0001069202-26-000054
SEC filingMixed Q1: revenue grew 5.8% on Building Climate Solutions strength, but Home Comfort Solutions faced volume headwinds, and net income declined 2.6% due to higher interest and tax costs.
Gross profit increased 6.9% to $351.3M, and gross margin improved to 30.9% from 30.6% a year ago, as favorable mix and price more than offset product cost inflation and lower factory absorption. Operating income rose 5.1% to $163.5M, but net income declined 2.6% to $117.2M, or $3.35 per diluted share, compared to $3.37 a year ago. The decline in net income was driven by higher interest expense and a higher effective tax rate due to income in higher tax jurisdictions.
Net cash provided by operating activities improved to $16.1M from negative $35.8M in the prior year quarter, reflecting working capital improvements. However, capital expenditures more than doubled to $55.5M, resulting in negative free cash flow of $39.4M. The company continues to invest in capacity and efficiency initiatives.
The company periodically reviews its capital structure to ensure appropriate levels of leverage and liquidity. Its goal is to maintain investment grade ratings from Moody's and S&P to help ensure capital markets remain available. Cash held in foreign locations is used for investing and operating activities in those locations, and the company generally does not have the need or intent to repatriate those funds to the United States.
In March 2026, Lennox was named in a putative antitrust class action alleging price fixing in the HVAC equipment market. The company disputes the allegations and plans to vigorously defend itself, but cannot estimate potential loss. Separately, the company is evaluating the impact of recent U.S. tariff actions on material costs and sourcing decisions, which could create additional headwinds in future quarters.