 23, 2019, the Eight Supplemental
Indenture, dated as of May 22, 2020 and the Ninth Supplemental Indenture, dated as of July 30, 2020 (the "Ninth Supplemental Indenture")
(the Base Indenture, as so supplemented, the "Indenture"), pursuant to which the Company has issued 3.000% Notes due 2023 (the "2023
Notes"), 1.350% Notes due 2025 (the "2025 Notes") and 1.700% Notes due 2027 (the "2027 Notes" and, together with the 2023 Notes and
the 2025 Notes, the "Notes");
WHEREAS, Section 8.06 of the Sixth Supplemental Indenture and Section 8.06 of the Ninth Supplemental Indenture provide that the
Company is required to cause each New Guarantor to execute and deliver to the Trustee a supplemental indenture evidencing its guarantee of
the punctual payment when due of all monetary obligations of the Company under the Indenture and the Notes on the terms and conditions
set forth herein and in Article 8 of the Sixth Supplemental Indenture and Article 8 of the Ninth Supplemental Indenture;
WHEREAS, each New Guarantor desires to enter into such supplemental indenture for good and valuable consideration, including
substantial economic benefit in that the financial performance and condition of such New Guarantor is dependent on the financial
performance and condition of the Company, the obligations hereunder of which such New Guarantor has guaranteed; and
WHEREAS, pursuant to Section 8.01 of the Base Indenture, the parties hereto are authorized to execute and deliver this Tenth
Supplemental Indenture to amend the Indenture, without the consent of any Holder.
NOW, THEREFORE, in consideration of the foregoing and for other good and valuable consideration, the receipt of which is hereby
acknowledged, the Guarantors, the Company and the Trustee mutually covenant and agree for the benefit of the Holders of the Notes as
follows:
1. Defined Terms. As used in this Tenth Supplemental Indenture, terms defined in the Indenture or in the preamble or recitals hereto
are used herein as therein defined. The words "herein," "hereof' and "hereby" and other words of similar import used in this Tenth
Supplemental Indenture refer to this Tenth Supplemental Indenture as a whole and not to any particular section hereof.
2. Agreement to Guarantee. Each New Guarantor, as primary obligor and not merely as surety, hereby jointly and severally with the
Existing Guarantors, irrevocably and fully and unconditionally guarantees to each Holder and to the Trustee and its successors and
assigns (the "Guarantee"), on a senior unsecured basis and equal in right of payment to all existing and future senior indebtedness of
such New Guarantor, the punctual payment when due of all monetary obligations of the Company under the Indenture and the Notes,
whether for principal of or interest on the Notes, on the terms and subject to the conditions set forth in Article 8 of the Sixth
Supplemental Indenture and Article 8 of the Ninth Supplemental Indenture and agrees to be bound by (and shall be entitled to the
benefits of) all other applicable provisions of the Indenture as a Guarantor.
3. Termination. Release and Discharge. The Guarantee shall terminate and be of no further force or effect, and the New Guarantors
shall be released and discharged from all obligations in respect of the Guarantee, as and when provided in Section 8.03 of the Sixth
Supplemental Indenture and Section 8.03 of the Ninth Supplemental Indenture.
4. Parties. Nothing in this Tenth Supplemental Indenture is intended or shall be construed to give any Person, other than the Holders
and the Trustee, any legal or equitable right, remedy or claim under or in respect of the Guarantee or any provision contained herein
or in the Indenture.
5. Governing Law. This Tenth Supplemental Indenture and the Notes shall be deemed to be a contract under the laws of the State of
New York, and for all purposes shall be construed in accordance with the laws of such State, except as may otherwise be required by
mandatory provisions of law.
6. Ratification of Indenture: Supplemental Indentures: Part of Indenture. The Indenture, as supplemented by this Tenth
Supplemental Indenture, is in all respects ratified and confirmed, and this Tenth Supplemental Indenture shall be deemed part of the
Indenture in the manner and to the extent herein and therein provided.
7. Trustee Makes No Representation: Trustee's Rights and Duties. The recitals contained herein shall be taken as the statements of
the Company, and the Trustee assumes no responsibility for the correctness of the same. The Trustee makes no representation as to
the validity or sufficiency of this Tenth Supplemental Indenture and shall not be liable in connection therewith. The rights and duties
of the Trustee shall be determined by the express provisions of the Indenture and, except as expressly set forth in this Tenth
Supplemental Indenture, nothing in this Tenth Supplemental Indenture shall in any way modify or otherwise affect the Trustee's
rights and duties thereunder.
8. Countemarts. This Tenth Supplemental Indenture may be executed in any number of counterparts, each of which shall be an
original; but such counterparts shall together constitute but one and the same instrument.
9. Headings. The section headings herein are for convenience only and shall not affect the construction hereof.
[Remainder of page intentionally left blank]
IN WITNESS WHEREOF, the parties hereto have caused this Tenth Supplemental Indenture to be duly executed as of the date first above
written.
LENNOX INTERNATIONAL INC.
ADVANCED DISTRIBUTOR PRODUCTS LLC
ALLIED AIR ENTERPRISES LLC
HEATCRAFT INC.
HEATCRAFT REFRIGERATION PRODUCTS LLC
HEATCRAFT TECHNOLOGIES INC.
LENNOX GLOBAL LLC
LENNOX INDUSTRIES INC.
LENNOX NATIONAL ACCOUNT SERVICES INC.
LENNOX NATIONAL ACCOUNT SERVICES LLC
LENNOX PROCUREMENT COMPANY INC.
LENNOX SERVICES LLC
LGL AUSTRALIA (US) INC.
LGL EUROPE HOLDING CO.
By: /s/ Theresa McCray
Name: Theresa McCray
Title: Vice President, Corporate
Tax and
Treasurer
[Signature Page to Tenth Supplemental Indenture]
U.S. BANK NATIONAL ASSOCIATION, AS TRUSTEE
By: /s/ Michael K. Herberger
Name: Michael K. Herberger
Title: Vice President
[Signature Page to Tenth Supplemental Indenture]
Exhibit 4.8
DESCRIPTION OF THE REGISTRANT'S SECURITIES REGISTERED PURSUANT TO SECTION 12 OF
THE SECURITIES AND EXCHANGE ACT OF 1934
The following is a summary of the terms and provisions of the common stock, par value $0.01 per share (the "Common Stock") of Lennox International
Inc., a Delaware corporation, and is qualified by reference to our Restated Certificate of Incorporation ("Certificate of Incorporation") and Amended and
Restated Bylaws ("Bylaws"), which are incorporated by reference herein and attached as exhibits to the Company's most recent Annual Report on Form 10-
K filed with the Securities and Exchange Commission, and to applicable provisions of Delaware law.
Authorized Capital Stock
Our authorized capital stock consists of 200,000,000 shares of Common Stock and 25,000,000 shares of preferred stock, par value $0.01 per share
("Preferred Stock"). The outstanding shares of our Common Stock are legally issued, fully paid and nonassessable. There are no shares of Preferred Stock
currently outstanding.
Voting Rights
The holders of our Common Stock are entitled to one vote per share on all matters to be voted on by stockholders. Generally, all matters to be voted on by
stockholders must be approved by a majority (or, in the case of a contested election of directors, by a plurality) of the votes entitled to be cast by all shares
of Common Stock present in person or represented by proxy, voting together as a single class, except as may be required by law and subject to any voting
rights granted to holders of any Preferred Stock. However, the removal of a director from office for cause, the approval and authorization of specified
business combinations and amendments to specified provisions of our Certificate of Incorporation and Bylaws each require the approval of not less than
80% of our voting stock, voting together as a single class. The Common Stock does not have cumulative voting rights.
Dividend Rights
Subject to the prior rights of the holders of any shares of our Preferred Stock, the holders of shares of our Common Stock shall be entitled to receive, to the
extent permitted by law, such dividends as may be declared from time to time by our board of directors.
Liquidation Rights
On our liquidation, dissolution or winding up, after payment in full of the amounts required to be paid to holders of Preferred Stock, if any, all holders of
shares of Common Stock are entitled to share ratably in any assets available for distribution to holders of shares of Common Stock.
Anti -Takeover Provisions
Classified Board of Directors; Removal; Number of Directors; Filling Vacancies
Our Certificate of Incorporation and Bylaws provide that our board of directors shall be divided into three classes, with the classes to be as nearly equal in
number as possible. The term of office of each class shall expire at the third annual meeting of stockholders for the election of directors following the
election of such class. Each director is to hold office until his or her successor is duly elected and qualified, or until his or her earlier resignation or removal.
Our Bylaws provide that any vacancies will be filled only by the affirmative vote of a majority of the remaining directors, even if less than a quorum.
Accordingly, absent an amendment to the Bylaws, our board of directors could prevent any stockholder from enlarging our board of directors and filling the
new directorships with such stockholder's own nominees. Moreover, our Certificate of Incorporation and Bylaws provide that directors may be removed
only for cause and only upon the affirmative vote of holders of at least 80% of our voting stock at a special meeting of stockholders called expressly for that
purpose.
The classification of directors could have the effect of making it more difficult for stockholders to change the composition of our board of directors. The
classification provisions could also have the effect of discouraging a third
party from initiating a proxy contest, making a tender offer or otherwise attempting to obtain control of us, even though such an attempt might be beneficial
to us and our stockholders.
No Stockholder Action by Written Consent; Special Meetings
Our Certificate of Incorporation and Bylaws provide that stockholder action can be taken only at an annual or special meeting of stockholders and
stockholder action may not be taken by written consent in lieu of a meeting. Special meetings of stockholders can be called only by our board of directors
by a resolution adopted by a majority of our board of directors, or by the chairman of the board, vice chairman or the president.
Our Certificate of Incorporation and Bylaws prohibit stockholder action by written consent and permit special meetings to be called only by the chairman,
vice chairman or president, or at the request of a majority of our board or directors, may have the effect of delaying consideration of a stockholder proposal
until the next annual meeting.
Other Rights and Preferences
The Common Stock has no sinking fund or redemption provisions and does not have any preemptive, subscription or conversion rights. Additional shares
of authorized common stock may be issued, as authorized by our board of directors from time to time, without stockholder approval, except as may be
required by applicable stock exchange requirements.
Listing
Our Common Stock is listed on the New York Stock Exchange under the symbol "LII."
EXHIBIT 21.1
Lennox International Inc. Subsidiaries
The following are the subsidiaries of Lennox International Inc., as of February 3, 2023, and the states or jurisdictions in which they are organized.
Subsidiaries are indented below their immediate parent entity. The names of certain subsidiaries have been omitted because, considered in the aggregate as
a single subsidiary, they would not constitute, as of the end of the year covered by this report, a "significant subsidiary" as that term is defined in Rule 1-
02(w) of Regulation S-X under the Securities Exchange Act of 1934.
Name
Lennox Industries Inc. (See Annex A)
Ownership
100%
Jurisdiction
Delaware
Heatcraft Inc.
100%
Delaware
Bohn de Mexico S.A. de C.V.
50%
Mexico
Frigus-Bohn S.A. de C.V.
50%
Mexico
Advanced Distributor Products LLC
100%
Delaware
Heatcraft Refrigeration Products LLC
100%
Delaware
Advanced Heat Transfer LLC
50%
Delaware
Heatcraft Technologies Inc.
100%
Delaware
Alliance Compressor LLC
24.5%
Delaware
Lennox Procurement Company Inc. 100% Delaware
ANNEX A
TO
EXHIBIT 21.1
Lennox Industries Inc. Subsidiaries
Name Ownership urisdiction
Allied Air Enterprises LLC 100% Delaware
LPAC Corp. 100% Delaware
Lennox Global LLC (See Annex B) 100% Delaware
LGL Europe Holding Co. (See Annex C)
53.2% Delaware
Lennox National Account Services Inc. 100% California
Lennox Services LLC 100% Delaware
Lennox National Account Services LLC 100% Florida
ANNEX B
TO
EXHIBIT 21.1
Lennox Global LLC Subsidiaries
Name
Ownership
Jurisdiction
Lennox (Shanghai) Refrigeration Technology Consulting Co Ltd.
100%
China
LGL Europe Holding Co. (See Annex C)
46.8%
Delaware
LGL Australia (US) Inc.
100%
Delaware
Lennox India Technology Centre Private Ltd.
0.0005%
India
LII Comercial de Mexico,S. de R.L. de C.V.
99.97%
Mexico
ANNEX C
TO
EXHIBIT 21.1
LGL Euroue Holding Co. Subsidiaries
Name
Ownership
Jurisdiction
LGL Holland B.V.
100%
Netherlands
Lennox Benelux N.V./S.A.
0.024%
Belgium
Lennox Industries (Canada) ULC
100%
Canada
Lennox Switzerland GmbH
100%
Switzerland
LII Mexico Holdings Ltd.
100%
UK
LII United Products, S. de R.L. de C.V.
99.99%
Mexico
LII Comercial de Mexico,S. de R.L. de C.V.
0.03%
Mexico
Lennox Mexico Minority Holdings LLC
100%
Delaware
LII United Products, S. de R.L. de C.V.
0.01%
Mexico
Lennox Ukraine LLC
99%
Ukraine
Lennox India Technology Centre Private Ltd.
99.9995%
India
Etablissements Brancher S.A.S.
100%
France
LGL France S.A. S.
100%
France
Lennox Refac, S.A.
0.02%
Spain
LGL Germany GmbH
100%
Germany
Hyfra Ind. GmbH
100%
Germany
Lennox Deutschland GmbH
100%
Germany
LGL Deutschland GmbH
100%
Germany
Lennox Global Spain S.L.
100%
Spain
LGL Refrigeration Spain S.A.
100%
Spain
Lennox Portugal Lda
0.008%
Portugal
Lennox Refac, S.A.
99.98%
Spain
Lennox Portugal Lda
99.92%
Portugal
Lennox Polska sp. z.o.o.
100%
Poland
Lennox Benelux B.V.
100%
Netherlands
Lennox Benelux N.V./S.A.
99.976%
Belgium
Lennox NAO
0.5%
Russia
Lennox Ukraine LLC
1%
Ukraine
HCF-Lennox Limited
100%
United Kingdom
Lennox Industries
100%
United Kingdom
Lennox NAO
99.5%
Russia
Exhibit 22.1
List of Guarantor Subsidiaries
The following subsidiaries of Lennox International Inc. (the "Company") are guarantors with respect to the Company's (1) 3.00%
Notes due 2023, (2) 1.35% Notes due 2025, and (3) 1.70% Notes due 2027:
Guarantor
Advanced Distributor Products LLC
Allied Air Enterprises LLC
Heatcraft Inc.
Heatcraft Refrigeration Products LLC
Heatcraft Technologies Inc.
Lennox Global LLC
Lennox Industries Inc.
Lennox National Account Services Inc.
Lennox National Account Services, LLC
Lennox Procurement Company Inc.
Lennox Services, LLC
LGL Australia (US) Inc.
LGL Europe Holding Co.
State or Other Jurisdiction of Formation
Delaware
Delaware
Delaware
Delaware
Delaware
Delaware
Delaware
California
Florida
Delaware
Delaware
Delaware
Delaware
Exhibit 23.1
Consent of Independent Registered Public Accounting Firm
We consent to the incorporation by reference in the registration statement (No. 333-265185) on Form S-8 and the registration
statement (No. 333-268030) on Form S-3 of our report dated February 21, 2023, with respect to the consolidated financial
statements and financial statement Schedule II of Lennox International Inc. and the effectiveness of internal control over financial
reporting.
(signed) KPMG LLP
Dallas, Texas
February 21, 2023
Exhibit 3 1. 1
CERTIFICATION
I, Alok Maskara, certify that:
1. I have reviewed this annual report on Form 10-K of Lennox International Inc.;
2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the
statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this
report;
3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the
financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4. The registrant's other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in
Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-
15(f)) for the registrant and have:
(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to
ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those
entities, particularly during the period in which this report is being prepared;
(b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our
supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for
external purposes in accordance with generally accepted accounting principles;
(c) Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the
effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
(d) Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent
fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to
materially affect, the registrant's internal control over financial reporting; and
The registrant's other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to
the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions):
(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are
reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and
(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal
control over financial reporting.
Date: February 21, 2023
/s/ Alok Maskara
Alok Maskara
Chief Executive Officer
Exhibit 31.2
CERTIFICATION
I, Joseph W. Reitmeier, certify that:
1. I have reviewed this annual report on Form 10-K of Lennox International Inc.;
2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the
statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this
report;
3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the
financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4. The registrant's other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in
Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-
15(f)) for the registrant and have:
(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our
supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by
others within those entities, particularly during the period in which this report is being prepared;
(b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our
supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for
external purposes in accordance with generally accepted accounting principles;
(c) Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the
effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
(d) Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most
recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably
likely to materially affect, the registrant's internal control over financial reporting; and
The registrant's other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to
the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions):
(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are
reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and
(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal
control over financial reporting.
Date: February 21, 2023
/s/ Joseph W. Reitmeier
Joseph W. Reitmeier
Chief Financial Officer
Exhibit 32.1
CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
In connection with the Annual Report of Lennox International Inc. (the "Company") on Form 10-K for the year ended December 31, 2022 as filed
with the Securities and Exchange Commission on the date hereof (the "Report"), each of the undersigned, Alok Maskara, Chief Executive Officer of the
Company, and Joseph W. Reitmeier, Chief Financial Officer of the Company, certifies, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to section
906 of the Sarbanes-Oxley Act of 2002, that to his or her knowledge:
(1) The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and
(2) The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company
/s/ Alok Maskara
Alok Maskara
Chief Executive Officer
February 21, 2023
/s/ Joseph W. Reitmeier
Joseph W. Reitmeier
Chief Financial Officer
February 21, 2023
A signed original of this written statement has been provided to the Company and will be retained by the Company and furnished to the Securities
and Exchange Commission or its staff upon request. The foregoing certification is being furnished to the Securities and Exchange Commission as an exhibit
to the report.
s ! ! I ift
■ ■
P.O. Box 400, Austin, Texas 78767
800.695.2919 • bids(mbuyboard.com • buyboard.corn
8. Does your company have any outstanding financial judgments and/or is it currently in default on any loan or financing
agreement? If so, provide detailed information on the nature of such items and prospects for resolution.
Please refer to the attached 2022 1 OK
9. List all contracts, if any, in the last 10 years on which Proposer has defaulted, failed to complete or deliver the work,
or that have been terminated for any reason. Include any contract for which the surety was notified of a potential claim
in regard to a payment or performance bond. For each such contract, provide the project name, scope, value and date
and the name of the procuring entity. Fully explain the circumstances of the default, notice to surety, failure to complete
or deliver the work, or termination.
Please refer to the attached 20221 OK
10. List all litigation or other legal proceedings (including arbitration proceedings and/or claims filed with a surety in regard
to a payment or performance bond), if any, in the last 10 years brought against your firm, or any of the firm's past or
present owners, principal shareholders or stockholders, officers, agents or employees, that relate to or arise from a
contract similar to this Contract or the Work contemplated under this Contract. Provide the style of the lawsuit or
proceeding (name of parties and court or tribunal in which filed), nature of the claim, and resolution or current status.
Please refer to attached 2022 1 OK
11. Describe in detail the quality control system Vendor will use, including third party auditing certification, to support the
long-term performance and structural strength of the products to be used in a project under the Contract.
Please refer to the attached Quality Control Document.
Page 40 of 76
PROPOSAL FORMS CONST. v.05.04.2023
LENNOX.
Lennox International Commercial Heating and Cooling
512 W. Lennox Drive, Stuttgart, AR 72160
QUALITY
At the Stuttgart, AR manufacturing facility quality starts with people, is customer and process focused,
and includes systems to drive stable processes, quick problem solving, permanent preventive and
corrective actions, and continuous improvement. The facility operates under a comprehensive
management system, LCMS-S (Lennox Commercial Management System - Stuttgart) that is certified to
ISO 9000:2015 requirements and has been continually in compliance since December 1992.
Our quality policy is:
Lennox Commercial strives to design, build, and deliver the highest quality and value products and
services in the industry, and meet and exceed customer's expectations, while fulfilling our core values of
integrity, respect, and excellence.
Quality at Lennox Commercial Stuttgart is everyone's job emphasizing the quality journey of accept no
defects, make no defects, and pass no defects along. Ensuring quality at the source is our emphasis.
Resourcing includes personnel responsible for quality engineering, quality management, auditing, and
inspection across the pillars of supplier quality, product and process design quality, manufacturing, and
field quality.
The production quality system includes that all, that is 100% of, finished HVAC commercial products
produced on Lennox Commercial Stuttgart assembly lines are run tested to ensure operational
performance requirements are met. Traceability of these test records as well as all other test and build
records are maintained for every unit by serial number. In addition, ensuring that correct critical
components are assembled in to each unit, is maintained through CVT bar-code scanning technology.
All of this and more, helps ensure that Lennox Commercial designs, builds, and delivers the highest
quality and best value products in the industry to our customers and that we continually improve quality
performance in every aspect of our processes, systems, and business as a whole.
PFBoard-
P.O. Box 400, Austin, Texas 78767
800.695.2919 • bids(mbuyboard.com • buyboard.corn
12. If the Work will require Vendor to tender performance or payment bonds, provide the name of the bonding company
or surety that will issue such bonds.
Not applicable
13. Describe in detail all documented safety issues, if any, that have involved Vendor in the last three years related to the
type of work contemplated under this Contract. Provide a three-year history of your firm's workers compensation
experience modifier.
Please refer to the attached ESG Report.
Page 41 of 76
PROPOSAL FORMS CONST. v.05.04.2023
Environmental
Social
Governance
Report 2021
LI LENNOX
Table of Contents
Message from our CEO...........................................................................................3
BusinessOverview.............................................................................................4
AboutLII...................................................................................................................5
OurBusiness............................................................................................................5
Recent History of Innovation and Sustainability.................................................6
Awardsand Recognition.........................................................................................6
Our Sustainability Commitments..........................................................................7
Alignment with the UN SDGs................................................................................7
Environmental.....................................................................................................8
Our Approach and 2021 Progress.........................................................................9
Environmental Management...............................................................................10
Product Efficiency and Innovation.......................................................................11
Examples of Our Efficient Products
...................................................................13
Product Life Cycle Management.........................................................................15
Refrigerant Management.....................................................................................16
Greenhouse Gas Emissions..................................................................................
17
Energy....................................................................................................................19
Water.....................................................................................................................
20
Waste......................................................................................................................
