LII Filings — Lennox International Inc - FilingSpy
LII
Lennox International Inc
A maker of home heating and cooling, Lennox International builds residential furnaces, air conditioners, and heat pumps under brands like Lennox, Armstrong Air, and Ducane, plus commercial refrigeration gear under Heatcraft and Bohn. The company traces back to 1895 in Marshalltown, Iowa, when machinist Dave Lennox accepted a patent for a riveted-steel furnace in lieu of payment for his work. A good party fact: Dave's namesake "Dave Lennox" mascot, a cartoon caveman in a fur coat, has been the face of the brand for decades.
Home Comfort volumes fell 12% again, but tariff refunds and Building Climate growth lifted Lennox's Q2 gross margin to 34.9%.
Home Comfort Solutions volumes fell for the fourth straight quarter, but the pain was offset elsewhere. rose 3% to $1.55 billion and reached 34.9% as a 29% profit increase in Building Climate Solutions and $25 million in tariff refunds more than compensated for the residential weakness. The company is now running on two diverging engines, with commercial and acquisitions carrying the load while its core residential business waits for a floor.
Key takeaways
Home Comfort Solutions profit fell 12% as a 12% volume decline—the fourth consecutive quarter of double-digit drops—overwhelmed favorable mix and pricing, though $25 million in tariff refunds partially offset the impact.
Building Climate Solutions profit rose 29% on 24% sales growth, driven by higher volumes, the Duro Dyne and Supco acquisitions, and favorable mix and pricing.
Consolidated improved 40 to 34.9%, as favorable mix and price and a 40-basis-point benefit from acquisitions outweighed higher product costs and freight inflation.
Section summaries
Management's Discussion and Analysis
Q2 2026 net sales rose 3% to $1.55B as Building Climate Solutions growth offset Home Comfort Solutions volume declines.
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Consolidated increased 3% to $1,545 million, driven by a 24% surge in Building Climate Solutions, while Home Comfort Solutions fell 7% due to a 12% volume drop.
improved 40 to 34.9%, as favorable mix/price (+120 bps) and acquisitions (+40 bps) outweighed higher product costs (-80 bps) and freight/distribution inflation (-40 bps).
improved to $188 million from $51 million a year ago, driven by favorable changes, while nearly doubled to $91 million for innovation centers.
The company repaid $300 million in maturing notes in 2025 and increased borrowings to $412 million, with $586 million remaining available under its .
The consolidated antitrust class actions alleging HVAC price-fixing since 2020 are ongoing; amended complaints were filed in July 2026, and the company cannot yet estimate a possible loss.
What changed
The 12% volume decline in Home Comfort Solutions, while still large, is an improvement from the 21% drop in Q1 2026 and the 23% plunge in Q3 2025, suggesting the post-pre-buy demand contraction may be moderating rather than accelerating.
Building Climate Solutions' 29% profit growth, while below Q1's 63% increase, confirms the 's recovery from the factory inefficiencies and tariff costs that compressed margins in early 2025, with organic volume growth and acquisitions both contributing.
of 34.9% is the highest quarterly level since at least 2016, exceeding the 34.5% record set in Q2 2025, as pricing and mix continue to more than offset the product-cost inflation that compressed margins to 30.9% in Q1 2026.
The $25 million in tariff refunds recorded in Home Comfort Solutions is a new development not flagged in prior filings, providing a one-time offset to volume-driven profit declines that will not recur.
What to watch
Whether the 12% volume decline in Home Comfort Solutions in Q2 represents the trough, and if volumes stabilize or return to growth in Q3—the seasonally important cooling quarter—now that comparisons begin to lap the 23% drop from Q3 2025.
The trajectory of in the second half without the $25 million tariff refund benefit, and whether the 34.9% level can be sustained if product-cost inflation and factory under-absorption persist.
Whether Building Climate Solutions can sustain its organic volume growth and profit momentum as the Duro Dyne and Supco acquisitions begin to annualize in the fourth quarter.
Any developments in the consolidated antitrust class actions, including whether a loss estimate becomes possible or preliminary settlement discussions begin, given the amended complaints filed in July 2026.
Home Comfort Solutions profit fell $30 million (12%) on lower volumes, partially offset by $25 million in tariff refunds and favorable mix/price.
Building Climate Solutions profit rose $35 million (29%) on higher volumes, acquisitions, and favorable mix/price, partially offset by product cost inflation.
improved to $188 million from $51 million a year ago, driven by favorable changes, while nearly doubled to $91 million for innovation centers.
The company repaid $300 million in maturing notes in 2025, increased borrowings to $412 million, and maintains $586 million in available credit.
Quantitative and Qualitative Disclosures About Market Risk
For quantitative and qualitative disclosures about market risk affecting LII, see "Quantitative and Qualitative Disclosures About Market Risk" in Item 7A of Part II of our Annual Report on Form 10-K for the fiscal year ended December 31, 2025. Our exposure to market risk has not…
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For quantitative and qualitative disclosures about market risk affecting LII, see "Quantitative and Qualitative Disclosures About Market Risk" in Item 7A of Part II of our Annual Report on Form 10-K for the fiscal year ended December 31, 2025. Our exposure to market risk has not changed materially since December 31, 2025.
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The Company is a defendant in consolidated antitrust class actions alleging HVAC price-fixing; no loss can be estimated.
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Seven HVAC manufacturers, including the Company, were sued in March 2026 in the Eastern District of Michigan for alleged Sherman Act and state-law violations.
The consolidated case is captioned In re HVAC Equipment Antitrust Litigation, and amended complaints were filed on July 10, 2026.
Plaintiffs allege a conspiracy to fix, raise, maintain, or stabilize HVAC equipment prices from January 1, 2020 to the present.
The seeks unspecified damages, , and attorneys' fees.
The Company disputes the allegations, plans to defend vigorously, and cannot reasonably estimate a possible loss or outcome.
An adverse outcome could materially impact the Company's business, financial position, results of operations, or cash flows.
In addition to the other information set forth in this Quarterly Report on Form 10-Q, you should carefully consider the risk factors discussed in Part I, “Item 1A. Risk Factors” in our Annual Report on Form 10-K for the year ended December 31, 2025, which could materially affect…
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In addition to the other information set forth in this Quarterly Report on Form 10-Q, you should carefully consider the risk factors discussed in Part I, “Item 1A. Risk Factors” in our Annual Report on Form 10-K for the year ended December 31, 2025, which could materially affect our business, financial condition or results of operations. There have been no material changes to our risk factors from those disclosed in our Annual Report on Form 10-K for the year ended December 31, 2025.
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