LIILennox International

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, Agreement (“USMCA”), and initiating tariffs on certain foreign goods from a variety of countries and regions. countries. In addition, the new U.S. presidential administration has articulated that it may impose substantial new or imposed increased tariffs on foreign imports into the U.S., particularly from Canada and Mexico. Mexico for goods not covered by the USMCA. The USMCA is subject to review and renewal in 2026, and there can be no assurance that any newly negotiated terms in the USMCA will not adversely affect our business or operations. These changes in U.S. trade policy have historically resulted in, led, and may continue again lead, to result in, one or more foreign governments adopting enacting responsive trade policies that make it more difficult increase the difficulty or costly for us to do cost of doing international business in or import or export our products or components from those countries. The trade. As a consequence, the sales, gross margins, and profitability for each of our segments could be directly impacted by changes in tariffs and trade agreements.

Inventory costs include material, labor, and capitalized overhead. Inventories of $494.3 million and $438.9 million as of December 31, 2024 and 2023, 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 are valued at the lower of cost or net realizable value with cost costs determined primarily using either the standard cost, which approximates costs determined on a first-in, first-out (“FIFO”) or average cost methods. basis. See Note 9 for more information on our inventories. In the fourth quarter of 2025, we changed the method of accounting for certain of our inventories from last-in-first-out (“LIFO”) to FIFO. Refer to “Change in Accounting” below for further discussion.

All In the Notes 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 certain of our subsidiaries that guarantee indebtedness under our Credit Agreement. the Guarantor Subsidiaries. The indenture governing the Notes 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 $75.0 $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, 2024, we believe we were in compliance with all covenant requirements.

Total warranty liability as of December 31, 2022 $ 142.7 Payments made in 2023 (40.1) Changes resulting from issuance of new warranties 53.9 Changes in estimates associated with pre-existing liabilities (13.9) Changes in foreign currency translation rates and other 0.2 Total warranty liability as of December 31, 2023 $ 142.8 Payments made in 2024 (41.2) Changes resulting from issuance of new warranties 59.0 Changes in estimates associated with pre-existing liabilities (1.4) Changes in foreign currency translation rates and other (0.8) Total warranty liability as of December 31, 2024 $ 158.4 Payments made in 2025 (46.9) Changes resulting from issuance of new warranties 52.5 Changes in estimates associated with pre-existing liabilities 2.7 Changes in foreign currency translation rates and other 0.5 Total warranty liability as of December 31, 2025 $ 167.2