21
Social................................................................................................................... 22
Cultureand Values................................................................................................23
Diversity, Equity & Inclusion................................................................................24
DiversityMetrics....................................................................................................26
Recruitment...........................................................................................................27
Training and Development...................................................................................28
Employee Spotlight Series:#WhyLennox?........................................................31
Employee Engagement........................................................................................32
Employee Health and Safety...............................................................................33
2022 Safety Initiatives.........................................................................................34
COVID-19 Impact and Response.........................................................................37
Product Safety and Quality..................................................................................37
SupplyChain..........................................................................................................38
Stakeholder Engagement.................................................................................... 40
Community Involvement and Charitable Giving...............................................41
Governance.......................................................................................................
44
Board Oversight of ESG.......................................................................................45
Board Composition and Diversity.......................................................................46
RiskManagement..................................................................................................47
Managing Climate -Related Risk..........................................................................48
Business Ethics and Compliance.........................................................................49
Human Rights and Conflict Minerals.................................................................
50
Cybersecurity and Data Privacy..........................................................................
51
PublicPolicy...........................................................................................................52
About This Report and Indices.......................................................................53
AboutThis Report.................................................................................................54
Sustainability Accounting Standards Board(SASB)..........................................55
Task Force on Climate -related Financial Disclosures(TCFD)...........................58
EEO-1 Report.........................................................................................................65
2021 LII Political Contributions............................................................................66
APEX Verification Report......................................................................................67
COVER PHOTO SUBMITTED BY:
Brittney Ewing I Richardson, Texas, U.S. - Lake in Seward, Alaska, U.S.
2021 ESG REPORT 2
Message From Our CEO
Across Lennox International Inc. (LII), we are dedicated to
progressing our Environmental, Social, and Governance
(ESG) initiatives for the benefit of our stakeholders. As
we publish our 2021 ESG Report, the world is facing a
humanitarian crisis caused by the war in Ukraine, and
is continuing the battle against COVID and its related
impacts. Social inequities persist and climate extremes
around the world are on the rise —record breaking
temperatures, floods, wildfires, storms, and droughts. Now, more than ever, it
is critical for us to come together and address our challenges and opportunities
through meaningful ESG efforts. I know we will continue to rise to the occasion
Despite these global challenges, we are proud to celebrate another year of
producing innovative and efficient climate -control solutions for our customers
around the world. As industry leaders, we recognize our vital role in contributing
to a better world.
REDUCING ENVIRONMENTAL IMPACT THROUGH CARBON
REDUCTION INITIATIVES
We are proud to design and manufacture the most efficient climate -control
products on the market. We continue to develop products with progressively less
carbon impact through greater energy efficiency and use of refrigerants with
lower global warming potential (GWP).
In 2021, we set science -based emissions reduction targets validated by the
Science Based Targets Initiative (SBTi), a global coalition dedicated to curbing
global warming based on the latest climate science. Our commitments include
reducing absolute Scope 1 and 2 greenhouse gas (GHG) emissions by 37.5% and
Scope 3 emissions by 30% per product sold by 2034.
We were honored to be one of the first six industry leaders to participate in the
U.S Department of Energy's Cold Climate Heat Pump Technology Challenge,
recognizing our commitment to electrifying the heating industry and helping
us all reduce our carbon footprint. We are proud to announce that in June
2022, LII was the first to complete the Challenge, recognizing LII as the industry
leader in innovative technology for electric heat pumps. Our technology is paving the
way to replace gas furnaces, which will reduce greenhouse gas emissions. Our current
products, including our award -winning SL25XPV cold climate heat pump, and our Product
Development & Research teams are leaders in supporting electrification and ultimately, a
net -zero carbon economy.
IMPACTFUL SOCIAL ENDEAVORS
For many years, we have made and continue to make concerted efforts to expand our
diversity and inclusion, including bolstering our recruiting through Historically Black
College and Universities (HBCU) partnerships and setting candidate slating targets
for diversity. As one of my first actions as CEO of LII and in continuation of our
commitment from previous LII leadership, I proudly joined the CEO Action for Diversity
& Inclusion pledge to promote a more inclusive workplace. We also continue our support
for the Business Coalition for the Equality Act: proposed legislation addressing workplace
fairness for lesbian, gay, transgender, bisexual, and queer (LGBTQ+) employees.
Our employees are key to our success and their safety is always our top priority. We are
proud of sustained efforts made across the company to maintain and improve employee
health and well-being. We conduct robust health and safety audits, and aim for annual,
corporate -wide 20% reductions in the rate of year over -year incidents. In 2021, we again
reduced our recordable and lost workday frequency rates.
STRONG GOVERNANCE IS FOUNDATIONAL TO L11
Our core values of Integrity, Respect, and Excellence have guided us for 127 years and
continue to drive our culture of doing the right thing. I am proud to be the CEO of a
company with a strong governance framework and a well-rounded, diverse Board of
Directors to oversee the complex issues in today's environment as well as ensure what
has been a smooth CEO transition.
We're working to build a better world.
Going forward, as we continue to meet or exceed our existing ESG goals, we will
introduce new targets and goals that build on our existing strength and reflect the
urgent need to address climate change and social inequities. We also plan to increase our
stakeholder engagement to ensure our ESG efforts match expectations.
h C fz U- Alok Maskara
CEO
2021 ESG REPORT
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About LII Our Business
We began manufacturing the world's first steel coal-fired furnace 4101�
over 125 years ago in Marshalltown, Iowa, where we still manufacture
and assemble the quietest and most energy -efficient residential
heating and air conditioning equipment in the world. Today we
employ over 11,000 people globally and are an industry -leading
provider of sustainable, energy -efficient climate -control solutions.
Our advanced products and services showcase our deep expertise
and reflect the success of our established business processes. We
are dedicated to providing the most effective and energy -efficient
heating, air conditioning, indoor air quality, and refrigeration systems I
for our customers, and to driving performance to reduce our and our
customers' carbon footprint.
OUR ESTABLISHED BUSINESS PROCESSES:
EXCELLENCE
2021 REVENUE
2021 SEGMENT PROFIT
66%
77%
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Commercial
Excellence Innovation
�
Residential Heating
and Cooling
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Residential Heating
and Cooling
Talent
OUR STRATEGIC
PRIORITIES
21%
16%
Development
ESG
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Efficiency Deployment
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INNOVATION
Refrigeration
Refrigeration
2021 ESG REPORT 5
Recent History of Innovation and Sustainability
Developed the first two -
speed hermetic compressor,
making possible significant
energy cost savings in
residential and commercial
air conditioning
(nu
199
Launched configure -to -
order L Series product line,
with numerous unique
configuration combinations
and easy service access
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201
Published LII's first
Sustainability Report, set
environmental targets, and
submitted a CDP Climate
Change response for the
first time
202
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Science -based targets
validated by the SBTi,
covering reductions in our
Scope 1, 2, and 3 emissions
10,
198 200 202 202
Developed and Introduced HSX19, Achieved environmental First to complete the
manufactured the industry's quietest and targets set to reduce U.S. DOE's Cold Climate
industry's first high most energy -efficient air energy, emissions, water, Heat Pump Technology
efficiency gas furnaces conditioner and waste Challenge
Awards and
Recognition
Year after year, leading institutions
award LII for its industry -defining HVACR
products, sustainability performance,
and company culture.
02022
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MostEfficient GR�NBIAIDEa
INNOVATION AWARDS o A.a.:-_ HOT50
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America's Most
Responsible and
Most Trustworthy
Companies 2022
from Newsweek
2021 ESG REPORT 6
Our Sustainability Commitments
Topic SDG Alignment Goal
Reducing our 37.5% reduction in absolute Scope 1 and 2 emissions by 2034 (from 2019 baseline),
Environmental Footprint, validated by the SBTi
30% reduction in Scope 3 emissions per product sold by 2034 (from 2019 baseline),
validated by the SBTi
25% reduction in Building Better Plants energy use intensity by 2024
v (from 2014 baseline)
25% reduction in energy use intensity across all of LII's facilities by 2024 (from 2014
baseline)
25% reduction in water use intensity by 2024 (from a 2014 baseline)
25% reduction in solid waste by 2024 (from a 2014 baseline)
Alignment with the UN SDGs
The Sustainable Development Goals were adopted by the United Nations in 2015 as a call
to address climate issues, poverty, equality, access to clean water, sanitation, health, and
more in communities around the world. The SDGs list goals in 17 focus areas. At LII, we
have identified six of these goals that closely relate to our business and where we can
make a meaningful impact.
For more information on the UN SDGs, please see their official website.
2021 Progress
9% increase
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Our Approach and
2021 Progress
Driving innovation excellence in our products, services,
and operations is at the core of our business strategy and
embedded into our processes. Our commitment to reduce our
environmental impact is unwavering.
We are proud to share that we
have set near -term science -based
emissions reduction targets
validated by the Science Based
Targets Initiative (SBTi), a global
coalition dedicated to curbing
global warming based on climate
science. We have committed to
reduce absolute Scope 1 and 2
greenhouse gas (GHG) emissions
by 37.5% and Scope 3 emissions by
30% per product sold by 2034 from
a 2019 base year.
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Environmental Management
At LII, we have a comprehensive Environmental Management System
(EMS) aligned with ISO 14001 that comprises policies and procedures to
manage the environmental performance of our facilities. Through our
EMS framework we develop, review, and set timeframes to achieve our
environmental objectives, including reducing our environmental impact.
Our EMS also defines the organizational structure and roles that are
responsible for maintaining the best environmental management practices.
All of LII's facilities implement our EMS and maintain required standards,
procedures, and audits. Additionally, six facilities have ISO 14001
certifications, and further, LII has paid no significant fines or penalties
related to environmental or ecology issues for over a decade.
LII'S EMS INCLUDES THE FOLLOWING:
■ Monitoring and measuring environmental performance and
actions to prevent or correct non-conformance and maintaining
environmental records
■ Maintaining a comprehensive environmental compliance
program, including complying with applicable laws and
regulations governing environmental protection
■ Educating, training, and motivating employees to conduct their
activities in an environmentally -sound manner
■ Incorporating environmental considerations in evaluating new
projects, products, and processes
■ Encouraging the use of non-polluting technologies and waste
minimization in the design of products and processes
■ Promoting the conservation of resources and protection of the
environment through recycling, reuse, and proper disposal of
materials
■ Anticipating and responding to public concerns about potential
hazards and impacts of operations, products, waste, or services
■ Continuing to improve environmental performance, and
considering technical developments, scientific understanding,
consumer needs, and community expectations
ACROSS OUR OPERATIONS
Across our operations, we emphasize sound environmental
practices at all levels of the business. In 2022, we will launch a new
sustainability employee resource group to educate and engage our
employees about how we can all do our part in fighting climate
change and living our diversity and inclusion values.
2021 ESG REPORT 10
Product Efficiency
and Innovation
RESEARCH & DEVELOPMENT
For over 125 years, LII has invented new technologies, launched market -leading
products, and improved the quality of life for our customers with our heating,
cooling, indoor air quality, and refrigeration products.
Leading energy efficiency, adopting refrigerants with a lower carbon footprint,
deploying smart climate controls, and harmonizing with renewable energy and
electric sources are at the heart of our product strategy. We are laser -focused
on innovation and continuously push the envelope with our robust and dedicated
R&D. In 2021, we invested the vast majority of R&D resources in climate -related
innovations.
We conduct annual strategic assessments to evaluate market trends and identify
energy efficiency priorities for our R&D efforts. Our award -winning SL25XPV
fully electric heat pump used for heating and cooling is a result of our constant
drive for energy efficiency. Thirty percent of the patent applications we filed over
the last 10 years are tied to energy efficiency improvements. Additionally, in our
Refrigeration business segment, our advances in using lower GWP refrigerants
allow us to meet and exceed regulatory requirements across our markets, from the
U.S. Environmental Protection Agency to the similar regulatory body in Europe—
EcoDesign.
PRODUCT EFFICIENCY
Our products are sold around the world and used by millions of
customers. We make our most meaningful, positive climate impact
by focusing on product energy efficiency, more environmentally -
friendly refrigerants, and emissions reductions. Today, many of our
next -generation control systems, as well as our heating, cooling, and
refrigeration products, lead the industry in energy efficiency in their
respective categories.
Our Product Vitality Index (PVI) is a key metric by which we measure
our success in product innovation. The PVI represents sales of
products launched in the last three years as a percentage of total
sales. Given our newest products are also the most efficient, a higher
PVI indicates we are successfully delighting our customers and
meeting their expectations with a lower carbon footprint. Our high
PVI of 48% suggests that our newest, highest -efficiency products
are drivers of our strong performance. Our investment in energy -
efficient products continues to drive market -wide adoption of
efficient, sustainable climate control technologies.
2021 ESG REPORT 11
Thirty-seven percent of our revenue comes from the sale of highly
efficient products, those that are more energy -efficient than
minimum standards for their respective product types. Additionally,
51% and 65% of our eligible Residential and Commercial products by
revenue, respectively, meet ENERGY STAR criteria.
We aim to continue increasing the share of our revenue coming from
energy -efficient products. Some examples of our initiatives include:
®� Establishing an entire New Product Introduction
roadmap for commercial refrigeration to develop
alternative lower GWP refrigerants
0 0 0 Focusing on our Residential business's cold climate
000 to electric heat pumps roadmap to drive innovation
0 0 0 across the industry and facilitate nationwide building
electrification efforts
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MEMBERSHIP WITH THE INTERNATIONAL WELL BUILDING
INSTITUTE (IWB0
In 2021, we became a proud Keystone member of healthy building
certifier IWBI's WELL Performance Rating, a new designation that
certifies buildings that measure and validate their building and
human performance metrics as they relate to their occupants' health
and well-being. As a Keystone member, we are working with the
IWBI alongside other industry leaders to develop new pathways and
beta features for the new Performance Rating.
Electrification incentives in North America, as well as our
environmental goals, bolstered our R&D focus on cold climate
heat pumps. In November of 2021, the U.S. DOE confirmed LII
as one of the first six industry partners to participate in the
Cold Climate Heat Pump Technology Challenge. The competition
aims to reduce the carbon footprint of cold climate heating
technologies through enhancements targeting efficiency and
performance. This effort supports the Biden Administration's goal
of a net -zero carbon economy by 2050.
We are proud to announce that in June 2022, Lennox
International was the first HVAC partner in the Challenge
to develop a next -generation heat pump that can more
effectively heat homes in northern climates relative to today's
models. As reported by the DOE, "[t]his achievement is a
massive step toward for providing reliable clean heating and
cooling for millions of American families..."
2021 ESG REPORT 12
Examples of Our Efficient Products
RESIDENTIAL
DAVE LENNOX SIGNATURE COLLECTIO SL25XPV HEAT PUMP N
The SL25XPV Heat Pump leads the industry in heat pump technology as the most precise and
efficient heat pump currently on the market for heating and cooling. It holds a 2022 ENERGY
STAR certification.
Precise minute -by -minute adjustments with our Precise ComfortTM and TruHeat Performance
technologies allow for optimized heat output with enhanced efficiency, saving U.S. homeowners
in warm and cold climates up to 58%* in heating and cooling costs per year. As part of the
SL25XPV's robust design components, the QuantumTM Coil is designed to designed to weather
the harshest elements, increasing product longevity, and thus reducing its overall environmental
footprint.
CO RCIAL
MO L L
Launched in the last year, the Model L showcases the best of our innovation for enhanced
efficiency. With its variable -speed components and HumiditrolTM optimized humidity controls, the
Model L Ultra -High Efficiency Rooftop Unit holds industry -leading energy efficiency ratings.
The Model L's Ultimate IAQ System features a High Efficiency MERV 16 air filter, UVC Germicidal
lamp, and bipolar ionization to reduce air contaminants, microbes, pathogens, pollutants and
odors —supporting a healthier indoor environment for our customers.
Please see our Indoor Air Quality section for more information on the Model L's contribution to
improved air quality.
Based on savings from cooling operation in Texas when compared to a 10 SEER system.
2021 ESG REPORT 13
Examples of Our Efficient Products
REFRIGERATION
E-BALTIC R-32
The e-Baltic R-32 is the first rooftop unit in the world to use a refrigerant alternative to R410A.
Instead of R410A, which has a GWP of 2088, the e-Baltic uses the R-32 refrigerant, which
has a lower GWP of 677 and a 68% reduction in GWP emissions. This means each e-Baltic
unit, depending on size, has around 9,500-19,000 kg CO2e fewer emissions —which translates
to taking 2 to 4 average passenger cars off the road for a whole year. The enhanced design
of the e-Baltic also reduces refrigerant charge by up to 30%, further reducing the amount of
CO2 emitted. These design elements, which meet the 2022 EcoDesign seasonal efficiency
requirement, enable the unit to adjust its power and airflow according to real climatic conditions,
leading to optimized energy consumption.
SMART THERMOSTATS
(COMFORT® S30
Our smart thermostats are fully communicating. Not only do they help consumers save energy,
but they can also send alerts when a unit is not functioning optimally, avoiding a breakdown
and ensuring comfort and air quality. The iComfort® S30 thermostat's Smart AwayTM Mode
uses the location services in smartphones to detect when consumers are away from home and
automatically adjusts the temperature to a more energy -efficient setting. When they return
home, Smart Away Mode adjusts the system to its normal schedule and a more comfortable
temperature. The iComfort S30 thermostat can also run energy reports that show how often and
how long heating or cooling systems have run for the month, empowering users to manage their
own energy consumption.
2021 ESG REPORT 14
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Product Life Cycle Management
" � USE " E.
-
fNNOX — APPROACH
The quality and efficiencies of our products contribute to their long operating
lifespans of more than a decade. These longer lifespans translate to smaller
environmental footprints and require less frequent replacement. We design our
a1 - ar
products to be highly efficient; easily transported, serviced, and maintained; and
\ BLADE adaptable to each customer's operating environment. As part of our commitments
�E 28 to reduced environmental impacts and building a circular economy, we strive to
\ design, manufacture, monitor, and manage the use and disposal of our products
- LENNOX throughout their life cycle. Please see our Refrigerant Management section for
USE
BLADE USE 28" BLAn °°^^�"'°'°9 our approach to end -of -life management of refrigerants.
ENNOX II LENNOX DESIGN AND DEVELOPMENT
Where possible, our sourcing team procures materials with recycled content, such
M M
as steel, aluminum, and copper. Most of the products we manufacture contain
recycled content. For our packaging, we also source cardboard with pre- and post -
consumer recycled content.
TRANSPORTATION
1 We aim to be as efficient as possible when transporting our products to customers.
USE 28' BLADE A few years ago, we introduced and patented a compact furnace design, allowing
�sE za" BLADE USE 28" E _ more product per truckload, therefore leading to lower transportation costs.
LENNOX Further, we redesigned our Residential product packaging that enables us to stack
LENNOX �o�+ro9a� boxes directly without using wooden pallets, saving resources, costs, and space.
Over the past years, we have also increased our direct -to -consumer shipping,
shortening the distance in which products are transported.
00 NOTE _.
s°�e a oa �' `\ RECYCLABILITY
i We strive to achieve maximum recyclability of our products, reducing cost and
i waste. On average, our products are composed of over 90% metal that can
c. \
— be disassembled and recycled. For the other materials in our products, we are
` evaluating the development of additional, robust end -of -life processes, whether it
is replacing plastic components with more sustainable materials or partnering with
- organizations able to recycle these specific parts.
use Z� B" gLAU USE 28" Ell. DE
LENNOX USE 281,
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2021 ESG REPORT 15
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Refrigerant Management
APPROACH AND GOALS
Our approach to refrigerant management is primarily focused on the transition of products
to use lower GWP refrigerants. This transition is aligned with the European F-gas Regulation
517/2014, which aims to decrease EU's F-gas emissions by two-thirds by 2030. LII is committed
to transitioning all Lennox residential and commercial products to lower GWP refrigerants
by 2025 in line with expected state and federal regulations.
DESIGN & DEVELOPMENT
A key piece of our product design strategy is the deployment of alternative, low carbon
refrigerant technologies. In the past, we replaced chlorofluorocarbons (CFCs) and
hydrochlorofluorocarbons (HCFCs) to eliminate ozone depletion. Now, we are working toward
the transition to refrigerants with a lower GWP. We also produce and sell products that use
microchannel instead of standard coils to reduce the refrigerant charge needed for our units in
both our commercial and refrigeration businesses. Microchannel coils are 40% smaller and use
up to 65% less refrigerant than standard coils.
Our Refrigeration Center of Excellence
has developed and conducted
successful field tests using even lower
GWP refrigerants, such as CO2 and
ammonia, for condensing units, unit
coolers, and refrigeration racks.
PARTNER ENGAGEMENT
As we transition new products to lower GWP
refrigerants, we are also ensuring we enhance our end -
of -life management for our products. Our contractor
partners are primarily responsible for proper collection,
disposal, recycling and/or reuse of refrigerants. We
currently sell reclaimed refrigerant in Lennox Stores,
and our retail footprint makes us uniquely positioned
for wider practice as states and federal governments
roll out regulations designed to increase the use of
recycled refrigerants.
We recently partnered with Hudson Technologies to
help collect recovered refrigerant from our dealers. We
will receive reports from Hudson Technologies moving
forward to help track refrigerant take -back at end -of -
life for our Residential business. We continue to explore
ways to expand our partnerships and refrigerant
management processes across our other businesses.
2021 ESG REPORT 16
Greenhouse Gas Emissions
To help stem the global impact of climate change, we are committed to reducing the emissions of our
products and our operations. In 2021, we set an ambitious science -based emissions reduction target to
reduce Scope 1 & 2 absolute emissions by 37.5% and reduce Scope 3 emissions by 30% per product sold
by 2034 from a 2019 base year. These targets were validated by the SBTi in December of 2021.
The SBTi is a partnership between the CDP, the United Nations Global Compact, the World Resources
Institute (WRI), and the World Wide Fund for Nature (WWF), mobilizing companies to set science -based
targets over time to reduce their greenhouse gas emissions and mitigate the worst effects of climate
change. The two targets we set for LII were assessed against SBTi's qualitative and quantitative criteria
and validated in accordance with the SBTi validation protocol.
NEW SCIENCE -BASED TARGETS
3 7 ■ 5 % reduction in Scope 1+2
emissions versus 2019
3 O Q/O reduction in Scope 3 intensity
per product sold versus 2019
GHG EMISSIONS MANAGEMENT
We continue to develop an emissions reduction plan to support us in reaching our science -based targets. Pillars of our plan, include the following by emissions scope:
SCOPE 1
Ensure minimal to zero refrigerant leakage at
all manufacturing facilities
Evaluate alternatives to on -site fossil fuel
usage (where applicable)
Transition to lower GWP refrigerants
REFRIGERANT EMISSIONS
Emissions from refrigerant loss during the
manufacturing process accounts for a portion
of our Scope 1 emissions. Our facilities follow
refrigerant management regulations and work
towards eliminating refrigerant leaks and
reducing GHG emissions.
