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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
_________________________________________________
FORM 10-Q
 _________________________________________________
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 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.
Incorporated pursuant to the laws of the State of Delaware
_________________________________________________ 
Internal Revenue Service Employer Identification No. 42-0991521
2140 LAKE PARK BLVD., RICHARDSON, Texas, 75080
(972) 497-5000
_________________________________________________ 
Securities registered pursuant to Section 12(b) of the Act:
Title of each classTrading Symbol(s)Name of each exchange on which registered
Common stock, $0.01 par value per shareLIINew York Stock Exchange
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 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 past 90 days.    Yes      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      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 FilerAccelerated Filer
Non-Accelerated FilerSmaller 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 is a shell company (as defined in Rule 12b-2 of the Exchange Act).    Yes   No  
As of July 15, 2022, the number of shares outstanding of the registrant’s common stock, par value $0.01 per share, was 35,431,396.





LENNOX INTERNATIONAL INC.
FORM 10-Q
For the three and six months June 30, 2022

INDEX
Page
Part I
Consolidated Balance Sheets - June 30, 2022 (Unaudited) and December 31, 2021
Consolidated Statements of Operations (Unaudited) - Three and Six Months Ended June 30, 2022 and 2021
Consolidated Statements of Comprehensive Income (Unaudited) - Three and Six Months Ended June 30, 2022 and 2021
Consolidated Statements of Stockholders' Deficit (Unaudited) - Three and Six Months Ended June 30, 2022 and 2021
Consolidated Statements of Cash Flows (Unaudited) - Six Months Ended June 30, 2022 and 2021
Part II

i


Part I - Financial Information
Item 1. Financial Statements

LENNOX INTERNATIONAL INC. AND SUBSIDIARIES
Consolidated Balance Sheets
(Amounts in millions, except shares and par values)As of June 30, 2022As of December 31, 2021
(Unaudited)
ASSETS
Current Assets:
Cash and cash equivalents$57.4 $31.0 
Short-term investments5.3 5.5 
Accounts and notes receivable, net of allowances of $12.2 and $10.7 in 2022 and 2021, respectively
782.6 508.3 
Inventories, net692.8 510.9 
Other assets91.0 119.7 
Total current assets1,629.1 1,175.4 
Property, plant and equipment, net of accumulated depreciation of $906.6 and $888.8 in 2022 and 2021, respectively
519.5 515.1 
Right-of-use assets from operating leases204.7 196.1 
Goodwill186.2 186.6 
Deferred income taxes29.0 11.3 
Other assets, net90.5 87.4 
Total assets$2,659.0 $2,171.9 
LIABILITIES AND STOCKHOLDERS’ DEFICIT
Current Liabilities:
Current maturities of long-term debt$11.8 $11.3 
Current operating lease liabilities
59.5 54.8 
Accounts payable485.6 402.1 
Accrued expenses384.8 358.9 
Income taxes payable26.0  
Total current liabilities967.7 827.1 
Long-term debt1,681.5 1,226.5 
Long-term operating lease liabilities149.7 145.0 
Pensions85.6 83.3 
Other liabilities175.8 159.0 
Total liabilities3,060.3 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 capital1,144.0 1,133.7 
Retained earnings2,909.5 2,719.3 
Accumulated other comprehensive loss(117.9)(88.1)
Treasury stock, at cost, 51,743,384 shares and 50,536,125 shares for 2022 and 2021, respectively
(4,337.8)(4,034.8)
Total stockholders' deficit(401.3)(269.0)
Total liabilities and stockholders' deficit$2,659.0 $2,171.9 
The accompanying notes are an integral part of these consolidated financial statements.
1



LENNOX INTERNATIONAL INC. AND SUBSIDIARIES
Consolidated Statements of Operations
(Unaudited)
(Amounts in millions, except per share data)For the Three Months Ended June 30,For the Six Months Ended June 30,
 2022202120222021
Net sales$1,366.3 $1,239.0 $2,379.7 $2,169.4 
Cost of goods sold969.2 855.8 1,714.4 1,529.7 
Gross profit397.1 383.2 665.3 639.7 
Operating Expenses:
Selling, general and administrative expenses169.6 167.8 324.9 313.2 
Losses (gains) and other expenses, net1.6 2.3 2.0 2.6 
Restructuring charges0.5 1.2 1.0 1.3 
Income from equity method investments(1.5)(4.1)(1.4)(7.4)
Operating income226.9 216.0 338.8 330.0 
Pension settlements0.2  0.3 0.7 
Interest expense, net8.7 6.4 15.6 12.3 
Other expense (income), net0.7 0.9 1.2 1.9 
Net income before income taxes217.3 208.7 321.7 315.1 
Provision for income taxes40.1 38.7 60.9 60.9 
Net income$177.2 $170.0 $260.8 $254.2 
Earnings per share – Basic:$4.97 $4.55 $7.25 $6.74 
Earnings per share – Diluted:$4.96 $4.51 $7.23 $6.70 
Weighted Average Number of Shares Outstanding - Basic35.6 37.4 36.0 37.7 
Weighted Average Number of Shares Outstanding - Diluted35.7 37.7 36.1 38.0 

The accompanying notes are an integral part of these consolidated financial statements.


