Lennox International(US:LII)2026-02-17 21:17Financial Performance - Net sales decreased by $146 million, or 3%, to $5,195 million in 2025 from $5,341 million in 2024[154] - Net income in 2025 decreased to $806 million from $811 million in 2024[154] - The company's net sales for the year ended December 31, 2025, were $5,113.8 million, with a gross profit of $1,324.4 million and a net income of $406.3 million[212] - Net sales for the Corporate and Other segment in 2025 were $0, with a loss of $105 million, an improvement of $15.3 million or 13% compared to a loss of $120.3 million in 2024[169] Segment Performance - The Home Comfort Solutions segment experienced a 7% decrease in net sales and a $32 million decrease in segment profit in 2025 compared to 2024[153] - The Building Climate Solutions segment saw a 5% increase in net sales and a $33 million increase in segment profit in 2025 compared to 2024[153] - Home Comfort Solutions segment net sales increased by 11% in 2024 to $3,577.1 million, with segment profit rising by 24% to $760.5 million[179] - Building Climate Solutions segment net sales increased by 17% in 2024 to $1,764.2 million, with segment profit increasing by 18% to $401.7 million[181] Profitability and Margins - Gross profit margins for 2025 increased to 33.4% compared to 33.3% in 2024, driven by higher price and favorable mix[157] - Segment profit in 2025 increased by $33 million compared to 2024, driven by a $100 million benefit from price and mix, partially offset by $31 million in lower sales volumes and $16 million in increased product costs[168] - Gross profit margins for 2024 increased by 220 basis points to 33.3% compared to 31.1% in 2023, with a 250 basis point increase from higher price and favorable mix[170] Expenses and Cash Flow - Selling, general and administrative expenses decreased by $49 million in 2025, with a percentage of net sales dropping from 13.7% to 13.1%[158] - Net cash provided by operating activities decreased by $188 million to $757.6 million in 2025 compared to $945.7 million in 2024, primarily due to an increase in net working capital[186] - The company generated $758 million of cash flow from operating activities in 2025 compared to $946 million in 2024[154] Acquisitions and Investments - The acquisition of AES in October 2023 is included in the Building Climate Solutions segment, enhancing service and sustainability in light commercial markets[147] - The company completed the acquisition of Duro Dyne and Supco in October 2025, which complements existing residential and commercial offerings[146] - Net cash used in investing activities increased by $481 million from 2024 to 2025, primarily due to $545 million related to acquisitions[187] Debt and Capital Structure - Total debt as of December 31, 2025, was $1,388.4 million, including $800 million in senior unsecured notes and $300 million in term loans[189] - In September 2023, the company issued $500.0 million of senior unsecured notes maturing in September 2028 with an interest rate of 5.50%[194] - The company's debt-to-total-capital ratio decreased to 54% at December 31, 2025, compared to 57% at December 31, 2024[196] - The company maintained a Total Net Leverage Ratio of no more than 3.50 to 1.00, with an option to increase to 4.00 to 1.00 following a material acquisition[203] Tax and Compliance - The effective tax rate was 19.2% in 2025 compared to 18.8% in 2024, influenced by foreign taxes[164] - The company is currently in compliance with all covenant requirements related to its debt obligations[207] Foreign Operations - Net sales from outside the U.S. represented 7% of total net sales in 2025, with foreign currency transaction gains and losses not having a material impact on results[222] Dividends - Dividend payments increased to $173 million in 2025, up from $160 million in 2024, with a 13% increase in the quarterly dividend from $1.15 to $1.30 per share effective July 2025[199] Interest Rate Sensitivity - A 10% adverse movement in interest rates would have resulted in an increase to pre-tax interest expense of approximately $1.1 million for the year ended December 31, 2025[220]