SCOPE 2
Identify operational facilities with opportunities to
implement energy efficiency initiatives. Further
information on our energy efficiency initiatives can
be found in the Energy section of our report.
>> Continue to transition to LED lighting at LII-operated
facilitates
PROCURE RENEWABLE ENERGY
We signed an eight -year contract with our electric
provider in Texas to source renewable energy to
cover 100% of LII's electricity consumption in Texas
operations. In 2021, 14% of our total electricity
consumption came from renewable energy, purchased
through 100% wind renewable energy credits (RECs).
SCOPE 3
Continue to develop industry -leading,
energy -efficient equipment
Transition from fuel -powered products to
electric products
Transition to lower GWP refrigerants
PRODUCT USE EMISSIONS
The largest contributor to our carbon footprint
comes from the use of sold products within
Scope 3. Our Scope 3 emissions account for
over 90% of our total GHG emissions.
2021 ESG REPORT 17
ABSOLUTE GHG EMISSIONS (IN MTCO2E)
Scope 1
Scope 2 (Location -Based)
Scope 2 (Market -Based)
Scope 3
Total Scope 1+2+3 (Market -Based)
95,900
83,100
116,700
64,900
56,400
51,400
53,600
46,000
45,600
90,228,300
81,421,800
100,267,900
90,377,800
81,550,900
100,430,200
PROGRESS AGAINST TARGET BASELINE
Scope 1 +2 Market -Based Emissions
(MTCO2e)
2019
149,500
Y YiV I U JUbMi I I tU bT:
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Scope 3 Emissions Intensity
(MTCO2e/product sold)
• 54
• • 129,100 • • 1 49
Scope 1 and 2 emissions cover over 95% of our operational facilities and our Scope 3 emissions cover all relevant categories. Detailed breakdowns of our emissions can be found in our latest
CDP Climate Change disclosure. All emissions metrics are verified by a third -party. LII reports GHG emissions in accordance with the industry guidelines as developed by the GHG Protocol.
*2021 absolute GHG emissions values are rounded to the nearest hundred from emissions listed in third -party verification opinion.
2021 ESG REPORT 18
Energy
Determining where we can reduce energy usage in our operations
continues to play a role in our emissions reduction strategy.
To support these efforts, we joined the Department of Energy's Building
Better Plants initiative, with the goal to reduce our U.S. facilities' energy
efficiency intensity by 25% by 2025 vs. 2014. We are currently on track to
meet our Building Better Plants target early.
2021 PROGRESS
25% TARGET
22
22% reduction in Energy Use Intensity (EUI) for
LII facilities participating in the Building Better
Plants initiative versus 2014
25% TARGET
19%
19% reduction in Energy Use Intensity (EUI)
across all of LII's facilities versus 2014
Our reported energy usage covers over 95% of our operational facilities. Detailed
breakdowns of our energy usage can be found in our latest CDP Climate Change
disclosure. All energy usage metrics are verified by a third -party. All data includes only
current operational facilities as of December 31, 2021.
BUILDING BETTER PLANTS ENERGY USE INTENSITY -
(MMBtu/Millions USD in Normalized Revenue)
2014 I
2020 I
2021 I
ENERGY USE INTENSITY
(MWh/Millions USD in Normalized Revenue)
2014 I
2020 I
2021 I
ABSOLUTE ENERGY USAGE (IN MWH)
Non -Renewable Energy
Electricity 121,011
Fuel 126,354
Renewable Energy 0
Total Usage 247,365
135,160
121,769
126,780
156,928
126,935
142,798
11,183
12,913
18,162
303,271
261,618
287,740
2021 ESG REPORT 19
Water
Water is an essential resource. Although our operations do not use or consume significant
amounts of water, we are committed to reducing water usage across all our locations.
We met our 25% water reduction goal for 2024 (from a 2014 baseline) in 2019 and today
have reduced our water usage intensity by 40% from 2014.
WATER STEWARDSHIP
We focus on reducing our operational water consumption and safely managing any
wastewater, especially for facilities in water -stressed areas. Some examples include:
Installing touchless and low -flow faucets, flush valves, and waterless urinals
Implementing drought -tolerant landscaping and irrigation management
Monitoring water billing to quickly identify and address water leaks
ABSOLUTE WATER USAGE (IN CUBIC METERS)
• 2020 2021
Total Usage 181,048 174,337 164,670
Our reported water usage covers over 95% of our operational facilities. Our 2020 water
usage data has been updated to reflect more accurate water usage data. All data includes
only current operational facilities as of December 31, 2021.
TARGET AND PROGRESS
25% TARGET
Met target to reduce water use intensity by 25%
by 2024 (from a 2014 baseline)
WATER USAGE INTENSITY
(Cubic Meters/Millions USD in Normalized Revenue)
2014 I ■
2020 I ■ F9
2021 I ■
2021 ESG REPORT 20
Waste
We are committed to reducing the amount of waste we generate at
our facilities and diverting waste from landfills. We met our waste
reduction target to reduce landfill solid waste by 25% for 2024 (from
a 2014 baseline) in 2019.
TARGET AND PROGRESS
25% TARGET
Met target to reduce solid waste intensity by 25%
by 2024 (from a 2014 baseline)
WASTE MANAGEMENT
We continuously focus on reducing our waste - non -hazardous and
hazardous - and diverting waste from landfills. The majority of waste
we generate each year are recyclable commodities such as wood,
cardboard, and metal.
BREAKDOWN OF ABSOLUTE SOLID
WASTE GENERATED
IN 2021
(metric tons)
88%
Non -Hazardous
Non -Hazardous
Waste (Recycled)
Waste (Waste-
9%
to -Energy)
Non -Hazardous
Waste (Landfill)
Hazardous
Our reported waste production covers over 95% of our operational facilities.
All data includes only current operational facilities as of December 31, 2021.
ABSOLUTE SOLID WASTE GENERATED (IN METRIC TONS)
Total Hazardous Waste
172
127
168
Recycled
Not tracked
95
154
Disposed
Not tracked
32
14
Total Non -Hazardous Waste
Not tracked
34,038
37,941
Waste -to -Energy
668
1,003
1,089
Recycled
Not tracked
30,037
33,465
Landfill
3,123
3,008
3,387
Total Hazardous and Non -
34,175
38,108
Hazardous Solid Waste
2021 ESG REPORT 21
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2021 ESG REPORT 22
At LII, we promote a healthy, safe, and engaged
workforce. We champion diversity and inclusion
with our employees and all aspects of our business
operations. We design and manufacture safe, reliable,
and energy -efficient products. We support the
communities where we live and work through financial
contributions and volunteerism.
Our innovation stems from the diversity of our
experiences, and our leadership in the industry is
rooted in designing and manufacturing safe products.
Culture and Values
LII's core values of Integrity, Respect, and Excellence have defined us for over 125
years. Our steadfast commitment to these values built the reputation we enjoy
today for doing the right things.
INTEGRITY
We are honest and accountable.
That is how we do business.
RESPECT
We value our coworkers,
customers, business partners,
competitors, and the communities
where we work and live. We
champion diversity and inclusion.
EXCELLENCE
We expect high performance
from our employees and business
partners and high quality in our
products and services. We deliver
value to our shareholders and
other stakeholders.
2021 ESG REPORT 23
Diversity, Equity & Inclusion
WE FOCUS ON FIVE KEY PILLARS OF DIVERSITY AND INCLUSION.
Recruiting talent
that reflects the
communities where we
live and operate.
Developing our
workforce and
engaging in meaningful
career development
conversations.
Creating a climate
of inclusion and
better understanding
the needs of our
employees.
Ensuring leadership
commitment and
providing our
leaders with tools
and resources to be
successful.
Strengthening our
partnerships within
diverse communities
and ensuring diversity
in our business
activities to promote
better solutions.
We believe diversity and inclusion are important factors that empower LII
to continue being an innovative leader. In 2021, we further strengthened
our commitment to building ever more expansive diversity and inclusion
programs across the organization.
We believe that fair and equitable pay should be an essential element of
any successful business model. To this end, LII reviews employees' salaries
annually with an eye toward external and internal equity —including racial
and gender equity —and makes appropriate adjustments to maintain pay
equity. Furthermore, we recognize the importance of diversity in our
recruiting approach. In the U.S., we have a goal to include at least one
female and one person of color on each final slate of candidates.
2021 ESG REPORT 24
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CEO ACTION FOR DIVERSITY & INCLUSION
As part of our ongoing commitment to create an inclusive workplace,
our new CEO Alok Maskara joined the CEO Action for Diversity &
Inclusion pledge - continuing the commitment of LII's prior CEO since
2019. This pledge is the largest CEO -driven business commitment
to advance diversity and inclusion in the workplace. Today, nearly
2,200 CEOs have already pledged to:
Cultivate environments that support open dialogue on complex
and often difficult conversations around diversity, equity, and
inclusion
Implement and expand unconscious bias education and training
Share best-known diversity, equity, and inclusion programs and
initiatives, as well as those that have been unsuccessful
Engage boards of directors when developing and evaluating
diversity, equity, and inclusion strategies
WORKFORCE DIVERSITY
We use diversity and inclusion data analytics, as well as
other workforce metrics, to support our long-term, strategic
workforce planning. This data helps us ensure that we
maintain a vigorous pipeline and succession plan to support
our diversity and inclusion goals.
DIVERSE CORPORATE PARTNERSHIPS
At LII, we know that embracing people from different
backgrounds and experiences accelerates innovation. As part
of our efforts to attract diverse talent to our organization, we
have engaged in meaningful partnerships with organizations
that enable us to attract and develop diverse talent and build
an even more inclusive working environment.
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We are also a proud member of
the Business Coalition for the
Equality Act, a group of leading
U.S. employers that support the
Equality Act. This federal legislation
would provide the same basic
protections to LGBTQ+ people as
are provided to other protected
groups under federal law.
2021 ESG REPORT 25
Diversity Metrics
GENDER BREAKDOWN FOR GLOBAL EMPLOYEES IN 2021
OUT OF 10,888 EMPLOYEES
daC
MALE FEMALE
Gender Breakdown by Level for Global Employees in 2021
® Executive
Manager
All Other Salaried
CEPW Hourly
MALE FEMALE
Female Representation for Global Managers and Above
19%
20%
fr sal *1
20%
2020
21%
2021
PEOPLE OF COLOR BREAKDOWN FOR U.S. EMPLOYEES IN 2021
OUT OF 7,883 EMPLOYEES (-72% OF WO KFORCE)
Et
WHITE
54%
AFRICAN AMERICAN 0 HISPANIC ASIAN OTHER PEOPLE OF COLOR
People of Color Breakdown by Level for U.S. Employees in 2021
1:0 Executive
Manager
All Other Salaried
Hourly
WHITE PEOPLE OF COLOR
People of Color Representation for U.S. Managers and Above
29%
25% 25% 27% -
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2021 ESG REPORT 26
Recruitment
HISTORICALLY BLACK COLLEGES AND UNIVERSITIES ENGAGEMENTS
We understand the importance of engaging with colleges and universities that
reflect the communities where we live and work. Recently, we partnered with
several Historically Black Colleges and Universities (HBCUs) including: the North
Carolina Agricultural and Technical State University, the University of Arkansas at
Pine Bluff, Texas Southern University, and Prairie View A&M University. We know
that expanding our campus partners to include HBCUs is critical as we look to
strengthen our overall inclusion and diversity efforts. Many LII employees are proud
HBCU alumni, and we provide opportunities for them to engage in recruiting fairs,
student development workshops, and other campus -related events. Doing so allows
us to better connect and recruit talent from HBCUs, all while providing personal and
professional development opportunities for our employees.
STEM OUTREACH AND RECRUITMENT
To further support our communities, we encourage STEM areas of study for women
and under-resourced student populations. For example, our Product Development &
Research headquarters in Carrollton, Texas partners with Design Your World, a STEM
conference for girls in grades 5th through 8th that leads engineering exploration
and learning activities to encourage interest in STEM careers. At our local
universities in the Dallas metroplex and across the nation, we also recruit heavily in
STEM fields for internships, co-op opportunities, and full-time employment.
BUILDING DIVERSE SLATES
At LII, we recognize the importance of diversity in our
recruiting approach and continued growth of diversity
representation. In order to bring top talent to LII, we
target having at least one female and one person of
color on each final candidate slate in the U.S.
2021 ESG REPORT
27
Training and Development
INCLUSION INITIATIVES
To support an inclusive work environment, we partnered with Project Unity.
Project Unity leads a collaborative movement based on the belief that what
unites us is greater than what divides us. Through this partnership, our
U.S. salaried employees have the opportunity to engage in safe, facilitated
conversations about race and other inclusion and diversity -related topics.
This powerful experience builds upon the unconscious bias training that we
rolled out across our organization. We are looking to expand this experience
to our broader employee population in 2022.
DIVERSITY TRAINING
We continue our efforts in rolling out training sessions around unconscious
bias to our global employee population. All salaried employees completed
two eLearning modules that engaged learners on the importance of
recognizing bias and creating an environment of belonging. Through these
ongoing efforts, more than 4,000 unconscious bias eLearning trainings
have been completed by employees.
In 2021, we expanded our facilitator -led unconscious bias training to
multiple languages to reach our global leadership population. To date, we
have hosted over 100 of these facilitated learning experiences.
Ask Yourself Questions Like...
Why do I see this person this way?
Do the facts support the way I'm looking at this situation?
O How am I approaching this problem or decision? O
Why do I feel the way I do about this situation?
Why am I doing what I'm doing?
5 of 10
2021 ESG REPORT 28
EMPLOYEE LEARNING AND DEVELOPMENT
At LII, developing our employees is one of our strategic priorities
and we believe in empowering our employees to own their career.
Our employees have access to several career development programs
aimed to enhance their skillsets and provide learning experiences
that support professional growth.
LII offers el -earning content, instructor -led courses, and focused
development programs for salaried employees.
2021 SALARIED ONLINE LEARNING STATISTICS:
TALENT DEVELOPMENT AND REVIEW
Our semi-annual Talent Development and Review (TDR) process is used to
identify key talent, succession gaps, and retention risks. Our CEO is involved
in the TDR for Directors and above, and down to the Manager level in select
cases. Skill matrices are used to assess the potential skill gaps and needs
for technical functions across our organization. We also utilize a Global
Engagement Survey to engage LII employees, gather feedback, and improve
our internal management and processes. We will continue to use feedback
surveys and other assessments to integrate human capital metrics into our
risk mitigation strategies.
I
minimum average of online L Career
8 hours learning per employee •
IOURNEY
The Career Journey platform provides LII employees with the information
41/963 and resources needed to understand personal values and career priorities,
hours of total online learning to aid in building and achieving career goals. Regardless of career stage,
Career Journey helps employees gain clarity on development plans and have
better development conversations with their managers.
BENEFITS FOR EMPLOYEES WHO USE
51316 CAREER JOURNEY INCLUDE:
distinct participants
» Deeper understanding of personal career drivers and motivators
» Transparency on skills and competencies expected for roles across LII
and insight into the development areas needed in order to develop to
successfully pursue other roles
11983 » Ability to explore and map out potential career paths
courses completed » Resources for candid conversations with managers on career aspirations
I
2021 ESG REPORT 29
LEADERSHIP DEVELOPMENT
LII maintains a strong "promote from within" philosophy and an organizational commitment to talent development.
Our training offerings include a tiered series of leadership development trainings, including:
>> Foundations of Management for first-time managers
Driving Results through Effective Management for managers with 1-3 years of experience
Cultivating Exceptional Managers for more experienced managers
To complement our broader employee development programs, in 2021 we partnered with Korn Ferry and
McKinsey & Company to add two additional development programs that focus on underrepresented talent:
>> Power of Choice for individual contributors
Connected Leaders Academy for more experienced managers
leading
the
Lilway
A FRAMEWORK FOR LEADERS OF PEOPLE
In 2021, we created a new framework for
supporting the development of people leaders,
Leading the LII Way. The course is divided into
multiple one -hour webinars that focus on key
areas under the topics of Attract, Inspire, Deliver,
and Develop. The program has been well -
attended and well -received by people leaders at
LII.
Since 2008, we have offered an 18-month
intensive Leadership Development Program (LDP)
for cohorts of 20-25 executives. The LDP focuses
on career progression, emotional intelligence,
team building, and executive presence.
We ensure that
our development
programs focus
on diverse
representation
across all levels.
r --I
ATTRACT INSPIRE DELIVER DEVELOP
Recruit & hire the
best talent
Create diverse &
inclusive teams
Onboard
effectively
a
Drive
engagement
Communicate for
impact
Recognize
successes
n
Drive key
business priorities
Serve as a good
steward of LII
resources
Uphold
employment
policies
Create a diverse
talent pipeline
L7
Self-awareness /
Self -development
Collaborate across
boundaries
Coach / Provide
feedback
Enable career
development
Empower
employees to
achieve / exceed
goals
2021 ESG REPORT 30
Employee Spotlight Series: #WhyLennox?
As part of our ongoing efforts to enrich our culture of inclusion, we created an employee spotlight series called "#WhyLennox?" This series spotlights a diverse group
of employees from across our business. The #WhyLennox? series is shared internally on our employee intranet as well as externally via social media. These efforts
enable us to share the personal sentiments of why our employees enjoy working at LII.
"I'm surrounded by some of the
most passionate, caring, all-around
talented people in South Carolina.
Our Allied Air Team members make
coming to work fun and exciting.
It's also exciting to be here with
Lennox and witness the growth of
our business."
Byron Tobin
Production Supervisor - Allied Air
"Not only is the team
environment warm and
welcoming but also very
supportive in developing
my career. Opportunities at
Lennox are unmatched."
Maraiah Bangoy
Marketing Program Specialist
-in the last 3 years, I've served
in multiple roles. I've learned and
developed a lot through my daily
responsibilities and the endless
trainings that are available.
I've never worked with such an
appreciative company and team,
who strongly work together to
achieve customer satisfaction. -
Derek Shuta
LDC Operations Manager
2021 ESG REPORT 31
Employee Engagement
GLOBALENGAGEMENTSURVEYS
At LII, we value feedback from all our employees and proactively
provide channels for employees to provide feedback through
global engagement and pulse surveys. We launched our first global
engagement survey in 2010 and surveys are typically conducted
bi-annually. In 2021 we conducted a global engagement survey
and received an 82% response rate. Through this feedback we
have developed key actions and initiatives around discussing
career development, recognizing team member contributions, and
ensuring everyone feels a sense of belonging at Lennox.
In response to the Engagement Index survey questions, most
employees agreed they are happy at work and would recommend
LII to others as a great place to work.
EMPLOYEE RESOURCE GROUPS
At LII, we recognize that inclusion is an essential part of who we
are. We are committed to creating an environment where our
employees are valued, supported, and can be the best version
of themselves each day. One of the many ways we show our
commitment to driving inclusion is through our employee resource
groups (ERGS).
LII's ERGS, all of which are employee -led, are a critical part to our
overall I&D strategy. In addition, participation in our ERGS provides
opportunities for both personal and professional growth.
.II YOUNG PROFESSIONALS ASSOCIATION
MAKE AN IMPACT
LII WOMEN'S BUSINESS COUNCIL
LII YOUNG PROFESSIONAL
(LWBC)
ASSOCIATION (LYPA)
The members of LWBC focus on
LYPA provides a forum for social
professional development, networking,
interaction and networking,
and support for our employees. LWBC's
personal and professional
primary initiative is to enrich the lives
development, leadership
of women at LII, making us a stronger
opportunities, and engagement
company.
for young professionals at LII.
W E
SREPRESFMIN LUIVERSO EMP
LIPS EMPLOYEES OF AFRICAN
PROGRAMS REPRESENTING
DESCENT (LEAD)
INDIVIDUAL DIVERSITY
LEAD supports LII's commitment to
EQUALITY (PRIDE)
advancing diversity and inclusion within
PRIDE works to broaden
our workplace. LEAD serves as a resource
understanding and ensure that
to develop a network of employees who
LII is a place where LGBTQ+
promote diversity and embrace a culture
employees are supported in our
of inclusion.
Company and our communities.
All employees are invited to
join any of LII's ERGs. Each ERG
meets at minimum quarterly.
2021 ESG REPORT 32
Employee Health and Safety
The health and safety of our employees is our utmost priority. We are committed
to a safe workplace and support our safety goals through planning, training,
performance management, and employee engagement.
Our occupational health and safety (OHS) management system aligns with the
principles of the ISO 45001 management system standards and describes our
governance, process, and performance indicators as it relates to health and safety
at LII. We continue to improve our processes by focusing on risk identification
and reduction using information and data from: risk assessments, observations,
audits, inspections, and incidents. When an incident occurs, we identify and
analyze the multiple causes of risk and implement sustainable corrective actions.
Throughout the year, our Corporate Safety team coordinates recurring meetings
with operational and business leadership to discuss specific safety topics, review
incidents, and share best practices.
Leadership oversight is provided by our CEO and Board of Directors. At the
beginning of each year, our CEO reviews LII's corporate -wide safety plans with
our Business Segment Presidents, HR leadership, and operations leadership.
Throughout the year, our Board and Public Policy Committee review our program
and performance against established targets.
Our OHS organization continuously improves. While we look at root causes and
implement corrective action immediately in case of an incident, we also review
annual data, documentation, training, and corrective actions from the prior year
with relevant levels, from C-level executive management to our sites. Throughout
the year, our Corporate Safety team coordinates regular meetings with operational
and business leadership to discuss specific safety topics, review incidents, and
share best practices.
2021 ESG REPORT 33
2022 Safety Initiatives
Employee engagement is vital
for continuous and sustainable
process improvement. Several
areas of improvement are
highlighted in our corporate
strategy and factory and
business safety plans.
CORE INITIATIVES
As part of an overall strategy focused on
actions for factories and businesses regar
Reducing incidents involving new hires
>> Reducing cuts on hands and arms
>> Reducing slips, trips, and falls
Reducing ergonomic shoulder and bacl
All sites to track and report on Near Mi
SAFETY BUSINESS PLANS
We have a layered planning process that includes a three-year
strategy, annual safety plan, and quarterly operations review.
Plans are reviewed with the CEO, business segment presidents, HR
leadership, and business operations leadership. Status of progress
toward the annual plan is reported monthly.
SAFETY TRAINING
Trainings on safety and ergonomic topics are conducted on a regular
basis. All new hire and temporary employees receive fundamental
safety and ergonomic training during onboarding. Employees and
contractors undergo comprehensive safety training specific to their
roles. They also receive refresher trainings annually and additional
comprehensive safety trainings as needed. Examples include:
Power Industrial Trucks (PIT)/Pedestrian
Machine Safeguarding
Ladder Use
Powerl-ift®
Electrical Work Safe Practices
Manufacturing Employee Engagement
Avoidance of Distracted Driving
BEST PRACTICE SHARING
Sharing best practices, from internal learnings and other companies, is key to
continuous improvement. Monthly meetings are scheduled at the beginning of
each year and communicated to a large audience across the organization including
EHS professionals, engineering, operations leadership, and nurses. Meeting topics
include best practice presentations from specific LII sites, incident reviews, safety
alerts, and other relevant topics. These meetings are recorded for later reference
and use.
2021 ESG REPORT 34
-_ -- R •. h144
HEALTH AND SAFETY AUDITS
Site audits provide valuable information for best practice sharing and process improvements.
Each year, all manufacturing locations receive a formal audit administered by Corporate Safety
using a cross -functional team of EHS professionals. Aligned with the ISO 45001 framework, we
monitor our OHS management system, evaluate processes, conduct observations, and interview
employees across all levels of the organization to assess a facility's safety performance. Our goal
is year over year improvement and closure of findings from previous year's audit.
Non -manufacturing sites manage their own audit process, reporting, and corrective action
implementation. In addition to formal audits, each facility internally manages their own
inspections to mitigate their specific risks.
SAFETY REVIEW PROCESS
The Board and Public Policy Committee receive comprehensive safety briefings, as well as
summary safety updates at each Board meeting. Our CEO and operations leaders review all
recordable incidents in the week after they occur and conduct quarterly reviews of safety
metrics and performance across the company.
2021 ESG REPORT 35
IMF
a
SAFETY PERFORMANCE
Setting targets is key to our process for continuing to improve our safety
performance. Every year, we set company -wide safety targets, with specific
targets at the business unit and site -level depending on their performance in
the prior year. These site -level targets are also embedded into management's
performance appraisals and remuneration to reflect our LII focus on safety.
Supervisory operational roles have activity -based and/or safety -related
performance goal included in their annual evaluations.
Our efforts have resulted in significant reductions in safety incident rates since
2010 for our employees. We are proud of our record of zero workplace fatalities
for both contractors and employees since 2011. Year over year, we set highly
ambitious goals for reductions based on the prior year's performance and aim for
annual, corporate -wide 20% reductions in the rate of year over year incidents. In
2022, we continue to aim for further reductions.
2021 Recordable Frequency Rate
2021 Fatalities
2021 Lost Time Frequency Rate (Employees and Contractors)
.50
0
0.128
RECORDABLE FREQUENCY RATE
(recordable injuries per 200,000 hours worked)
1.0
0.88
0.8
0.6
0.4
0.2
0
2018
izi7��zil►�i�zi7r�i �
LOST TIME FREQUENCY RATE
(lost time injuries per 200,000 hours worked)
0.25
0.210
0.20
0.15
0.10
0.05
0
2018
2019 2020 2021
2021 ESG REPORT 36
COVID-19 Impact and
Response
Initiatives developed in response to the COVID-19
pandemic continued to shape our operations in 2021.
We are proud of sustained efforts made across LII
to ensure our employees and communities are kept
safe, while minimizing disruptions to our business
operations and customers. As an essential business, we
continue to implement best practices and procedures
to maintain employee safety throughout the pandemic.
We communicate frequently and transparently with
our global employees about COVID-19 guidelines,
developments, and safety protocols.
Product Safety and Quality
One of LII's core values is "Excellence," which highlights that quality and safety are
at the center of product design. We achieve excellence through a robust quality
management system present across our factories.
We rigorously test our products to ensure they meet all applicable quality and
safety standards. We also conduct field safety tests. We:
[CIC
� Conduct internal product and process audits, including new audits
for product -specific "Critical -to -Quality" features and processes.
Use monthly quick market intelligence (QMI) processes that
connect our engineering team with technical field consultants to
identify any issue. If an issue is trending in the field, we receive
real-time notifications that enable cross -functional team to move
quickly to problem solve and implement corrective actions.
Implement a gated multi -step product development process with
market concept, specification development, proof -of -design,
manufacturing and supply chain process verification, and post -
production checkpoints to ensure products and services meet
market and customer needs, product performance and safety,
reliability, and environmental targets.
IN Conduct
monthly warranty data analysis to identify and correct
emerging product quality issues that are not reported through the
QMI process.
We also have an early launch containment process that monitors recently -
launched products and any warranty claims associated with these products, as well
as a technical support call center that monitors products broadly for any safety -
related information.
2021 ESG REPORT 37
Supply Chain
Our Worldwide Sourcing team ensures we have the right materials and components in the right
place day after day. As we select and develop relationships with suppliers from around the
world, we are mindful of quality, resiliency, logistics, and sustainability. We frequently engage
with our vendor partners, both in person and virtually. We recognize the accomplishments of
our top suppliers with annual LII Supplier Excellence Awards. Key priorities assessed include the
delivery and resilience of LII's supply chain, productivity, and risk mitigation.
4 KEY COMPONENTS AND MATERIALS
Our top three component purchases are compressors, motors, and controls, while
steel, copper, and aluminum account for the bulk of our raw material purchases.
We continue to diversify our suppliers to ensure resiliency of our supply chain.
SUPPLIER IDENTIFICATION AND REVIEW PROCESS
O Our Worldwide Sourcing team identifies new suppliers to provide new products or
technologies to complement our business strategy. Using our onboarding process
for new suppliers involves conducting due diligence in the form of in -person
visits and audits. These due diligence exercises review a supplier's production
practices, equipment, and policies not only from a quality and engineering
perspective, but also from an environmental and workforce safety standpoint.
RISK MITIGATION
We recognize that with a global supply chain, destabilizing events such as
public health crises, geopolitical tensions, and climate -related risks may disrupt
our business operations. As such, we mitigate our risk and build supply chain
resiliency by diversifying the geographic locations of our suppliers and our
regional sourcing teams. When sourcing new suppliers in strategic categories, we
include geographical and climate risk in our decision matrix.
2021 ESG REPORT 38
UbAUDITS
Our Supplier Quality and Development team audits all new suppliers; current
suppliers are also audited every three years to ensure continued compliance.
Following an audit, we will identify areas of improvement, require suppliers to
provide us with a supplier action plan, and formally agree to LII's Business Partner
Code of Conduct. We collaborate with the supplier to ensure action plans are
robust enough to address flagged areas. Depending on the flagged areas, we
conduct follow up or surveillance audits to evaluate the supplier's performance
on corrective actions, improvement progress on quality systems, plans to improve
quality process control planning, and performance capability.
Examples of ESG topics and risks that are assessed as part of our audit include:
Workforce readiness, such as skills and access to training
Evidence that a functioning governance mechanism is made available and communicated to
workers in their native language
Workplace safety, provision of personal protective equipment (PPE), and enforcement of
safety rules
Workplace conditions, such as lighting and air quality
Presence of an environmental management system registered with a third party
Documented action plan to address environmental aspects associated with production
We recognize the potential for human rights risks across our supply chain and ensure at a
minimum that our suppliers are compliant with regional labor laws. We expect our suppliers
to comply with our Business Partner Code of Conduct and our Human Rights Policy. We are
currently assessing how to implement greater human rights focus in our supplier selection and
audit processes. Please see our Human Rights section of this report for more information on our
Human Rights Policy.
BUSINESS PARTNER CODE OF CONDUCT
Suppliers are required to comply with our Business Partner Code of Conduct. The 0 Ze
Business Partner Code of Conduct emphasizes LII's values and provides reporting
options, including anonymous reporting options provided by an independent third -
party, for our suppliers and their employees or contractors to report behavior or
actions from a LII employee that violates our values or the law. Please see our
Business Ethics and Compliance section of this report for more information on our
Business Partner Code of Conduct.
2021 ESG REPORT 39
Stakeholder Engagement
CUSTOMERS
We value customer feedback and engage with customers across multiple channels,
including through online product reviews, customer surveys, and customer
support centers. We also engage customers through focus groups, especially
when developing a new product or service. We review the net promoter score of
our customers on a quarterly basis and are regularly in contact with customers to
discuss their needs to ensure product excellence.
In addition, we engage and educate our customers on energy efficiency products.
For instance, our Refrigeration business created a dedicated webpage focused
on driving customer awareness of updates to the DOE Annual Walk -In Efficiency
Factor (AWEF) as it affects our Heatcraft products. We also created and launched a
new Refrigeration Toolkit app that helps customers successfully transition to using
higher efficiency products.
DEALERS AND DISTRIBUTORS
Our primary manner of going to market is selling LENNOX-branded residential
products directly through independent dealers. For other products, we sell to
general contractors, manufacturers' representatives, wholesalers, and distributors.
In all areas, we work closely with our business partners to ensure they have what
they need, including safe installation instructions and training.
To better support the lifelong learning of the wider industry, we provide top -tier
HVAC training on technical skills, leadership, and marketing through our Lennox
Learning Solutions program. More details on this program are available in the
Community Involvement and Charitable Giving section of this report.
INDUSTRY AND COMMUNITY SUPPORT
Lennox Learning Solutions is a top -tier HVAC training
program we provide to not only our own employees,
but also to technicians, salespeople, and leaders in
the industry. Courses are designed to meet dealers'
needs and can be accessed through an online learning
platform containing webinars, live video streaming,
virtual reality, as well as instructor -led classes.
Technicians gain HVAC skills, salespeople gain tools on
sales strategies, and managers gain leadership and
development skills. Since 2016, premier dealers have
registered for almost 600,000 online courses and over
5,000 instructor -led courses.
W.--
Community Involvement
and Charitable Giving
At LII, we believe we have a responsibility to support and make a
positive impact in the local communities where we live and work.
We specifically focus our contributions and involvement in five giving areas: Arts, Environment,
Health and Human Services (which includes social justice to support diversity and equity in our
communities), Youth, and Education. These areas align with the following four UN SDGs:
TE
3 AAowi aA 4 °o A' ox 10 N` 0ALITS 13 AMIN
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In 2021, LII contributed approximately $2M in monetary donations across these categories. This
does not include the generous amounts our employees gave under our matching gift program, and
other business -specific community engagement initiatives.
OUR 2021 CHARITABLE GIVING
Our employees also volunteer their time in numerous philanthropic activities. Every year, we are
proud to support over 200 organizations. Below are a few of the organizations we supported in 2021.
6%
Environment
American
Heart
Association 6
/& Arts
BOYS & GIRLS CLUBS 1 2 %
OFM MIC Youth
18%
Education
'.8%
=_alth and
iman Services
2021 ESG REPORT 41
SUPPORTING SOCIAL JUSTICE
In our continued focus on social justice, here is a
sample of the organizations LII supported in 2021:
>> NAACP Legal Defense Fund
>> Advancement Project
Project Unity
Southern Center for Human Rights
Equal Justice Initiative
National Civil Rights Museum
>> Black Trans Advocacy Coalition
10 REDUCED
IraquamEs ,
G
STEM Goes Red brings interesting careers in
science, technology, engineering, and mathematics
to life for young women by giving them access to
leading employers and experts and an insider look
at what they do. STEM Goes Red attendees will
gain first-hand experience, connect with inspiring
professionals, learn about jobs they never knew
they could have, and walk away feeling like a whole
new world of STEM has been revealed —a world in
which they can truly love what they do and make a
tremendous impact.
COMMUNITY INVOLVEMENT AND CHARITABLE GIVING
INITIATIVES ACROSS OUR BUSINESSES
Feel The Love"' is one of our key initiatives at Lennox Residential, supporting
heroes who make a difference. Every year since 2009, deserving, local heroes
are nominated to receive a new heating and cooling system. Recipients are
selected based on a variety of criteria, including persevering despite a disability,
experiencing financial challenges or job loss, and having performed military or
community service. What they all have in common is that they put others first. In
October of every year, LII works with our partner dealers and installers across the
US and Canada to deliver our high -quality products to these selected heroes at no
cost. In 2021, we proudly supported 140 equipment installations and worked with
120 Lennox dealers.
3 AxOWFII BFNNC 11] NEEMIICES
r
2021 ESG REPORT 42
F
aWoddTCRA'
vide
Refrigeration
Tf,
Heatcraft Cares
Our Heatcraft Cares team aims to foster civic
leadership in the community through volunteer time
and financial resources for worthy causes, including the
following groups supported in 2021.
Donated nearly 1,300 pounds of school supplies
to Mims Kids, a children and arts community
outreach program that provides at -risk youth
access to summer camp and other opportunities
to learn about arts, travel, and life skills.
11VI►A Contributed financial support
�`� House of Ruth, an organization
HOUSE focused on ending domestic and
OF RUTH
sexual violence and abuse through
a collaborative, multidisciplinary approach to
investigations, advocacy and support, while
working in the community to change attitudes,
beliefs, and behaviors.
0 Hih, IM Coop Donated $10,000
LILBURN COOPERATIVE MINISTRY, INC. and conducted a
back -to -school and
canned foods drive for the Lilburn Cooperative
Ministry, which helps meet the needs of families
and individuals in Gwinnett County by providing
services including a food pantry, donated
clothing, and a family shelter.
6
Our Lennox India Technology Center (LITC) i
supports under resourced communities. In 2021, LITC
employees contributed 770+ hours volunteer hours
and donated $75,800+ to our communities in India.
V
Examples include:
O C
O
>> Donated over $20,000 in medical supplies during India's
Y ♦� �—
second and third COVID-19 waves.
* *
>> Partnered with organizations to set up study centers,
9
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scholarships, and supplies for students and schoolteachers.
tis"EAa`"
> Installed Bio-Gas plants in a nearby village, providing an
alternative fuel source for cooking.
Partnered with the Save the Sparrow movement in Koodugal
to supply and distribute sparrow nests across the region in
an effort to prevent the spread of mosquito -borne diseases.
2021 ESG REPORT 43
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Board Oversight
of ESG
Strong corporate governance is foundational
to LII. We recognize integrity, accountability,
and transparency are keys to a strong business
today and tomorrow.
LII's full Board oversees our ESG strategy.
We review the ESG strategy with the Board
twice a year. Though our Board's Public Policy
Committee holds the main responsibility for
oversight of LII's ESG priorities, all Board
Committees are briefed on various ESG topics
during every standard meeting. We are pleased
to report that all board members attended all
Board meetings over the past year.
GLOBAL ESG COUNCIL (ESGC)
In 2021, to deliver our ESG strategy, we
established the ESGC to provide a structure
for enterprise -wide ESG management and
streamline engagement across businesses and
corporate functions. The ESGC is comprised of
senior leaders across our business, corporate
functions, and regions and is currently chaired
by the Vice President, Deputy General Counsel
and Chief Sustainability, Ethics & Compliance
Officer. In order to be wholly representative
of the company, member selection was
strategic to include individuals from different
departments across the organization.
BOARD OF DIRECTORS
LII's full Board oversees product efficiency & innovation, as well as risk management. The Board is
briefed semi-annually on our ESG progress, enterprise risk management, and cybersecurity/data
privacy. The Board also receives an annual, comprehensive safety briefing as well as four summary
safety updates throughout the year. The four Board Committees oversee the following specific ESG
topic areas and are briefed more frequently on progress in these areas:
Audit Committee
Accounting & Tax Transparency
Business Ethics & Compliance /
Human Rights
Cyber Security and Data Privacy
Compensation and Human
Resources Committee
» Employee Diversity, Inclusion &
Engagement
» Pay Equity
» Employee Training & Development
» Benefits & Pension
» Executive Compensation
Board Governance Committee
Shareholder Rights
Board Composition & Diversity
Public Policy Committee
>> Energy, Waste, and Refrigerant Management
>> Climate Change & GHG Emissions
» Water Stewardship
» Product Lifecycle Management & Materials Sourcing
» Employee Health and Safety
» Product Safety
>> Supply Chain
>> Community Involvement / Charitable Giving
>> Public Policy
L'A
CEO AND EXECUTIVE STAFF
The CEO sets our ESG goals and delegates responsibility to execute on the goals to the Executive
Staff, which comprises of the senior executives responsible for all our major business segments
and corporate functions. Our CEO and Executive Staff members have ESG embedded into their
performance goals.
GLOBAL ESG COUNCIL
Members of the ESGC brief the CEO and the Executive Staff on a regular basis regarding our ESG
goals and progress and regularly brief the Board as a described above.
2021 ESG REPORT 45
Board Composition and Diversity
We maintain a well-rounded Board that is best positioned to guide and provide
robust oversight of LII's business direction and integration of ESG activities.
Our LII Board of Director Qualification Guidelines stipulate that the Board
will seek the best qualified candidates with consideration for diversity. When
choosing new Director candidates, we aim to balance the Board with a diversity
of experience, race, ethnicity, gender, age, cultural background, functional
expertise, industry knowledge, and tenure. Our current Board reflects this
effort. Four of LII's Directors are female. To further ensure a more balanced
Board, we have also separated the CEO and Board Chair roles. The Board and
the Board Governance Committee are committed to developing a diverse pool
of potential candidates for future Board service.
BOARD SKILLS AND EXPERTISE
Innovation/Technology/Cybersecurity
4 0 % Female Directors 2 0 % Racially Diverse ERM/Corporate Governance/ESG
Financial Accounting
Executive Leadership
BREAKDOWN OF TENURE 9 0 o/O
Independent Manufacturing/Distribution
3 3 4 Marketing/Sales
Global Experience $
<5 Years 5-10 Years 10+ Years 0 Average
Strategic Planning/Oversight Q
Director Age
HR/Compensation Q
All Board composition metrics shown here include Alok Maskara, our new CEO who joined the Board on May 19, 2022, and as such differ from those metrics shared in our 2022 Proxy, which was
published prior to Alok Maskara's employment. Metrics shown here for Board Skills and Expertise exclude Alok Maskara due to his new tenure.
2021 ESG REPORT 46
Risk Management
BOARD OVERSIGHT OF RISK MANAGEMENT
LII's Board oversees the company's processes for managing risk across the organization, including enterprise risk exposure through our Enterprise Risk Management
(ERM) process. In addition to reviewing LII's full ERM every year, the Board is also regularly educated on risk management issues pertinent to specific topics. Please
see our Task Force on Climate -related Financial Disclosures index in the Appendix for further detail on our ERM process.
11-11 ERM PROCESS
0 +-.71
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Survey Feedback ' Risk Assessment ' Risk Response ' Reassessment, ' Review of Top
from Key Workshops Planning and Monitoring, and Prioritized Risks
Management Execution Reporting and Review Plans
PHOTO SUBMITTED BY:
Kartik Deshpande I Carrollton, Texas, U.S. - Golden Hour at Zabriskie Point
in Death Valley National Park, Furnace Creek, California
. r. ;
Managing Climate -Related Risk
Climate -related risk impacts multiple aspects of our business, from severe
weather events to customer preferences, supply chain resiliency, and government
regulation. We consider climate change a driver that influences our top risks. To
better understand our climate -related risks, this year we have begun climate risk
training for our executive leadership to pinpoint our greatest opportunities. We are
continuing our physical climate risk assessments —including an analysis of flood,
severe storms, fire, drought, and extreme heat risks at our facilities —as part of our
risk profile analysis.
Our ERM results and progress are presented to the full Board twice a year, though
specific risks may be reviewed by the Board more frequently. We are working on
formally incorporating climate -related risks. This year, we are providing education
on climate and human capital risks as they relate to our business.
In addition to our annual ERM process, in 2021, we also conducted a climate
scenario analysis to evaluate the potential risks and opportunities across a range
of possible climate futures. In this year's scenario analysis, the impact and scope
of various transition risks were evaluated against three scenarios: an ambitious net
zero scenario (IEA NZE), a more conservative stated policies scenarios (IEA STEPS),
and a middle of the road announced pledges scenario (IEA APS).
The results of our scenario analysis are facilitating further clean product strategy
discussions and business -wide priorities with the goal to support LII's R&D
allocation decisions and marketing priorities. These decisions will be aimed to take
advantage of expected shifts in the overall market demand and landscape. We
expect to continue these discussions and further advance subsequent scenario
analyses in future years.
Further information on how LII assesses climate -related risks and opportunities,
and our strategy to address and capture these respectively is outlined in our Task
Force on Climate -related Financial Disclosures index in the Appendix.
T Tyson McGrath I Dartmouth, Nova Scotia, CA -
Lighthouse in Peggy's Cove, Nova Scotia, CA
Vi
2021 ESG REPORT
48 —
Business Ethics and Compliance
We understand that our success is determined by what we do, how we treat others,
who we do business with, and how we serve our communities. We conduct our
business in accordance with our core values of Integrity, Respect, and Excellence
and applicable laws around the world and pursue continuous improvement. Our
leaders set the "tone at the top" by modeling and promoting these values in
meetings, communications, and their conduct.
LII CODE OF BUSINESS CONDUCT
Employees, officers, and members of the Board of Directors are all held to the
same set of standards through LII's Code of Business Conduct. Our Code guides
our day-to-day decisions in accordance with our values, policies, and both the
letter and spirit of applicable laws. The Code also provides available resources for
reporting concerns —including our secure and anonymous third -party reporting
options. We recently added a "You Are Our Code in Action" section that outlines
specific obligations for employees and heightened responsibilities for managers.
LII's Code of Business Conduct is offered in nine languages and publicly available
on LII's website. It is also available to employees on our intranet or in hard copy.
To educate employees on our Code and supporting policies, we regularly
communicate and train employees on a variety of topics, including anti -bribery/
corruption, anti-trust, anti -harassment, anti -retaliation, conflicts of interest,
human rights, insider trading, protection of intellectual property, confidential
information, and lessons learned from real situations at LII. Training is assigned
based on role and location. All employees and our Board are required to complete
annual Code training - either in person or online. We consistently achieve more
than 95% completion on required training. Also on an annual basis, executives,
members of the Board of Directors, and other selected employees are required to
complete an Ethics & Compliance Questionnaire where they are asked to:
Report conduct inconsistent with our Code
Disclose potential conflicts of interest and
Confirm compliance with the Insider Trader Policy
Any issues raised in the questionnaire are addressed. We are proud to continue
our track record of recording no monetary losses in 2021 due to legal proceedings
associated with bribery, corruption, or anti -competitive behavior regulations.
BUSINESS PARTNER CODE OF CONDUCT
We select business partners whose values and business practices align
with our own core values and Code. LII's Business Partner Code of Conduct
lays out expectations for our contractors, temporary employees, dealers,
suppliers, distributors, third party intermediaries, joint venture partners, and
other business partners. The Business Partner Code of Conduct is offered in
nineteen languages and publicly available on LII's website.
REPORTING OPTIONS
We know speaking up takes courage. It's also the right thing to do and
what's expected of each of us at LII. To make things easy, LII offers several
avenues for our employees and others to report concerns, seek guidance, and
disclose conflicts of interest —including our secure and anonymous third -party
reporting options. All reports are reviewed by the Ethics & Compliance Office
and assigned for investigation or handling. If an allegation is substantiated,
corrective action is taken. The Ethics & Compliance Office provides a quarterly
report to the Board's Audit Committee of all issues raised and case trend
data. LII prohibits retaliation for raising Code issues or participating in an
investigation, as outlined in our Anti -Retaliation Policy in our Code of
Conduct.
ETHICS & COMPLIANCE OFFICE
Though our Board of Directors and Chief Executive Officer provide active
oversight of LII's ethics and compliance efforts, our Chief Ethics & Compliance
Officer ("CECO") and the Ethics & Compliance Office ("ECO") have operational
responsibility for the program. The ECO promotes an organizational culture
that encourages ethical conduct and a commitment to compliance with the
law by establishing and maintaining our Code and related policies, providing
awareness and training, fostering a speak -up culture, responding to,
tracking, and ensuring consistent enforcement of issues raised, performing
anti-bribery/corruption due diligence, and monitoring the effectiveness and
continuously improving the program.
The CECO reports directly to the Chief Legal Officer and has direct access
to the Board's Audit Committee. To ensure visibility and accountability, the
CECO presents a comprehensive annual review of the ECO's activities to
the Board's Audit Committee and leads a Compliance Committee comprised
of compliance risk -owners from various functions including Internal Audit,
Finance, Global Trade Compliance, Safety, Risk, Legal, HR, and Environmental.
2021 ESG REPORT 49
Human Rights and Conflict Minerals
HUMAN RIGHTS POLICY
We are committed to creating an ethically conscious business environment that respects and protects
international human rights in alignment with the UN Guiding Principles on Business and Human Rights and
compliance with local regulations for the areas in which we have sales, including the UK Modern Slavery
Act. We support advancement opportunities to all persons, where employment decisions are based on
merit, qualifications, and abilities. We prohibit discrimination on the basis of age, race, color, sex, sexual
orientation, gender identity and expression, or any other characteristic protected by applicable law. We view
any human rights violations as Code violations, and they are subject to the same level of disciplinary actions.
Concerns can be reported to LII directly or through our third -party service outlined in our Code of Business
Conduct.
Please see our Human Rights Policy, publicly available on our website, for further details.
CONFLICT MINERALS POLICY
Lennox International is committed to conducting business with respect for human rights and non -violence.
As part of this commitment, we take steps to ensure our sourcing of any tin, tungsten, tantalum, and gold
(collectively, "Conflict Minerals") is done responsibly and does not help finance armed conflict or related
human rights abuses in the Democratic Republic of the Congo (DRC) and surrounding countries of Angola,
Burundi, Central African Republic, Congo Republic, Rwanda, South Sudan, Tanzania, Uganda, and Zambia
(collectively with DRC, "Covered Countries"). We publicly disclose information related to the use of Conflict
Minerals originating in the Covered Countries to the U.S. Securities and Exchange Commission in accordance
with federal legislation, namely the Dodd -Frank Wall Street Reform and Consumer Protection Act of 2010.
LII does not source Conflict Minerals directly from smelters or refiners. We have established a Conflict
Minerals compliance program to help ensure suppliers conduct responsible conflict -free sourcing. We abide
by procedures under the Conflict -Free Smelter Initiative ("CFSI") and relevant principles of the internationally
recognized Organization for Economic Co-operation and Development ("OECD") framework. We require
suppliers to provide us with country of origin and smelter or refiner information (if applicable) for the
materials or components they supply. We compare the smelters or refiners used by our suppliers with
the CFSI list of compliant smelters to confirm responsible sourcing of Conflict Minerals. We also conduct
additional due diligence, including assessing records for completeness and consistency. If a supplier refuses
to adhere to this policy or non-compliance is detected, we reevaluate use of their materials in future projects.
For further details or to report concerns to LII directly or through our third -party service, please refer to our
Conflict Minerals Policy, publicly available on our website.
PHOTO SUBMITTED BY:
Ram Karthik I LITC -
Kochi, Kerala, India
Cybersecurity and Data Privacy
CYBERSECURITY AND DATA PRIVACY POLICY
In our increasingly digital world, we recognize cybersecurity and data privacy as
key aspects of our business. We have invested considerably in our cybersecurity
operations and infrastructure and conduct robust risk mitigation, assessments, and
planning for our global operations. Our IT infrastructure is aligned with the NIST
standard and has been assessed by third parties. We test all our infrastructure on
an ongoing basis.
Operationally, we employ three core teams: cybersecurity engineering, data
privacy, and a security operation center (SOC). These teams ensure new system
and infrastructure deployments are installed with data safety in mind. The
teams also guarantee that our controls are appropriate and sufficient to defend
against security breaches, and document and investigate any anomalies affecting
employees, suppliers, and customers. Our Chief Technology Officer, part of the
executive management team, is responsible for overseeing cybersecurity at LII
and reports to the Board twice a year on Ul's cybersecurity tactical responses and
strategic roadmap. The entire Board reviews significant cybersecurity risks and
works with the Audit Committee to address these issues. Several members of the
Board have specific expertise in managing cybersecurity risk.
We also have an internal, cross -functional cybersecurity team, our
Data Protection & Cybersecurity Steering Committee, that meets
on a quarterly basis. The committee ensures LII's data protection and
cybersecurity policies and procedures are effective.
LII's cybersecurity management consists of robust policies around
incident response and communication response plans, as well as
cybersecurity trainings for employees. Examples of key initiatives
that strengthen our cybersecurity and data privacy management
include:
Mandatory cybersecurity training for all employees, ongoing
awareness campaigns, simulated phishing attempts multiple times
a year to reinforce learnings, and consideration of cybersecurity
vigilance in employee performance evaluations.
External security specialists are engaged to assist in ongoing
monitoring for emerging threats.
Dedicated 24/7 team that monitors activities on LII's
infrastructure and systems, with a documented escalation plan
that reaches executives if incidents occur.
Rigorous breach simulations conducted twice a year, including
participation in the Department of Homeland Security's Cyber
Storm.
Events to train executive leadership on how to respond to
ransomware events.
Vulnerability scans and analysis, including simulated hacker
attacks, by a third party at least once a year, and internally on an
ongoing basis for our environment and the applications LII deploys
to the public domain.
Transition toward advanced analytics platforms that utilize
artificial intelligence and machine learning capabilities to baseline
normal behaviors and detect anomalies that could indicate
potential security threats.
2021 ESG REPORT 51
Public Policy
LII is at the forefront of driving responsible environmental policy. We innovate,
manufacture, and sell some of the most efficient products on the planet. We
continue to lead the global HVACR industry's transition to more environmentally
friendly refrigerants by advocating for faster transitions to lower GWP
refrigerants and supporting the broad use of reclaimed and recycled refrigerants.
We actively participate in and work with various industry associations,
sustainability-focused coalitions, environmental advocates, and other
stakeholders to influence and promote:
Greater energy conservation standards for HVACR products
Product certification, verification, and testing for product efficiency ratings
Phasedown of high global warming potential refrigerants
Air quality and emissions standards
Tax policy or other government incentives that encourage the purchase and
installation of energy -efficient and lower carbon footprint products
TRANSITION TO LOW GWP REFRIGERANTS
LII is committed to transitioning all Lennox residential and commercial products to
lower GWP refrigerants by 2025 in line with expected regulations. LII partnered
with the Natural Resources Defense Council to advocate for an accelerated
transition to lower GWP refrigerants in California. LII also supported passage of
the U.S. AIM Act pass in December of 2020, which facilitated an accelerated
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transition to lower GWP refrigerants nationally, and strongly supports the adoption of corresponding safety codes and standards at the state level. Aligned with the
Kigali Amendment, the AIM Act directs the EPA to phase down HFCs by 85% over the next 15 years. We continue to work with the EPA and other stakeholders to shape
the phasedown process and the types of refrigerants and equipment that will be impacted.
POLITICAL ACTIVITY
In compliance with federal regulations, LII does not contribute to political parties or candidates, including corporate funds or in -kind contributions, to national
party committees, campaigns, or candidates for federal office. LII also does not contribute to Section 527 organizations or independent expenditure political action
committee, also known as "Super PACS". Furthermore, we strictly prohibit political and charitable contributions that act as a means of bribery and corruption. With the
exception of the LII Government Affairs function, our employees are prohibited from engaging in political activity on behalf of the company or as a company employee,
and our Code of Business Conduct states our respect for the political process. LII belongs to trade associations who take part in activities to shape future legislation,
regulations, building codes and safety standards in the policy areas that affect our business. Monetary contributions for lobbying and trade associations are provided in
the Appendix of this report as we believe it is important to be transparent on our advocacy and political involvement.
2021 ESG REPORT 52
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About This Report
LII's ESG report references the Sustainability
Accounting Standards Board (SASB) and
the Task Force on Climate -related Financial
Disclosures (TCFD) reporting frameworks.
For any questions related to this report
please contact:
STEVE HARRISON
VP, Investor Relations
steve.harrison@lennoxintl.com
The reporting boundary for the quantitative metrics was drawn from available data covering the
2021 calendar year, whereas qualitative information includes the 2021 calendar year and partial
year data from the 2022 calendar year.
The environmental and social metrics provided in this report cover >75% of business operations
(whether in terms of employees covered or other operational measures) unless otherwise
specified. Greenhouse gas emissions are reported in accordance with the industry guidelines
as developed by the GHG Protocol. We must make assumptions when estimating Scope 3
greenhouse gas (GHG) emissions, product energy consumption and resulting GHG emissions, and
the like. Forward -looking content reflects approaches, goals, and priorities established by the LII
teams responsible for implementing them. These were set in consultation with internal, and in
some cases external, stakeholders, and consider leading corporate practices.
LII engaged Georgeson and HXE Partners to support the stakeholder engagement process, report
design, content development, quantitative data collection, and calculations. Our environmental
information included in this report is preliminary, unaudited, and subject to revision, apart
from our greenhouse gas emissions and energy usage statements, which are verified by Apex
Companies under limited assurance.
This report contains forward -looking statements within the meaning of the federal securities
laws. You can identify these statements by our use of the words "assumes," "believes,"
"estimates," "expects," "guidance," "intends," "plans," "projects" and similar expressions that
do not relate to historical matters. You should exercise caution in interpreting and relying on
forward -looking statements because they involve known and unknown risks, uncertainties, and
other factors which are, in some cases, beyond our control and could materially affect actual
results, performance, or achievements. We do not undertake a duty to update or revise any
forward -looking statement, whether as a result of new information, future events or otherwise.
The data and information herein are as of December 31, 2021 unless otherwise indicated.
Stakeholders are urged to closely consider the disclosure and risk factors in our most recent
Annual Report on form 10-K and in other reports on file with the Securities and Exchange
Commission, available at Lennox's website: www.lennoxinternational.com
2021 ESG REPORT 54
Sustainability Accounting
Standards Board (SASB) SASB
SASB standards enable businesses around the world to identify, manage and
communicate financially -material sustainability information to their investors.
SASB provides a complete set of 77 globally applicable industry -specific standards
that identify the minimal set of financially material sustainability topics and their
associated metrics for the typical company in an industry. The following table
references topics from the "Electrical & Electronic Equipment" and "Industrial
Machinery & Goods" industry standards. Upon reviewing both industry standards,
we included relevant topics to our strategy and c
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2021 ESG REPORT 55
SUSTAINABILITY ACCOUNTING STANDARDS BOARD (SASB)
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TOPIC SASB CODE
DESCRIPTION
RESPONSE
Employee Health & RT-IG-320a.1
(1) Total recordable incident rate (TRIR), (2)
(1) 0.50 total recordable frequency rate for employees
Safety (Industrial
fatality rate, and (3) near miss frequency
(2) 0 fatality rate
Machinery & Goods)
rate (NMFR)
(3) Not disclosed
Energy RT-EE-130a.1
(1) Total energy consumed, (2) percentage
(1) 287,740 MWh
Management
grid electricity, (3) percentage renewable
(2) 44%
(3) 6%
Hazardous Waste RT-EE-150a.1
Amount of hazardous waste generated,
In 2021, our operations generated 168 metric tons of hazardous waste, as defined by the authorities
Management
percentage recycled
that regulate each of our facilities. 92% of hazardous waste is recycled, while the remaining is properly
disposed.
RT-EE-150a.2
Number and aggregate quantity of
We had no reportable spills in 2021.
reportable spills, quantity recovered
Product Safety RT-EE-250a.1
Number of recalls issued, total units
We had no recalls issued in 2021.
recalled
RT-EE-250a.2
Total amount of monetary losses as a
$0
result of legal proceedings associated with
product safety
Materials RT-EE-440a.1
Description of the management risks
Our top three component purchases are compressors, motors, and controls, while steel, copper, and
Sourcing
associated with the use of critical
aluminum account for the bulk of our raw material purchases. We are doing an updated evaluation of
materials
critical suppliers by component and region to better identify ways to manage associated risks.
Communication, both internal and external, and continued planning around critical materials are
key tools we use to reduce our materials -related risk. We recognize that with a global supply chain,
climate -related risks may be present. As such, we mitigate our risk and build supply chain resiliency by
diversifying the geographic locations of our suppliers and regional sourcing teams. When sourcing new
suppliers in strategic categories, geographical and climate risk are included in our decision matrix.
Product Life RT-EE-410a.1
Percentage of products by revenue that
Data not available
Management
contain IEC 62474 declarable substances
RT-EE-410a.2
Percentage of eligible products, by
Residential: 51% Commercial: 65%
revenue, that meet ENERGY STAR®
Refrigeration: No ENERGY STAR@ eligible products. Our U.S. commercial refrigeration equipment
criteria
complies with the Department of Energy's Annual Walk-in Energy Factor (AWEF) efficiency ratings.
RT-EE-410a.3
Revenue from renewable energy -related
In 2021, 37% of LII's total product revenue is generated from products that are more energy -efficient
and energy efficiency -related products
than minimum standards for their respective product types in the U.S.
Continued on following page
2021 ESG REPORT 56
SUSTAINABILITY ACCOUNTING STANDARDS BOARD (SASB)
PB�IITV AC�O
G
s
S9"Nfl�S BAP o„
TOPIC SASB CODE DESCRIPTION RESPONSE
Business Ethics RT-EE-510a.1 Description of policies and practices for The LII Code of Business Conduct, which includes policies on preventing corruption, bribery, and anti -
prevention of (1) corruption and bribery competitive behavior is shaped by our core values. The Code guides the company on how to apply our
and (2) anti -competitive behavior core values in daily decision -making, in alignment with LII's expectations and legal requirements and
describes how employees can report violations or suspected violations of the Code, with an option to
remain anonymous through an ethics hotline or online form operated by a third party. The Code applies
to our Board and all employees, regardless of role or location.
We have a separate Business Partner Code of Conduct that includes standards for our partners to
operate in a manner consistent with our core values and the LII Code of Business Conduct. We conduct
due diligence requisite with the risk before engaging third parties to provide products and perform
services on behalf of the company. We are continuing to develop processes to evaluate and assess
the performance of our partners against our ethical standards. The LII Code of Business Conduct and
Business Partner Code of Conduct can be found on our website.
To educate employees on our Code and supporting policies, we regularly communicate and train
employees on a variety of topics, including anti-bribery/corruption, antitrust, conflicts of interest,
and lessons learned from real situations at LII. We consistently achieve more than 95% completion on
required training.
Also on an annual basis, executives, members of the Board of Directors, and other selected employees
are required to complete an Ethics & Compliance Questionnaire where they are asked to:
Report conduct inconsistent with our Code
Disclose potential conflicts of interest and
Confirm compliance with the Insider Trader Policy
Any issues raised in the questionnaire are addressed.
RT-EE-510a.2 Total amount of monetary losses as a $0
result of legal proceedings associated with
bribery or corruption
RT-EE-510a.3 Total amount of monetary losses as a $0
result of legal proceedings associated with
anti -competitive behavior regulations
Activity Metrics RT-EE-000.A Number of units produced by product Proprietary data
category (indoor climate control
electronics)
RT-EE-000.B Number of employees As of December 31, 2021, we employed approximately 11,000 people. Of these employees,
approximately 4,800 were salaried and 6,200 were hourly. The number of hourly workers varies in
order to match our labor needs during periods of fluctuating demand.
2021 ESG REPORT 57
TCFDI TASK FORCE ON
CLIMATE -RELATED
FINANCIAL
DISCLOSURES
Task Force on Climate -related
Financial Disclosures (TCFD)
TCFD is a market -driven initiative, set up to develop a set of
recommendations for voluntary and consistent climate -related financial
risk disclosures in mainstream filings. The work and recommendations of
the Task Force help firms understand what financial markets want from
disclosure in order to measure and respond to climate change risks and
encourage firms to align their disclosures with investors' needs.
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PHOTO SUBMITTED BY:
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2021 ESG REPORT 58
TASK FORCE -
TASK FORCE ON CLIMATE -RELATED FINANCIAL DISCLOSURES (TCFD) TC� FINANCIAL
CLIMATE-RELATED
DISCLOSURES
TOPIC RESPONSE
GOVE
NANCE
Board. oversight of LII's Board is responsible for oversight of our ESG strategy, including our strategy around climate -related issues. Our Board's Public Policy Committee specifically
climate -related risks and discusses our climate -related strategy, GHG emission reduction goals, and action plans around climate change semiannually, with the CEO in attendance.
opportunities
Our Enterprise Risk Management program identifies and addresses climate -related risks which are presented to and discussed with the Board twice a year, though
specific risks may be reviewed by the Board more frequently.
Management's role in
The full Board has general oversight over climate topics, though Public Policy
assessing and managing
Committee has the most direct/formal oversight.
climate -related risks and
opportunities
Our CEO sets our ESG objectives, including those related to climate, and is
actively engaged in managing LII's approach to climate change. Our CEO is the
ultimate decision -maker regarding reporting of GHG metrics and objectives,
as well as annual funding of capital set aside to address GHG emissions
reductions. The responsibility to set and execute on goals that support these
objectives is delegated to our Executive Staff, which comprises of the senior
executives responsible for all our major business segments and corporate
functions. Our CEO and Executive Staff have ESG embedded into their
performance goals.
To better understand our climate -related risks, this year we have begun climate
risk training for our executive leadership to pinpoint our greatest opportunities.
In 2021, to deliver our ESG strategy, we established our Global ESG Council
(ESGC) to provide a structure for enterprise -wide ESG management and
streamline engagement across diverse business and corporate functions. The
ESGC is comprised of senior leaders across our business, corporate functions,
and regions, and is currently chaired by our Vice President, Deputy General
Counsel and Chief Sustainability, Ethics & Compliance Officer. Members of
the ESGC brief the CEO and the Executive Staff on a regular basis regarding
our climate goals and progress. The Board is briefed semi-annually on ESG
progress.
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Audit Committee Board Governance
Committee
Compensation and Human
Public Policy Committee
Resources Committee
CEO AND EXECUTIVE STAFF
IV
GLOBAL ESG COUNCIL
Continued on following page
2021 ESG REPORT 59
TASK FORCE ON CLIMATE -RELATED FINANCIAL DISCLOSURES (TCFD)
TOPIC RESPONSE
TC FDITASK FORCE -
FINANCIAL
DISCLOSURES CLIMATE -RELATED
Short-, medium-, and long- Our business and financial planning horizons are based on quarterly, annual, and three-year increments, and consider climate -related risks. Our Enterprise Risk
term climate -related risks Management process, which incorporates these risks, is described below under "Risk Management."
SHORT-TERM W YEAR)
Physical Risks (Acute): As climate change advances, severe weather events may increase. The ability to plan for and mitigate the effects of severe weather
events is important for our operations and key suppliers. Our key suppliers could experience a disruption in production if impacted by a severe weather event.
We have developed robust business continuity planning processes and dual sourcing projects to build supply chain resiliency in the face of severe weather
events. To identify potential exposures, we digitally map (geographic information system) all our key suppliers to pinpoint their locations relative to weather and
other natural catastrophe hazard zones. We do this to improve our awareness of assets subject to acute hazards, including flooding, earthquakes, windstorms,
extratropical storms, volcanos, tsunamis, tropical cyclones, hail, tornados, lightning, storm surges and coastal flooding. In addition to identifying assets exposed
to risks, we also conduct live tracking of significant weather events and distribute event notices to key stakeholders. By identifying potential storms early, our
stakeholders are able to take action to reduce risks to employees and better protect our assets.
MEDIUM -TERM (1-5 YEARS)
Transition Risks (Regulatory and Market -Related): We are subject to extensive and changing federal, state, and local laws and regulations designed to protect
the environment. These laws and regulations could impose liability for remediation costs and civil or criminal penalties in cases of non-compliance. Compliance
with environmental laws increases our costs of doing business.
As part of the climate scenario analysis conducted in 2021, we evaluated the potential risks and opportunities a range of possible climate futures may have on our
business. In particular, we identified potential risks of aggressive policies that could force faster transitions away from HFC refrigerant, higher product efficiency
standards, and movement away from fossil fuel or gas -powered heating equipment. Although these laws are subject to frequent changes, we have calculated
initial estimates of the financial impact noncompliance with these regulations would have on our business. Please see our CDP responses for further details.
Changes in environmental and energy efficiency standards and regulations, such as the LIN Montreal Protocol's Kigali Amendment to phase down the use of
HFCs, may 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. Our inability or delay in developing or marketing products that match customer demand and that meet applicable efficiency and environmental
standards may negatively impact our results. The demand for our products and services could also be affected by the size and availability of tax incentives for
purchasers of our products and services. Our future success depends on our continued investment in research and new product development as well as our ability
to commercialize new HVACR technological advances in domestic and global markets. If we are unable to continue to timely and successfully develop and market
new products, achieve technological advances or extend our business model and technological advances into international markets, in response to many factors,
including climate change, our business and results of operations could be adversely impacted.
LONG-TERM (5-15 YEARS)
Physical Risks (Chronic): Longer -term shifts in climate patterns (e.g., sustained higher temperatures) that may cause sea levels to rise or chronic heat waves
are understood to be a great challenge for the world but are not considered relevant in our current Enterprise Risk Management processes since the nature of our
manufacturing and distribution processes can adapt to changing chronic conditions. Should we identify risk associated with chronic physical changes in the future,
we will integrate them into our Enterprise Risk Management system. Transition Risks (Reputation): There are potential negative impacts associated with various
stakeholder perceptions of our response to climate change. Energy efficiency and refrigerants are key components of products across our business units. If we are
unable to continue to timely and successfully develop and market new products, achieve technological advances or extend our business model and technological
advances into international markets, in response to many factors, including climate change, the reputation and results of operations could be adversely impacted.
Continued on following page
2021 ESG REPORT 60
TASK FORCE -
TASK FORCE ON CLIMATE -RELATED FINANCIAL DISCLOSURES (TCFD) TC� FINANCIAL
CLIMATE-RELATED
DISCLOSURES
TOPIC RESPONSE
Impact of climate -related We recognize that the identified climate -related risks may have a significant impact on our business. Therefore, we are focused on addressing these risks by
risks on business, strategy, integrating climate considerations into our R&D, product development, and public policy strategies.
and financial planning
R&D: In 2021, we spent $76M on R&D to develop new products and services that are more efficient and sustainable, align with customer focuses, and comply
with new regulatory requirements. Thirty percent of the patent applications we filed over the last 10 years are tied to energy efficiency improvements. LII
continues to focus on maintaining leadership in energy -efficient climate control systems and using alternative refrigerants across our businesses.
We leverage improvements in product development cycle time and product data management systems to commercialize new products to market more rapidly.
Supported by sustainability-focused R&D efforts, LII is committed to transitioning all Lennox residential and commercial products to low GWP refrigerants by 2025
in line with expected regulations.
Product Development: We have taken a proactive approach toward addressing climate -related risks by developing efficient, market -leading solutions. From a
refrigerant perspective, we have substituted HFCs in some products with alternative refrigerant compounds that have low global warming potentials and do not
deplete the ozone. In developing new products, we strive to use more alternative refrigerants with lower global warming potential. Furthermore, we continue
to launch the most energy -efficient air conditioning units, furnaces, refrigeration, and heat pumps on the market. Our heat pumps in particular are designed to
perform better in colder climates than standard heat pumps, and have variable speed settings that are compatible with intermittent renewable energy sources,
including solar and wind. Additionally, the communication controls built into our products, as well as our smart thermostats, enable more precise operational
control to meet heat/cool load and ventilation requirements, allowing customers to use less energy than other non -communicating HVAC systems. Together,
continuing to develop efficient products both drives our strategy and enables us to reduce energy usage and corresponding emissions across our products' life
cycle.
Facility Operations: To reduce our operation's contribution to climate change, which indirectly aims to reduce future climate -related risks on our business, we
replaced ozone -depleting CFCs with HFCs. HFCs do not deplete the ozone and have a global warming potential lower than that of CFCs. However, they remain a
significant source of greenhouse gases. For this reason, we have implemented strict management controls to track our operational refrigerant losses.
Regulations and Public Policy: LII is at the forefront of driving responsible environmental policy. We innovate, produce and distribute some of the most efficient
products on the planet. We continue to lead the global HVACR industry's transition to more environmentally friendly refrigerants by advocating for faster
transitions to low GWP refrigerants and supporting the broad use of reclaimed and recycled refrigerants. We actively participate in and work with various industry
associations, sustainability focused coalitions and other stakeholders to promote, among others:
Energy efficiency standards for HVACR products
Product certification, verification, and testing for product efficiency ratings
Phaseout of high global warming potential refrigerants
Air quality and emissions standards
Tax policy or other government incentives that encourage the purchase and installation of energy -efficient products
Our businesses also monitor and conduct stress testing for regulatory risks, particularly as it relates to potential future regulations around increasing energy
efficiency and low GWP refrigerant regulatory requirements. We conduct analysis and testing on likely timeframes for and stringency of such regulations.
Continued on following page
2021 ESG REPORT 61
TASK FORCE -
TASK FORCE ON CLIMATE -RELATED FINANCIAL DISCLOSURES (TCFD) TC� FINANCIAL
CLIMATE-RELATED
DISCLOSURES
TOPIC RESPONSE
Resilience of strategy using Under the Science Based Targets Initiative (SBTi)'s well -below 2°C scenario, we have set near -term science -based emissions reduction targets.
2°C or lower scenarios
In 2021, we conducted a climate scenario analysis to evaluate the potential risks and opportunities across a range of possible climate futures. In this year's
scenario analysis, the impact and scope of various transition risks were evaluated against three scenarios: an ambitious net zero scenario (IEA NZE), a more
conservative stated policies scenarios (IEA STEPS), and a middle of the road announced pledges scenario (IEA APS).
We identified that LII has considerable opportunities to support a transition and adapt to the most aggressive IEA NZE scenario through our product lines and
clean product strategies, all the while meeting increasing demand for new energy -efficient heating and cooling equipment, including heat pumps. We also
identified potential risks of aggressive policies that could force faster transitions away from HFC refrigerant and towards higher product efficiency standards.
The results of our scenario analysis are facilitating further clean product strategy discussions and business -wide priorities with the goal to support LII's R&D
allocation decisions and marketing priorities. These decisions will be aimed to take advantage of expected shifts in the overall market demand and landscape. We
expect to continue these discussions and further advance subsequent scenario analyses in future years.
Process to identify and We view climate change as a driver that indirectly influences varying components of our top risks. For example, climate -driven risks to the regulatory landscape
assess climate -related risks are assessed as part of our overall assessment of regulatory risk in our ERM process. The ERM process consists of a comprehensive bottom -up approach: from risk
identification and response planning by operating management to risk assessments and monitoring by our executive team, and finally, reviews of top prioritized
risks and corresponding risk response plans by the Board. All risks are addressed with a plan to accept, mitigate/reduce, share/transfer, or avoid risks, and all Risk
Response Plans are encouraged to follow SMART guidelines —be Specific, Measurable, Aggressive, Relevant, and Time bound.
Top risks are identified, ranked, and risk -response plans are developed with business unit leadership teams monitoring progress and reporting to our CEO and
Executive Staff. Our Board reviews and monitors our top ten risks and corresponding mitigation plans. In this process, risks are placed in "impact/likelihood" and
"impact/significant" quadrants. Likelihood is scored on a 1-5 scale, from "least likely" to "almost certain," considering frequency, probability, and time horizon.
Significance is also scored on a 1-5 impact scale, with the following dollar amounts considered:
1. Insignificant: profit/cash flow impact less than $1 million
2. Minor: profit/cash flow impact $1-$5 million
3. Moderate: profit/cash flow impact $5-$25 million
4. Major: profit/cash flow impact $25-$100 million
5. Catastrophic: profit/cash flow impact more than $100 million
Factors for scoring potential impacts of the risk include, but are not limited to, financial, operational, brand, and health and safety impact. Climate -related risks
and considerations may also influence the risk's level of impact. Combined, the highest quadrant of concern (i.e., substantive financial or strategic impact) is any
issue with impact and likelihood ratings of 3 or higher and a likelihood rating of 3 or higher.
Separate from the ERM, we have developed comprehensive LII facility risk profiles to determine the probability and potential severity of climate -related risks -
including coastal erosion, extreme heat, floods, hailstorms, severe winters and thunderstorms- on each of our facilities. For each facility we quantified the
potential financial impact of each climate -related risk and identified possible risk improvements for the most impactful risks across our facilities.
Continued on following page
2021 ESG REPORT 62
TASK FORCE ON CLIMATE -RELATED FINANCIAL DISCLOSURES (TCFD)
TOPIC
RESPONSE
TC FDITASK FORCE -
FINANCIAL
DISCLOSURES CLIMATE -RELATED
Process to manage climate- Overall, we manage and reduce our operational and reputational risks related to climate change through sound environmental and business management. Our
related risks facilities vary in function, geography, size, and surrounding natural environments, which gives rise to varying exposure levels to severe weather events, different
regulatory requirements, and different levels of environmental quality. Although our facilities have their own operating plans depending on their location, all
function under a ERM process which provides an effective foundation for environmental stewardship.
We have specific processes that help us manage our short-, medium-, and long-term climate -related risks:
SHORT-TERM W YEAR)
We have a robust business continuity planning (BCP) process, with oversight from our Risk Management team, to manage acute, physical climate risks. The
process includes educating stakeholders and facilitation of BCP scenario testing. Three operational business segment champions and site -specific BCP team
leaders ensure that team members are trained and BCP documents are updated and housed within the BCP SharePoint system. Each manufacturing facility has
five to 15 employees at manufacturing sites (based on size and complexity) who participate in training, documentation, and testing. We believe this process builds
site specific resiliency in the face of potential climate -related disasters.
We also transfer some of these physical climate risks to insurers. We purchase property insurance covering replacement costs for damage to our facilities, business
interruption loss resulting from physical damage, and more limited contingent business interruption loss from suppliers disrupted by a physical damage loss.
MEDIUM -TERM (1-5 YEARS)
To mitigate our medium -term climate -related transition risks around the regulatory sphere, LII leverages our leadership position in the HVACR industry to actively
participate in the development and implementation of climate -related policies that increase energy efficiency and reduce emissions. We work through various industry
associations and coalitions to shape future climate -related legislation, regulations, building codes and safety standards in the policy areas that affect our business.
LONG-TERM (5-15 YEARS)
A vital way we are addressing long-term climate -related transition risks to our reputation is by increasing the quality and quantity of our disclosure around our
sustainability commitments and approach to managing material ESG issues. Our Enterprise Risk Management system is regularly reviewed and adapted to meet
the needs of our changing risk landscape, in which climate change is expected to assume a larger part. We believe we are well positioned to manage climate
change issues both in our operations and in product development with the ultimate result being that our reputation for innovative and responsible HVAC solutions
should remain intact.
Further actions we take to manage climate -related risks include:
Setting environmental performance objectives and monitoring our progress
Complying with applicable environmental laws and regulatory requirements globally
Providing strategic training and guidance to our environmental and compliance professionals to help them stay informed on environmental issues and best
practices that could impact our business
Publicly disclosing environmental performance through reporting frameworks such as the Sustainability Accounting Standards Board (SASE) and CDP, in
addition to the TCFD. The reporting process helps us manage and measure our progress as well as engage with our internal and external stakeholders on
climate -related issues
Integration of risk Although climate -related risks are already indirectly incorporated into our ERM, described under "Process to identify and assess climate -related risks,- we are
processes into overall risk working on formally incorporating climate -related risks. This year, we are providing education on climate and human capital risks as they relate to our business.
management These ERM surveys are shared with operating management during the risk identification process. Our ERM results and progress are presented to the full Board
twice a year, though specific risks may be reviewed by the Board more frequently.
Continued on following page
2021 ESG REPORT 63
TASK FORCE ON CLIMATE -RELATED FINANCIAL DISCLOSURES (TCFD)
TC FDITASK FORCE -
FINANCIAL
D SCLOSURES CLIMATE -RELATED
TOPIC RESPONSE
Metrics used to assess We disclose our GHG emissions and emission intensities as part of this TCFD Index. In addition, we track and monitor a number of metrics around our
climate -related risks environmental performance to further help us assess our climate -related risks. These metrics include:
Energy usage related to our direct operations
Refrigerant loss from our manufacturing facilities
• Energy efficiency ratings of our products, such as SEER (Seasonal Energy Efficiency Ratio)
• Percentage of our product portfolio, by revenue, represented by energy -efficient products
Water usage related to our direct operations
Scope 1, 2, and 3 emissions Our Scope 1, 2, and 3 emissions cover over 95% of our operational facilities and track the following GHGs: CO2, N20, CH4, HFCs, HCFCs. The vast majority of our
total emissions comes from our Scope 3 emissions, particularly during our products' operational lifecycles.
All 2021 Scope 1, 2, and 3 emissions have been verified by a third party, Apex Companies. Please see the data assurance letter from Apex Companies in this
section of the report in accordance with ISO 14064-3 standards.
We used the following standards, protocols, and data collection methods for
each source driving our overall emissions calculation methodology:
Emission (mTCo2e) 2019 2020 2021
Scope 1
Scope 1 95,900 83,100 116,700
D AIRS - CH4, N20, Refrigerant
US EPA Climate Leaders: Direct Emissions from Mobile Combustion Sources -
Scope 2 (Location -Based) 64,900 56,400 51,400
Propane, Propylene
» US EPA Climate Leaders: Direct Emissions from Stationary Combustion -
Scope 2 (Market -Based) 53,600 46,000 45,600
Gasoline, Diesel, Ethanol GHG Protocol - Natural Gas (energy & volume)
Scope 3 90,228,300 81,421,800 100,267,900
Scope 2»
US EPA eGRID - USA
Total Scope 1+2+3 Emissions
» Canadian Industry Partnership for Energy Conservation - Canada
90,377,800 81,550,900 100,430,200
(Market -Based)
International Energy Agency: CO2 Emissions from Fuel Combustion (CO2,
N20, CH4) - France, Germany, India, Mexico, Spain
Scope 3
Categories: Purchased good and services, Capital goods, Fuel -and -energy -
related activities, Upstream transportation and distribution, Waste generated in
operations, Business travel, Employee commuting, Downstream transportation
and distribution, Use of sold products, End -of -life treatment for sold products
Targets used to manage We have set science -based emissions reduction targets approved by the Science
Based Targets Initiative (SBTi). We have committed to reducing absolute Scope
climate -related risks and 1 and 2 greenhouse gas (GHG) emissions by 37.5% and Scope 3 emissions by
30% per product sold by 2034 from a 2019 base year. These targets were approved
opportunities by the Science Based Targets Initiative (SBTi) in December of 2021 against the SBTi's Criteria v4.2. The two targets we set for LII were assessed against SBTi's
qualitative and quantitative criteria and validated in accordance with the SBTi validation protocol. In 2021, we saw an 8% increase in our absolute Scope 1 and
2 market -based emissions since 2019 due to increases in production. We are
working towards driving reductions through our GHG Emissions Management plan,
described earlier in our report.
2021 ESG REPORT 64
2022 Equal
Employment
Opportunity
(EEO-1)
Report'
Native
American
Hispanic or Black or African
Hawaiian or
Indian or
Two or More
Job Categories
White
Latino
American
Pacific Islander
Asian Alaskan Native
Races
Executive / Sr Officials & Mgrs
32
3
1
0
5
0
0
First / Mid Officials & Mgrs
519
87
42
2
54
2
6
Professionals
373
49
58
2
137
4
11
Technicians
199
20
32
0
6
1
3
Sales Workers
264
23
12
0
3
0
1
Administrative Support
220
62
73
0
5
1
13
Craft Workers
433
174
172
1
19
5
23
Operatives
785
143
1,089
3
26
10
19
All Others'
15
0
8
0
0
0
0
Total Job Categories By Race
2,840
561
1,487
8
255
23
76
Executive / Sr Officials & Mgrs
9
1
0
0
0
0
1
First / Mid Officials & Mgrs
155
19
21
1
17
1
2
Professionals
182
36
63
0
73
0
8
Technicians
13
0
5
0
0
0
1
Sales Workers
79
9
9
1
2
0
2
Administrative Support
105
36
86
1
7
2
4
Craft Workers
19
4
71
0
0
0
1
Operatives
257
105
1,142
2
22
5
8
All Others'
3
1
8
0
0
0
0
ETotai Job Categories By Race
277
5
121
8
27
1 U.S. employees only as of 12/31/2021.
2 All other category includes Laborers & Helpers, and Service Workers.
OVERALL TOTALS
52
Executive/Sr Officials
& Managers
928
First/Mid Officials
& Managers
996
Professionals
280
Technicians
405
Sales Workers
615
Administrative Support
922
Craft Workers
3,616
Operatives
35
All Others'
7,849
Total
2021 ESG REPORT 65
2021 Lll Political Contributions
Lobbying, interest representation or similar
Local, regional or national political campaigns / organizations / candidates
Trade associations or tax-exempt groups (e.g., think tanks)
Other (e.g., spending related to ballot measures or referendums)
CY 2018
CY 2019
CY 2020
CY 2021
$460,000
$390,000
$280,000
$320,000
$0
$0
$0
$0
$561,511
$585,823
$576,616
$550,458
$0
$0
$0
$0
2021 ESG REPORT 66
VERIFICATION OPINION DECLARATION
GREENHOUSE GAS EMISSIONS
To: The Stakeholders of Lennox International, Inc.
Apex Companies, LLC (Apex) was engaged to conduct an independent verification of the greenhouse gas (GHG)
emissions reported by Lennox International, Inc. (Lennox) for the period stated below. This verification opinion
declaration applies to the related information included within the scope of work described below.
The determination of the GHG emissions is the sole responsibility of Lennox. Lennox is responsible for the
preparation and fair presentation of the GHG statement in accordance with the criteria. Apex's sole responsibility was
to provide independent verification on the accuracy of the GHG emissions reported, and on the underlying systems
and processes used to collect, analyze and review the information. Apex is responsible for expressing an opinion on
the GHG statement based on the verification. Verification activities applied in a limited level of assurance verification
are less extensive in nature, timing and extent than in a reasonable level of assurance verification.
Boundaries of the reporting company GHG emissions covered by the verification:
• Operational Control
• Worldwide
Types of GHGs: CO2, N20, CH4, HFCs, HCFCs, Kyoto and Montreal Protocol
GHG Emissions Statement:
• Scope 1: 116,668 metric tons of CO2 equivalent
• Scope 2 (Location -Based): 51,406 metric tons Of CO2 equivalent
• Scope 2 (Market -Based): 45,572 metric tons of CO2 equivalent
• Scope 3:
Purchased Goods & Services: 926,579 metric tons of CO2 equivalent
Capital Goods: 35,023 metric tons of CO2 equivalent
Fuel- and Energy -Related Activities: 18,501 metric tons of CO2 equivalent
Upstream Transportation and Distribution: 41,338 metric tons of CO2 equivalent
Waste Generated in Operations: 10,432 metric tons Of CO2 equivalent
Business Travel: 2,467 metric tons of CO2 equivalent
Employee Commuting: 22,027 metric tons of CO2 equivalent
Downstream Transportation and Distribution: 57,766 metric tons of CO2 equivalent
Use of Sold Products: 96,940,307 metric tons of CO2 equivalent
End -of -Life Treatment of Sold Products: 2,213,523 metric tons Of CO2 equivalent
Energy Use:
• Direct: 514,073 GJ
• Indirect: 521,792 GJ
WATER RESOURCES • ENVIRONMENTAL SERVICES • INDUSTRIAL HYGIENE • SAFETY • CLIMATE CHANGE
Apex Companies, LLC • (800) 733-2739 • www.apexcos.com
AV%%
APEX Page 2
Data and information supporting the Scope 1 and 2 GHG emissions assertion were in some cases estimated and, in
some cases, historical in nature. Scope 3 emissions were in some cases based on estimates derived using the
Comprehensive Environmental Data Archive (CEDA) U.S. version 6, an environmentally extended input-output
(EEIO) database.
Period covered by GHG emissions verification:
• January 1, 2021 to December 31, 2021
Criteria against which verification conducted:
• World Resources Institute (WRI)/World Business Council for Sustainable Development (WBCSD)
Greenhouse Gas (GHG) Protocol Corporate Accounting and Reporting Standard (Scope 1 and 2)
WRI/WBCSD Greenhouse Gas Protocol Corporate Value Chain (Scope 3) Accounting and Reporting
Standard (Scope 3)
Reference Standard:
ISO 14064-3 (2019-04) Second Edition: Greenhouse gases -- Part 3: Specification with guidance for the
verification and validation of greenhouse gas statements
Level of Assurance and Qualifications:
• Limited
This verification used a materiality threshold of ±5% for aggregate errors in sampled data for each of the
above indicators
GHG Verification Methodology:
Evidence -gathering procedures included but were not limited to:
• Interviews with relevant personnel of Lennox and their consultant;
• Review of documentary evidence produced by Lennox;
• Review of Lennox data and information systems and methodology for collection, aggregation, analysis and
review of information used to determine GHG emissions; and
• Audit of sample of data used by Lennox to determine GHG emissions.
Verification Opinion:
Based on the process and procedures conducted, there is no evidence that the GHG emissions statement shown
above:
• is not materially correct and is not a fair representation of the GHG emissions data and information; and
• has not been prepared in accordance with the WRI/WBCSD GHG Protocol Corporate Accounting and
Reporting Standard (Scope 1 and 2), and WRI/WBCSD Greenhouse Gas Protocol Corporate Value Chain
Accounting and Reporting Standard (Scope 3).
It is our opinion that Lennox has established appropriate systems for the collection, aggregation and analysis of
quantitative data for determination of these GHG emissions for the stated period and boundaries.
Statement of independence, impartiality and competence
Apex is an independent professional services company that specializes in Health, Safety, Social and Environmental
management services including assurance with over 30 years history in providing these services.
WATER RESOURCES • ENVIRONMENTAL SERVICES • INDUSTRIAL HYGIENE • SAFETY • CLIMATE CHANGE
Apex Companies, LLC • (800) 733-2739 • www.apexcos.com
1
Aff .
APEXPage 3
No member of the verification team has a business relationship with Lennox, its Directors or Managers beyond that
required of this assignment. We conducted this verification independently and to our knowledge there has been no
conflict of interest.
Apex has implemented a Code of Ethics across the business to maintain high ethical standards among staff in their
day-to-day business activities.
The verification team has extensive experience in conducting assurance over environmental, social, ethical and
health and safety information, systems and processes, and has over 20 years combined experience in this field and
an excellent understanding of Apex's standard methodology for the verification of greenhouse gas emissions data.
Attestation:
szm-0 4i 497"
Scott Johnston, Lead Verifier
Principal Consultant
Apex Companies, LLC
Doral, FL
July 14, 2022
Mary E. Armstrong-Friberg, Technical Reviewer
Sr. Project Manager
Apex Companies, LLC
Cleveland, OH
This verification declaration, including the opinion expressed herein, is provided to Lennox and is solely for the benefit of Lennox in
accordance with the terms of our agreement. We consent to the release of this statement by you to CDP in order to satisfy the terms
of CDP disclosure requirements but without accepting or assuming any responsibility or liability on our part to CDP or to any other
party who may have access to this statement.
WATER RESOURCES • ENVIRONMENTAL SERVICES • INDUSTRIAL HYGIENE • SAFETY • CLIMATE CHANGE
Apex Companies, LLC • (800) 733-2739 • www.apexcos.com
PFBoard-
P.U. Box 4U0, Austin, TQxaS 7$7B7
800.695.2919 • hids(m6uyboard.com • 6uyboard.com
VENDOR REQUEST TO SELF -REPORT BUYBOARD PURCHASES
The General Terms and Conditions require that all Purchase Orders generated by or under any Contract awarded under this
Proposal Invitation be processed through the BuyBoard and, except as expressly authorized in writing by the Cooperative
administrator, Vendors are not authorized to process Purchase Orders received directly from Cooperative members that
have not been processed through the BuyBoard or provided to the Cooperative. In accordance with this provision, Vendor
may request authorization of the Cooperative administrator to self -report Cooperative member purchases if awarded a
Contract under this Proposal Invitation. By making such a request, Vendor acknowledges and agrees that self -reporting is
specifically subject to and conditioned upon (1) Vendor's agreement to the Additional Terms and Conditions for BuyBoard
Self -Reporting which are included in this Proposal Invitation and incorporated herein for all purposes and (2) approval of
this request in writing by the Cooperative administrator.
Note; This form is NOT required as part of your proposal. You should sign and return this form ONL Y if you
wish to request authorization to self -report BuyBoard purchases, Any request to self -report will not be effective,
and Vendor shall not be authorized to self -report BuyBoard member purchases, unless and until (1) Vendor is awarded a
Contract under this Proposal Invitation, and (2) the request has been approved in writing by the Cooperative administrator.
By my signature below, I hereby request authorization from the Cooperative administrator to self -report
BuyBoard purchases if my company is awarded a Contract. I certify that lam authorized by the above -
named Vendor to approve this form, and I have received and read the Additional Terms and Conditions for
BuyBoard Self -Reporting included in this Proposal Invitation and do hereby approve and agree to such terms and
conditions on behalf of Vendor,
NAME OF VENDOR:
Signature of Vendor Authorized Representative
Printed Name:
Title:
Date:
(For Cooperative Administrator Use Only)
Approved by BuyBoard Administrator:
Effective/Start Date for Self -Reporting:
Page 42 of 76
PROPOSAL FORMS CONST. v.05.04.2023
Board® Pa. Box 400, Aust]!l, Texas 78767
500.695.2919 • hldsg6uyboard.com - 6uyboard.com
PROPOSAL SPECIFICATION SUMMARY
The categories and items specified for this Proposal Invitation are summarized below. For full Proposal
Specifications, you must review and complete the Proposal Specification information in the electronic proposal
submission system in accordance with the Instructions to Proposers (or, if submitting a hard copy Proposal, timely
request and complete the Proposal Specification Form in accordance with the Instructions to Proposers).
PROPOSAL NOTE Z; Vendors shall submit catalog (s)/pricel ist(s) with their Proposal response or the Proposal will not be
considered. Vendors shall submit catalog (s)/pricel ist(s) with the Proposal in a readily available and readable electronic format,
with Excel or searchable PDF preferred. No paper catalogs or manufacturer/ vendor websites will be accepted.
PROPOSAL NOTE2; A Vendor proposing on Section I: HVAC EaUbment, Products, and Supplies; Specification Lines 1-3 shall
be authorized by the manufacturer to sell, install, and service the brand(s) of product(s) proposed. Proposer's responding to this
proposal invitation shall submit an approval letter from each manufacturer for each product line proposed. Manufacturer
authorization letters must include the regions in which product may be sold. Manufacturers responding directly to this proposal
invitation, in lieu of an authorization letter, shall submit a written explanation that the company is the manufacturer of the product
line(s) proposed.
PROPOSAL NOTE3: Vendor's responding to this Proposal Invitation for installation and repair services shall submit copy of their
license from the Texas Department of License and Regulations. If a proposer will serve outside the State of Texas, a copy of
Proposer's license from the appropriate licensing agency for the state(s) the vendor proposes shall be provided. Vendors that
assert they are not required to maintain such a license for the proposed installation and repair services shall submit a written
explanation supporting their assertion.
Section I: HVAC Eauipment, Products, and Supplies
1. Discount (%) off catalog/pricelist for HVAC Equipment (all types - rooftop units, split systems, chillers, compressors,
cooling towers, heat pumps, furnaces, unit heaters, duct furnaces, and other related items).
2. Discount (%) off catalog/pricelist for HVAC Controls, Software, and Monitoring Systems (all types).
3. Discount (%) off catalog/pricelist for HVAC Air Handling Products (all types - coils, fans, and other related items).
4. Discount (%) off catalog/pricelist for HVAC Supplies (all types).
5. Discount (%) off catalog/pricelist for HVAC Filters (all types).
6. Discount (%) off catalog/pricelist for HVAC Indoor Air Quality Products (all types).
7. Discount (%) off catalog/pricelist for HVAC Repair Parts (all types).
8. Discount (%) off catalog/pricelist for HVAC Refrigerants (all types).
9. Discount (%) off catalog/pricelist for HVAC Refrigerant Recovery Equipment (all types).
10. Discount (%) off catalog/pricelist for UVC Emitters/Lamps (used to incorporate downstream of all cooling coils and
above all drain pans to control airborne and surface microbial growth and transfer. Fixtures and lamps must be
manufactured for this purpose and safety interlocks/features shall be provided to limit hazard to operating staff).
11. Discount (%) off catalog/pricelist for Insulation Products for HVAC Equipment.
12. Discount (%) off catalog/pricelist for HVAC Maintenance Agreements.
Section II: Installation and Repair Service
13. Standard Hourly Labor Rate for Installation/Repair Service of HVAC Equipment and Products, not to exceed
standard hourly labor rate for Installation/Repair Service of HVAC Equipment and Products.
14. Non -Standard Hourly Labor Rate for Installation/Repair Service of HVAC Equipment and Products, not to
exceed non-standard hourly labor rate for Installation/Repair Service of HVAC Equipment and Products.
15. Hourly Labor Rate for Installation of HVAC Filter Change Out Service (including labor, filters, and
removal/disposal of product), not to exceed hourly labor rate for Installation of HVAC Filter Products.
16. Coefficient for Standard Hours of Installation/Repair Service of HVAC Equipment and Products - RSMeans
Cost Data from the Total INCL 0&P column (most current edition).
17. Coefficient for Non -Standard Hours for Installation/Repair Service of HVAC Equipment and Products -
RSMeans Cost Data from the Total INCL O&P column (most current edition).
Page 43 of 76
PROPOSAL FORMS CONST. v.05.04.2023
P.O. Sex 400, Aust]n, Texas 78767
800.695.2919 - bids(u:buybuard.com - buyboard.com
■
REQUIRED FORMS CHECKLIST
(Please check (V) the following)
❑ Reviewed/Completed: Proposer's Acceptance and Agreement
PROPOSAL FORMS PART 1: COMPLIANCE FORMS
Reviewed/Completed: Proposal Acknowledgements
Reviewed/Completed: Felony Conviction Disclosure
Reviewed/Completed: Resident/Nonresident Certification
Reviewed/Completed: Debarment Certification
Reviewed/Completed: Vendor Employment Certification
Reviewed/Completed: No Boycott Verification
Reviewed/Completed: No Excluded Nation or Foreign Terrorist Organization Certification
Reviewed/Completed: Historically Underutilized Business Certification
Reviewed/Completed: Acknowledgement of BuyBoard Technical Requirements
Reviewed/Completed: Construction -Related Goods and Services Affirmation
Reviewed/Completed: Deviation and Compliance
Reviewed/Completed: Vendor Consent for Name Brand Use
Reviewed/Completed: Confidential/Proprietary Information
Reviewed/Completed: EDGAR Vendor Certification
Reviewed/Completed: Compliance Forms Signature Page
PROPOSAL FORMS PART 2: VENDOR INFORMATION FORMS
Reviewed/Completed: Vendor Business Name
Reviewed/Completed: Vendor Contact Information (complete in electronicproposa/submissionsystem)
Reviewed/Completed: Federal and State/Purchasing Cooperative Experience
Reviewed/Completed: Governmental References
Reviewed/Completed: Company Profile
Reviewed/Completed: Texas Regional Service Designation (complete in electronicproposa/submissionsystem)
Reviewed/Completed: State Service Designation (complete in electronicproposa/submissionsystem)
Reviewed/Completed: National Purchasing Cooperative Vendor Award Agreement (vendors serving outside Texas only)
Reviewed/Completed: Local/Authorized Seller Listings
Reviewed/Completed: Manufacturer Dealer Designation
Reviewed/Completed: Proposal Invitation Questionnaire
Reviewed/Completed: Vendor Request to Self -Report BuyBoard Purchases (optional)
Reviewed/Completed: Proposal Specifications Discount(%) off Catalog/Price/istand/or other requiredpricing
information including Catalogs/Pricelists (or no bid response) must be submitted with the Proposal or the Proposal
will notbe considered, Manufacturer Authorization Letter(s), and License.
Page 44 of 76
PROPOSAL FORMS CONST. v.05.04.2023
Ll LENNOX Lennox International Inc. Mailing Address: Telephone: 972.497.5000
2140 Lake Park Boulevard P.O. Box 799900 Facsimile: 972.497.5349
I N T E R N A T I O N A L
Richardson, Texas 75080-2254 Dallas, Texas 75379-9900 Lennoxlnternational.com
License for HVAC Installation & Repair Services for Lennox is not applicable. We will not be
providing install services or repair.
ILI LENNOX
Lennox International Inc. Mailing Address:
2140 Lake Park Boulevard P.O. Box 799900
Richardson, Texas 75080-2254 Dallas, Texas 75379-9900
Christopher J Drury
Vice President, Sales Lennox Commercial
Phone 972.497.7896
June 30, 2023
Re: Manufacturers Authorization I BuyBoard RFP 720-23
BuyBoard Cooperative,
We hereby certify that Lennox Industries, Inc. is the manufacturer of commercial equipment and products proposed in
the Buy Board RFP 720-23. We are participating in the above -mentioned bidding process with our Lennox product line
and have the factory support regarding all product warranties.
Sincerely yours,
Christopher J. Drury
Vice President, Sales
Lennox North America Commercial
Lennox Industries, Inc Information
Address:
2022 McKenzie Dr. Ste. 120
Carrollton, TX 75006
Phone:
(281) 217-8844
Fax:
(713) 856-5242
Toll Free:
(800) 453-6669
Web Address:
www.lennoxcommercial.com
By submitting your response, you certify that you are authorized to represent and bind your company.
Christopher J. Drury chris.drury@lennoxind.com
Signature Email
Submitted at 7/7/2023 08:48:50 AM (CT)
Requested Attachments
18971-BuyBoard-(Lennox
BuyBoard Proposal Invitation No. 720-23, HVAC Equipment, Supplies, Industries Inc.) -Request for
and Installation Proposal (RFP) - Fully
Executed.pdf
REQUIRED -In PDF format, upload all proposal invitation documents available for download at vendor.buyboard.com
including any additional pages, as necessary. NOTICE: DO NOT complete proposal forms in internet browser. No data
will be stored. Download file to computer and complete proposal forms prior to submitting. (Please DO NOT password
protect uploaded files.)
Catalog/Pricelist
Lennox Catalog.xlsx
REQUIRED -In Excel or PDF format, upload catalog (s)/price list(s) in accordance with proposal invitation instructions.
Vendors shall submit catalog(s)/pricelist(s) with their Proposal response or Proposal will not be considered. No paper
catalogs or manufacturer/vendor websites will be accepted. File size must not exceed 250MB. (Please DO NOT
password protect uploaded files.)
Exceptions and/or Detailed Information Related to Discount % and/or No response
Hourly Labor Rate Proposed
In PDF format and if necessary, vendor shall attach detailed information regarding exceptions to pricing and/or
discount percentage and define the services that are proposed to be provided. NOTE: IF DETAILED INFORMATION IS
NOT SUBMITTED, PROPOSAL MAY NOT BE CONSIDERED. (Please DO NOT password protect uploaded files.)
Company Profile
Lennox Company Profile.doc
REQUIRED -Information on awarded Cooperative Contracts is available to Cooperative Members on the BuyBoard
website. If your company is awarded a Contract under this Proposal Invitation, please provide a brief company
description that you would like to have included with your company profile on the BuyBoard website. Submit your
company profile in a separate file, in Word format, with your Proposal. (Note: Vendor is solely responsible for any
content provided for inclusion on the BuyBoard website. The Cooperative reserves the right to exclude or remove any
content in its sole discretion, with or without prior notice, including but not limited to any content deemed by the
Cooperative to be inappropriate, irrelevant to the Contract, inaccurate, or misleading.)
Manufacturer Authorization Letter(s)
BuyBoard - Authorization Letter -
Lennox Industries Inc- 720-23.pdf
REQUIRED - Upload Manufacturer Authorization Letter(s) in PDF format. A Vendor proposing on Section I: HVAC
Equipment, Products, and Supplies; Specification Lines 1-3; shall be authorized by the manufacturer to sell, install,
and service the brand(s) of product(s) proposed. Proposer's responding to this proposal invitation shall submit an
approval letter from each manufacturer for each product line proposed. Manufacturer authorization letters must
include the regions in which product may be sold. Manufacturers responding directly to this proposal invitation, in lieu
of an authorization letter, shall submit a written explanation that the company is the manufacturer of the product line(s)
proposed.
Page 3 of 31 pages Vendor: Lennox Industries, Inc 720-23
License for HVAC Installation/Repair Services
License for HVAC Install & Repairs
(Not Applicable).pdf
Vendor's responding to this Proposal Invitation for installation and repair services shall submit copy of their license
from the Texas Department of License and Regulations. If a proposer will serve outside the State of Texas, a copy of
Proposer's license from the appropriate licensing agency for the state(s) the vendor proposes shall be provided.
Vendors that assert they are not required to maintain such a license for the proposed installation and repair services
shall submit a written explanation supporting their assertion.
IRS Form W-9 Request for Taxpayer Identification Number and 2023 W9 - Lennox Industries
Certification Inc.pdf
REQUIRED -In PDF format, upload W-9 form. (Please DO NOT password protect uploaded files.)
Response Attachments
2021 LII ESG Report.pdf
Environmental Sustainability Report
2023.07.01 Lennox Certificate of Insurance.pdf
Lennox Certificate of Insurance
Exhibit A- Lennox Commercial Shipment, Cancellation, and Return Policy.pdf
Lennox Commercial Shipment Policy (Confidential)
Lennox - Customer Service 2023.pdf
Lennox Customer Service
Lennox International 10-K for 2022.pdf
Lennox 10-K 2022
Lennox Marketing Strategy 2023.pdf
Lennox Marketing Strategy 2023
QUALITY Letter 2023-07-06.pdf
Lennox Quality
Bid Attributes
1 Federal Identification Number
Federal Identification Number
1420377110
2 1 HUB/No Israel Boycott Certification/No Excluded Nation or Foreign Terrorist Certification
HUB/No Israel Boycott Certification/No Excluded Nation or Foreign Terrorist Certification
Page 4 of 31 pages Vendor: Lennox Industries, Inc 720-23
3 No Israel Boycott Certification
A Texas governmental entity may not enter into a contract with a value of $100,000 or more that is to be paid wholly
or partly from public funds with a company (excluding a sole proprietorship) that has 10 or more full-time employees
for goods or services unless the contract contains a written verification from the company that it: (1) does not
boycott Israel; and (2) will not boycott Israel during the term of the contract. (TEX. GOV'T CODE Ch. 2270).
Accordingly, this certification form is included to the extent required by law.
"Boycott Israel" means refusing to deal with, terminating business activities with, or otherwise taking any action that
is intended to penalize, inflict economic harm on, or limit commercial relations specifically with Israel, or with a
person or entity doing business in Israel or in an Israeli -controlled territory, but does not include an action made for
ordinary business purposes. TEX. GOV'T CODE §808.001(1).
By signature on the Compliance Forms Signature Page, to the extent applicable, I certify and verify that Vendor
does not boycott Israel and will not boycott Israel during the term of any contract awarded under this Proposal
Invitation, that this certification is true, complete and accurate, and that I am authorized by my company to make this
certification.
Yes
4 No Excluded Nation or Foreign Terrorist Organization Certification
Chapter 2252 of the Texas Government Code provides that a Texas governmental entity may not enter into a
contract with a company engaged in active business operations with Sudan, Iran, or a foreign terrorist organization
— specifically, any company identified on a list prepared and maintained by the Texas Comptroller under Texas
Government Code §§806.051, 807.051, or 2252.153. (A company that the U.S. Government affirmatively declares
to be excluded from its federal sanctions regime relating to Sudan, Iran, or any federal sanctions regime relating to
a foreign terrorist organization is not subject to the contract prohibition.)
By signature on the Compliance Forms Signature Page, I certify and verify that Vendor is not on the Texas
Comptroller's list identified above; that this certification is true, complete and accurate; and that I am authorized by
my company to make this certification.
Yes I
5 MWBE/HUB Status Certification
A Proposer that has been certified as a Historically Underutilized Business (also known as a Minority/Women
Business Enterprise or "MWBE" and all referred to in this form as a "HUB") is encouraged to indicate its HUB
certification status when responding to this Proposal Invitation. The BuyBoard website will indicate HUB certifications
for awarded Vendors that properly indicate and document their HUB certification on this form.
certify that my company has been certified as a MWBE/HUB in the following categories: (Please check all that
apply)
6 Minority Owned Business
Minority Owned Business
❑ Minority Owned Business
7 Women Owned Business
Women Owned Business
❑ Women Owned Business
8 Service -Disabled Veteran Owned Business
Service -Disabled Veteran Owned Business (veteran defined by 38 U.S.C. §101(2), who has a service -connected
disability as defined by 38 U.S.C. § 101(16), and who has a disability rating of 20% or more as determined by the U.
S. Department of Veterans Affairs or Department of Defense)
❑ Service -Disabled Veteran Owned Business
Page 5 of 31 pages Vendor: Lennox Industries, Inc 720-23
9 Certification Number
Certification Number
No response
1 Name of Certifying Agency
U Certifying Agency
No response
1 Non-MWBE/HUB
1 My company has NOT been certified as a MWBE/HUB
❑ Non -HUB
L12
Vendor General Contact Information
Proposal/Contract General Contact Information
1 Vendor Proposal/Contract Contact Name
3 Vendor Proposal/Contract Contact Name
Ed Wright
1 Vendor Proposal/Contract Contact E-mail Address
4 Vendor Proposal/Contract Contact E-mail Address
ed.wright@lennoxintl.com
1 Vendor Proposal/Contract Mailing Address
5 Vendor Proposal/Contract Mailing Address
12140 Lake Park Blvd, Richardson, TX 75080-2254
1 Vendor Proposal/Contact Mailing Address - City
6 Vendor Proposal/Contact Mailing Address - City
Richardson
1 Vendor Proposal/Contact Mailing Address - State
7 Vendor Proposal/Contact Mailing Address - State (Abbreviate State Name)
ITX
1 Vendor Proposal/Contact Mailing Address - Zip Code
8 Vendor Proposal/Contact Mailing Address - Zip Code
175080
1 Vendor Proposal/Contact Phone Number
9 Vendor Proposal/Contact Phone Number (xxx-xxx-xxxx)
1 972-497-5000
2 Vendor Proposal/Contact Extension Number
U Vendor Proposal/Contact Extension Number
No response
Page 6 of 31 pages Vendor: Lennox Industries, Inc 720-23
2 Company Website
Company Website (www.xxxxx.com)
www.lennoxcommercial.com
2 Purchase Orders Contact Information
2 All Purchase Orders from Cooperative members will be available through the Internet. Vendors need Internet
access and at least one e-mail address so that notification of new orders can be sent to the Internet contact when a
new purchase order arrives. An information guide will be provided to Vendors to assist them with retrieving their
orders.
Please select options below for receipt of Purchase Orders and provide the requested information:
• I will use the internet to receive Purchase Orders at the following address
Yes I
2 Purchase Order E-mail Address
3 Purchase Order E-mail Address
southcentral.commercial@lennoxind.com
2 Purchase Order Contact Name
4 Purchase Order Contact Name
South Central Commercial
2 Purchase Order Contact Phone Number
5 Purchase Order Contact Phone Number (xxx-xxx-xx(x)
1 (800) 372-3283
2 Purchase Order Contact Extension Number
6 Purchase Order Contact Extension Number
No response
2 Alternate Purchase Order E-mail Address
7 Alternate Purchase Order E-mail Address
No response
2 Alternate Purchase Order Contact Name
8 Alternate Purchase Order Contact Name
No response
2 Alternate Purchase Order Contact Phone Number
9 Alternate Purchase Order Contact Phone Number (xxx-xxx-xxxx)
No response
3 Alternate Purchase Order Contact Extension Number
0 Alternate Purchase Order Contact Extension Number
No response
Page 7 of 31 pages Vendor: Lennox Industries, Inc 720-23
Purchase Orders Contact Information
3
1
All Purchase Orders from Cooperative members will be available through the Internet. Vendors need Internet
access and at least one e-mail address so that notification of new orders can be sent to the Internet contact when a
new purchase order arrives. An information guide will be provided to Vendors to assist them with retrieving their
orders.
Please select options below for receipt of Purchase Orders and provide the requested information:
• Purchase Orders may be received by the Designated Dealer(s) identified on my company's Dealer
Designation form as provided to the Cooperative administrator. I understand that my company shall remain
responsible for the Contract and the performance of all Designated Dealers under and in accordance with
the Contract.
Yes
3 I Request for Quotes (RFQ)
2 Cooperative members will send RFQs to you by e-mail. Please provide e-mail addresses for the receipt of RFQs:
3 Request for Quote (RFQ) E-mail Address
3 Request for Quote (RFQ) E-mail Address
southcentral.commercial@lennoxind.com
3 I Request for Quote (RFQ) Contact Name
4 Request for Quote (RFQ) Contact Name
South Central Commercial
3 I Request for Quote (RFQ) Contact Phone Number
5 Request for Quote (RFQ) Contact Phone Number (xxx-xxx-=oo
1 (800) 372-3283
3 I Request for Quote (RFQ) Contact Extension Number
6 Request for Quote (RFQ) Contact Extension Number
No response
3 I Alternate Request for Quote (RFQ) E-mail Address
7 Alternate Request for Quote (RFQ) E-mail Address
No response
3 Alternate Request for Quote (RFQ) Contact Name
8 Alternate Request for Quote (RFQ) Contact Name
No response
3 Alternate Request for Quote (RFQ) Contact Phone Number
9 Alternate Request for Quote (RFQ) Contact Phone Number (xxx-xxx-xxxx)
No response
4 Alternate Request for Quote (RFQ) Contact Extension Number
U Alternate Request for Quote (RFQ) Contact Extension Number
No response
Page 8 of 31 pages Vendor: Lennox Industries, Inc 720-23
4 Invoices
Your company will be billed monthly for the service fee due under a Contract awarded under this Proposal
Invitation. All invoices are available on the BuyBoard website and e-mail notifications will be sent when
they are ready to be retrieved.
4 Invoices
2 Please choose only one (1) of the following options for receipt of invoices and provide the requested
information:
(a) Service fee invoices and related communications should be provided directly to my company at:
or
(b) In lieu of my company, I request and authorize all service fee invoices to be provided directly to the following
billing agent:
If Vendor authorizes a billing agent to receive and process service fee invoices, in accordance with the General Terms and Conditions of the Contract,
Vendor specifically acknowledges and agrees that nothing in that designation shall relieve Vendor of its responsibilities and obligations under the
Contract including, but not limited to, payment of all service fees under any Contract awarded Vendor.
Service fee invoices and notices direct to company I
4 Invoice Company Name
3 Invoice Company Name
Lennox Industries, Inc.
4 Invoice Company Department Name
4 Invoice Company Department Name
Lennox Commercial
4 Invoice Contact Name
5 Invoice Contact Name
Ed Wright
4 Invoice Mailing Address
6 Invoice Mailing Address (P.O. Box or Street Address)
12140 Lake Park Blvd, Richardson, TX 75080-2254
4 Invoice Mailing Address - City
7 Invoice Mailing Address - City
Richardson
4 Invoice Mailing Address - State
8 Invoice Mailing Address - State (Abbreviate State Name)
I-rx
4 Invoice Mailing Address - Zip Code
9 Invoice Mailing Address (Zip Code)
175080
Page 9 of 31 pages Vendor: Lennox Industries, Inc 720-23
5 Invoice Contact Phone Number
U Invoice Contact Phone Number (xxx-xxx-xxxx)
1 972-497-5000
5 Invoice Contact Extension Number
Invoice Contact Extension Number
No response
5 Invoice Contact Fax Number
2 Invoice Contact Fax Number (xxx-xxx-xxxx)
No response
5 Invoice Contact E-mail Address
3 Invoice Contact E-mail
ed.wright@lennoxintl.com
5 Invoice Contact Alternate E-mail Address
4 Invoice Contact Alternate E-mail Address
No response
5 Billing Agent Company Name
5 Billing Agent Company Name
No response
5 Billing Agent Department Name
6 Billing Agent Department Name
No response
5 Billing Agent Contact Name
7 Billing Agent Contact Name
No response
5 Billing Agent Mailing Address
8 Billing Agent Mailing Address (P.O. Box or Street Address)
No response
5 Billing Agent Mailing Address - City
9 Billing Agent Mailing Address - City
No response
6 Billing Agent Mailing Address - State
U Billing Agent Mailing Address - State (Abbreviate State Name)
No response
6 Billing Agent Mailing Address - Zip Code
1 Billing Agent Mailing Address - Zip Code
No response
Pagel 0 of 31 pages Vendor: Lennox Industries, Inc 720-23
6 Billing Agent Contact Phone Number
2 Billing Agent Contact Phone Number (xxx-xxx-xxxx)
No response
6 Billing Agent Contact Extension Number
3 Billing Agent Contact Extension Number
No response
6 Billing Agent Fax Number
4 Billing Agent Fax Number
No response
6 Billing Agent Contact E-mail Address
5 Billing Agent Contact E-mail Address
No response
6 Billing Agent Alternative E-mail Address
6 Billing Agent Alternative E-mail Address
No response
6 Shipping Via
7 Common Carrier, Company Truck, Prepaid and Add to Invoice, or Other
Common Carrier
6 Payment Terms
8 Note: Vendor payment terms must comply with the BuyBoard General Terms and Conditions and the Texas Prompt
Payment Act (Texas Government Code Ch. 2251).
1 Please refer to the fully executed RFP with T&C's
6 Vendor's Internal/Assigned Reference/Quote Number
9 Vendor's Internal/Assigned Reference/Quote Number
No response
7 State or Attach Return Policy
U Note: Only return requirements and processes will be deemed part of Vendor's return policy. Any unrelated contract
terms, terms of sale, or other information not specifically related to return requirements and processes included in
Vendor's return policy shall not apply to any awarded Contract unless specifically included as a deviation in the
Deviation and Compliance Form and accepted by the Cooperative.
No response
7 Electronic Payments
1 Are electronic payments acceptable to your company?
Yes
7 Credit Card Payments
2 Are credit card payments acceptable to your company?
Yes I
Page 11 of 31 pages Vendor: Lennox Industries, Inc 720-23
7
3
Texas Regional Service Designation
Texas Regional Service Designation - Refer to Form in Proposal Invitation
The Cooperative (referred to as "Texas Cooperative" in this form and in the State Service Designation form) offers
vendors the opportunity to service its members throughout the entire State of Texas. If you do not plan to service all
Texas Cooperative members statewide, you must indicate the specific regions you will service on this form. If you
propose to serve different regions for different products or services included in your Proposal, you must complete
and submit a separate Texas Regional Service Designation form for each group of products and clearly indicate the
products or services to which the designation applies. By designating a region or regions, you are certifying that
you are authorized and willing to provide the proposed products and services in those regions. Designating
regions in which you are either unable or unwilling to provide the specified products and services shall be
grounds for either rejection of your Proposal or, if awarded, termination of your Contract. Additionally, if you
do not plan to service Texas Cooperative members (i.e., if you will service only states other than Texas), you must
so indicate on this form.
7 Company Name
4 Company Name
Lennox Industries, Inc.
7 Texas Regional Service Designation
5 Select only one of the following options. If you select "I will NOT serve all Regions of Texas", you must then
check the individual Regions you wish to serve.
I will serve all Regions of Texas
7 Region 1
6 Region 1 - Edinburg
❑ Region 1
7 Region 2
7 Region 2 - Corpus Christi
❑ Region 2
7 Region 3
8 Region 3 - Victoria
❑ Region 3
7 Region 4
9 Region 4 - Houston
❑ Region 4
8 Region 5
U Region 5 - Beaumont
❑ Region 5
8 Region 6
1 Region 6 - Huntsville
❑ Region 6
8 Region 7
2 Region 7 - Kilgore
❑ Region 7
Page 12 of 31 pages Vendor: Lennox Industries, Inc 720-23
8
Region 8
3
Region 8 - Mount Pleasant
❑ Region 8
8
Region 9
4
Region 9 - Wichita Falls
❑ Region 9
8
Region 10
5
Region 10 - Richardson
❑ Region 10
8
Region 11
6
Region 11 - Fort Worth
❑ Region 11
8
Region 12
7
Region 12 - Waco
❑ Region 12
8
Region 13
8
Region 13 - Austin
❑ Region 13
8
Region 14
9
Region 14 - Abilene
❑ Region 14
9
Region 15
0
Region 15 - San Angelo
❑ Region 15
9
Region 16
1
Region 16 - Amarillo
❑ Region 16
9
Region 17
2
Region 17 - Lubbock
❑ Region 17
9
Region 18
3
Region 18 - Midland
❑ Region 18
9
Region 19
4
Region 19 - El Paso
❑ Region 19
Page 13 of 31 pages Vendor: Lennox Industries, Inc 720-23
9 Region 20
5 Region 20 - San Antonio
❑ Region 20
9
6
State Service Designation
State Service Designation - Refer to Form in Proposal Invitation.
As set forth in the Proposal Invitation, it is the Cooperative's intent that other governmental entities in the United
States have the opportunity to purchase goods or services awarded under the Contract, subject to applicable state
law, through a piggy -back award or similar agreement through the National Purchasing Cooperative BuyBoard. If
you plan to service the entire United States or only specific states, you must complete this form accordingly. (Note:
If you plan to service Texas Cooperative members, be sure that you complete the Texas Regional Service
Designation form.) In addition to this form, to be considered for a piggy -back award by the National
Purchasing Cooperative, you must have an authorized representative sign the National Purchasing
Cooperative Vendor Award Agreement that follows this form.
If you serve different states for different products or services included in your Proposal, you must complete and
submit a separate State Service Designation form for each group of products and clearly indicate the products or
services to which the designation applies. By designating a state or states, you are certifying that you are
authorized and willing to provide the proposed products and services in those states. Designating states in which
you are either unable or unwilling to provide the specified products and services shall be grounds for either
rejection of your Proposal or, if awarded, termination of your Contract.
9 Company Name
7 Company Name
Lennox Industries, Inc.
9 State Service Designation
8 Select only one of the following options
the individual States you wish to serve.
I will serve all states in the United States
9 Alabama
9 Alabama
❑ Alabama
1 Alaska
6 Alaska
0
❑ Alaska
1 Arizona
Arizona
❑ Arizona
If you select "I will NOT serve all States", you must then check
1 Arkansas
2 Arkansas
❑ Arkansas
1 California
0 California (Public Contract Code 20118 & 20652)
3
❑ California
Page 14 of 31 pages Vendor: Lennox Industries, Inc 720-23
1 Colorado
4 Colorado
❑ Colorado
1 Connecticut
5 Connecticut
❑ Connecticut
1 Delaware
6 Delaware
❑ Delaware
1 District of Columbia
7 District of Columbia
❑ District of Columbia
1 Florida
8 Florida
❑ Florida
1 Georgia
9 Georgia
❑ Georgia
1 Hawaii
dHawaii
❑ Hawaii
1 Idaho
Idaho
❑ Idaho
1 Illinois
2 Illinois
❑ Illinois
1 Indiana
3 Indiana
❑ Indiana
1 Iowa
4 Iowa
❑ Iowa
1 Kansas
5 Kansas
❑ Kansas
Page 15 of 31 pages Vendor: Lennox Industries, Inc 720-23
1 Kentucky
6 Kentucky
❑ Kentucky
1 Louisiana
1 Louisiana
❑ Louisiana
1 Maine
8 Maine
❑ Maine
1 Maryland
9 Maryland
❑ Maryland
1 Massachusetts
UMassachusetts
❑ Massachusetts
1 Michigan
Michigan
❑ Michigan
1 Minnesota
2 Minnesota
❑ Minnesota
1 Mississippi
2 3 Mississippi
❑ Mississippi
1 Missouri
4 Missouri
❑ Missouri
1 Montana
5 Montana
❑ Montana
1 Nebraska
6 Nebraska
❑ Nebraska
1 Nevada
7 Nevada
❑ Nevada
Page 16 of 31 pages Vendor: Lennox Industries, Inc 720-23
1 New Hampshire
8 New Hampshire
❑ New Hampshire
1 New Jersey
9 New Jersey
❑ New Jersey
1 New Mexico
UNew Mexico
❑ New Mexico
1 New York
New York
❑ New York
1 North Carolina
2 North Carolina
❑ North Carolina
1 North Dakota
3 North Dakota
❑ North Dakota
1 Ohio
4 Ohio
❑ Ohio
1 Oklahoma
5 Oklahoma
❑ Oklahoma
1 Oregon
6 Oregon
❑ Oregon
1 Pennsylvania
7 Pennsylvania
❑ Pennsylvania
1 Rhode Island
8 Rhode Island
❑ Rhode Island
1 South Carolina
9 South Carolina
❑ South Carolina
Page 17 of 31 pages Vendor: Lennox Industries, Inc 720-23
1 South Dakota
4 South Dakota
❑ South Dakota
1 Tennessee
Tennessee
❑ Tennessee
1 Texas
4 Texas
❑ Texas
1 Utah
4 Utah
3
❑ Utah
1 Vermont
4 Vermont
❑ Vermont
1 Virginia
4rVirginia
❑ Virginia
1 Washington
44 Washington
❑ Washington
1 West Virginia
4 West Virginia
❑ West Virginia
1 Wisconsin
4 Wisconsin
❑ Wisconsin
1 Wyoming
4 9 Wyoming
❑ Wyoming
Bid Lines
Page 18 of 31 pages Vendor: Lennox Industries, Inc 720-23
Exhibit C - Conflict of Interest Questionnaire
CONFLICT OF INTEREST QUESTIONNAIRE
For vendor doing business with local governmental entity
FORM CIQ
This questionnaire reflects changes made to the law by H.B. 23, 84th Leg., Regular Session. OFFICE USE ONLY
This questionnaire is being filed in accordance with Chapter 176, Local Government Code, by a vendor who Date Received
has a business relationship as defined by Section 176.001(1-a) with a local governmental entity and the
vendor meets requirements under Section 176.006(a).
By law this questionnaire must be filed with the records administrator of the local governmental entity not later
than the 7th business day after the date the vendor becomes aware of facts that require the statement to be
filed. See Section 176.006(a-1), Local Government Code.
A vendor commits an offense if the vendor knowingly violates Section 176.006, Local Government Code. An
offense under this section is a misdemeanor.
jJ Name of vendor who has a business relationship with local governmental entity.
NA
J
❑ Check this box if you are filing an update to a previously filed questionnaire. (The law requires that you file an updated
completed questionnaire with the appropriate filing authority not later than the 7th business day after the date on which
you became aware that the originally filed questionnaire was incomplete or inaccurate.)
J Name of local government officer about whom the information is being disclosed.
NA
Name of Officer
J Describe each employment or other business relationship with the local government officer, or a family member of the
officer, as described by Section 176.003(a)(2)(A). Also describe any family relationship with the local government officer.
Complete subparts A and B for each employment or business relationship described. Attach additional pages to this Form
CIO as necessary.
NA
A. Is the local government officer or a family member of the officer receiving or likely to receive taxable income,
other than investment income, from the vendor?
Yes F-1 No
B. Is the vendor receiving or likely to receive taxable income, other than investment income, from or at the direction
of the local government officer or a family member of the officer AND the taxable income is not received from the
local governmental entity?
71 Yes F1 No
J Describe each employment or business relationship that the vendor named in Section 1 maintains with a corporation or
other business entity with respect to which the local government officer serves as an officer or director, or holds an
ownership interest of one percent or more.
NA
J
❑Check this box if the vendor has given the local government officer or a family member of the officer one or more gifts
as described in Section 176.003(a)(2)(B), excluding gifts described in Section 176.003(a-1).
J
CGt�<ilto,�Gt��,7 �Yr�
Christopher Drdry (May20, 202414:59 CD IT
May 20, 2024
Signature of vendor doing business with the governmental entity Date
Form provided by Texas Ethics Commission www.ethics.state.tx.us Revised 1/1/2021
CONFLICT OF INTEREST QUESTIONNAIRE
For vendor doing business with local governmental entity
Acomplete copy of Chapter 176 of the Local Government Code maybe found at http://www.statutes.legis.state.tx.us/
Docs/LG/htm/LG.176.htm. For easy reference, below are some of the sections cited on this form.
Local Government Code § 176.0010-a): "Business relationship" means a connection between two or more parties
based on commercial activity of one of the parties. The term does not include a connection based on:
(A) a transaction that is subject to rate or fee regulation by a federal, state, or local governmental entity or an
agency of a federal, state, or local governmental entity;
(B) a transaction conducted at a price and subject to terms available to the public; or
(C) a purchase or lease of goods or services from a person that is chartered by a state or federal agency and
that is subject to regular examination by, and reporting to, that agency.
Local Government Code § 176.003(a)(2)(A) and (B):
(a) A local government officer shall file a conflicts disclosure statement with respect to a vendor if:
(2) the vendor:
(A) has an employment or other business relationship with the local government officer or a
family member of the officer that results in the officer or family member receiving taxable
income, other than investment income, that exceeds $2,500 during the 12-month period
preceding the date that the officer becomes aware that
(i) a contract between the local governmental entity and vendor has been executed;
or
(ii) the local governmental entity is considering entering into a contract with the
vendor;
(B) has given to the local government officer or a family member of the officer one or more gifts
that have an aggregate value of more than $100 in the 12-month period preceding the date the
officer becomes aware that:
(i) a contract between the local governmental entity and vendor has been executed; or
(ii) the local governmental entity is considering entering into a contract with the vendor.
Local Government Code § 176.006(a) and (a-1)
(a) Avendor shall file a completed conflict of interest questionnaire if the vendor has a business relationship
with a local governmental entity and:
(1) has an employment or other business relationship with a local government officer of that local
governmental entity, or a family member of the officer, described by Section 176.003(a)(2)(A);
(2) has given a local government officer of that local governmental entity, or a family member of the
officer, one or more gifts with the aggregate value specified by Section 176.003(a)(2)(B), excluding any
gift described by Section 176.003(a-1); or
(3) has a family relationship with a local government officer of that local governmental entity.
(a-1) The completed conflict of interest questionnaire must be filed with the appropriate records administrator
not later than the seventh business day after the later of:
(1) the date that the vendor:
(A) begins discussions or negotiations to enter into a contract with the local governmental
entity; or
(B) submits to the local governmental entity an application, response to a request for proposals
or bids, correspondence, or another writing related to a potential contract with the local
governmental entity; or
(2) the date the vendor becomes aware:
(A) of an employment or other business relationship with a local government officer, or a
family member of the officer, described by Subsection (a);
(B) that the vendor has given one or more gifts described by Subsection (a); or
(C) of a family relationship with a local government officer.
Form provided by Texas Ethics Commission www.ethics.state.tx.us Revised 1/1/2021
2/27/24. 2:23 PM
M&C Review
CITY COUNCIL AGENDA
Create New From This M&C
DATE: 2/27/2024 REFERENCE
NO.:
CODE: P TYPE:
Official site of the City of Fort Worth, Texas
FoR1�O
**M&C 24- 13P COOP BB 720-23 HVAC
0143 LOG NAME: SUPPLIES AND
INSTALLATION WATER KQ
CONSENT PUBLIC NO
NO
SUBJECT: (ALL) Authorize Non -Exclusive Purchase Agreements with Carrier Enterprise, LLC.,
Enviromatic Systems of Fort Worth Inc., Trane U.S. Inc., and Lennox Industries, Inc. Using
BuyBoard Cooperative Contract No. 720-23 for the Purchase of Heating, Ventilation
and Air Conditioning Equipment, Supplies, and Installation Services for a Combined
Annual Amount Up to $1,612,500.00 and Authorize Two, One -Year Renewal Options for
the Same Amount for the Water, Property Management and Police Departments
RECOMMENDATION:
It is recommended that the City Council authorize non-exclusive purchase agreements with Carrier
Enterprise LLC., Enviromatic Systems of Fort Worth Inc., Trane U.S. Inc., and Lennox Industries,
Inc. using BuyBoard Cooperative Contract No. 720-23 for the purchase of heating, ventilation and air
conditioning equipment, supplies, and installation services for a combined annual amount up to
$1,612,500.00 and authorize two, one-year renewal options for the same amount for the Water,
Property Management and Police Departments.
DISCUSSION:
The Water, Property Management (PMD), and Police Departments approached the Purchasing
Division to enter into agreements with Carrier Enterprise LLC., Enviromatic Systems of Fort Worth
Inc., Trane U.S. Inc., and Lennox Industries, Inc., under BuyBoard Contract No. 720-23, HVAC
Equipment, Supplies, and Installation. The user -departments will utilize the agreements to purchase
Heating, Ventilation and Air Conditioning (HVAC) parts and installation services on an as -needed
basis.
Approval of this M&C authorizes the City to spend up to $1,612,500.00 per year; however, the actual
first -year spend is anticipated to be $1,290,000.00 based on current budget allocations. Actual usage
in any term can be up to the authorized amount and will be dependent upon actual appropriations for
this purpose in the departments' budgets.
Vendor
Carrier Enterprise
Enviromatic Systems of Fort Worth Inc.
Trane U.S Inc.
Lennox Industries, Inc.
Total
Department
Property Management
Police
Water
Amount
$478,000.00
$403,000.00
$359,000.00
$50,000.00
$1,290,000.00
Amount
$490,000.00
$10,000.00
$790,000.00
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Total $1,290,000.00
State law provides that a local government purchasing an item under a cooperative purchase
agreement satisfies any state law requiring that the local government seek competitive bids for the
purchase of the item. BuyBoard contracts are competitively bid to increase and simplify the purchasing
power of government entities across the State of Texas. Request for Proposal (RFP) No. 720-23 was
published on January 18, 2023, and responses were opened on July 13, 2023.
Funding is budgeted within the Water & Sewer Fund for the Water Department and the General Fund
for the Property Management Facilities Operations, Property Management Facilities Maintenance and
Police Northwest Division Admin Departments.
ADMINISTRATIVE CHANGE ORDERS - In addition, an administrative change order or increase may
be made by the City Manager up to the amount allowed by relevant law and the Fort Worth City Code
and does not require specific City Council approval.
RENEWAL OPTIONS — The initial term of this Agreement will end on November 30, 2024. The
Agreement may be renewed for two additional one-year periods through November 30, 2026. This
action does not require specific City Council approval provided that City Council has appropriated
sufficient funds to satisfy the City's obligations during the renewal terms.
A M/WBE goal is not assigned when purchasing from an approved purchasing cooperative or public
entity.
This project will serve ALL COUNCIL DISTRICTS.
FISCAL INFORMATION/CERTIFICATION:
The Director of Finance certifies that upon approval of the recommendation, funds are available in the
current operating budget, as previously appropriated, in the Water & Sewer Fund and General Fund.
Prior to an expenditure being incurred, the Property Management, Police and Water Departments
have the responsibility to validate the availability of funds.
BQN\\
TO
Fund Department Account Project Program Activity Budget Reference # Amount
ID ID Year (Chartfield 2)
FROM
Fund Department Account Project
ID ID
Submitted for City Manaqer's Office by:
Originating Department Head:
Additional Information Contact:
ATTACHMENTS
Program Activity Budget Reference #
Year , (Chartfield 2)
Reginald Zeno (8517)
Dana Burghdoff (8018)
Reginald Zeno (8517)
Ricardo Salazar (8379)
Jo Ann Gunn (8525)
Karen Quintero (8321)
1295 Form - Lennox.pdf (CFW Internal)
13P COOP BB 720-23 HVAC SUPPLIES AND INSTALLATION PMD Combined FID.xlsx (CFW Internal)
13P COOP BB 720-23 HVAC SUPPLIES AND INSTALLATION PMD.docx (CFW Internal)
Amount
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13P COOP BB 720-23 HVAC SUPPLIES AND INSTALLATION PMD.xlsx (CFW Internal)
13P COOP BB 720-23 HVAC SUPPLIES AND INSTALLATION WATER KQ funds availabilitv.pdf (CFW Internal)
FID Table - BB HVAC Parts.xlsx (CFW Internal)
FID TABLE Lennox Stores 01.16.24.xlsx (CFW Internal)
Form 1295 - City of Fort Worth Carrier.pdf (CFW Internal)
Form 1295 Certificate - Enviromatic.pdf (CFW Internal)
Form 1295 Certificate 101148438 - Trane.pdf (CFW Internal)
SAM 1.23.24.pdf (CFW Internal)
SAMs - 1.9.24.pdf (CFW Internal)
SAMs 1.9.24 Enviromatic.pdf (CFW Internal)
SAMs Carrier Enterprise 1.9.24.pdf (CFW Internal)
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