2


LENNOX INTERNATIONAL INC. AND SUBSIDIARIES
Consolidated Statements of Comprehensive Income
(Unaudited)
(Amounts in millions)For the Three Months Ended June 30,For the Six Months Ended June 30,
 2022202120222021
Net income$177.2 $170.0 $260.8 $254.2 
Other comprehensive income (loss):
Foreign currency translation adjustments(7.9)4.2 (9.1)1.6 
Net change in pension and post-retirement liabilities(1.1)(2.3)(2.7)(5.3)
Reclassification of pension and post-retirement benefit losses into earnings1.4 2.1 2.9 4.3 
Pension settlements0.2  0.3 0.7 
Share of equity method investments other comprehensive income0.7  0.7  
Net change in fair value of cash flow hedges(30.9)11.0 (11.3)20.6 
Reclassification of cash flow hedge gains into earnings(8.8)(9.1)(16.2)(13.5)
Other comprehensive (loss) income before taxes(46.4)5.9 (35.4)8.4 
Tax benefit (expense)9.0 0.2 5.6 (4.3)
Other comprehensive (loss) income, net of tax(37.4)6.1 (29.8)4.1 
Comprehensive income$139.8 $176.1 $231.0 $258.3 
The accompanying notes are an integral part of these consolidated financial statements.

3


LENNOX INTERNATIONAL INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' DEFICIT
For the three and six months ended June 30, 2022 and 2021 (Unaudited)
(In millions, except per share data)
Common Stock IssuedAdditional Paid-In CapitalRetained EarningsAccumulated Other Comprehensive LossTreasury Stock at CostTotal Stockholders' Deficit
(For the three months ended June 30, 2022)
Shares Amount
Balance as of March 31, 2022$0.9 $1,110.4 $2,769.8 $(80.5)51.1 $(4,210.8)$(410.2)
Net income— — 177.2 — — — 177.2 
Dividends, $1.06 per share
— — (37.5)— — — (37.5)
Foreign currency translation adjustments— — — (7.9)— — (7.9)
Pension and post-retirement liability changes, net of tax expense of $0.2
— — — 0.3 — — 0.3 
Share of equity method investments other comprehensive income— — — 0.7 — — 0.7 
Stock-based compensation expense— 5.9 — — — — 5.9 
Change in cash flow hedges, net of tax benefit of $9.2
— — — (30.5)— — (30.5)
Treasury shares reissued for common stock— 0.7 — —  0.2 0.9 
Treasury stock purchases— 27.0 — — 0.6 (127.2)(100.2)
Balance as of June 30, 2022$0.9 $1,144.0 $2,909.5 $(117.9)51.7 $(4,337.8)$(401.3)
Common Stock IssuedAdditional Paid-In CapitalRetained EarningsAccumulated Other Comprehensive LossTreasury Stock at CostTotal Stockholders' Deficit
(For the three months ended June 30, 2021)
Shares Amount
Balance as of March 31, 2021$0.9 $1,090.3 $2,440.9 $(99.2)49.4 $(3,593.6)$(160.7)
Net income— — 170.0 — — — 170.0 
Dividends, $0.92 per share
— — (34.3)— — — (34.3)
Foreign currency translation adjustments— — — 4.2 — — 4.2 
Pension and post-retirement liability changes, net of tax benefit of $0.3
— — — 0.1 — — 0.1 
Stock-based compensation expense— 8.9 — — — — 8.9 
Change in cash flow hedges, net of tax expense of $0.1
— — — 1.8 — — 1.8 
Treasury shares reissued for common stock— (0.3)— — (0.1)1.2 0.9 
Treasury stock purchases— 30.0 — — 0.7 (234.2)(204.2)
Balance as of June 30, 2021$0.9 $1,128.9 $2,576.6 $(93.1)50.0 $(3,826.6)$(213.3)

The accompanying notes are an integral part of these consolidated financial statements.


4


LENNOX INTERNATIONAL INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' DEFICIT
For the three and six months ended June 30, 2022 and 2021 (Unaudited)
(In millions, except per share data)
Common Stock IssuedAdditional Paid-In CapitalRetained EarningsAccumulated Other Comprehensive LossTreasury Stock at CostTotal Stockholders' Deficit
(For the six months ended June 30, 2022)
SharesAmount
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— — 260.8 — — — 260.8 
Dividends, $1.98 per share
— — (70.6)— — — (70.6)
Foreign currency translation adjustments— — — (9.1)— — (9.1)
Pension and post-retirement liability changes, net of tax expense of $0.6
— — — — — —  
Share of equity method investments other comprehensive income— — — 0.7 — — 0.7 
Stock-based compensation expense— 10.6 — — — — 10.6 
Change in cash flow hedges, net of tax benefit of $6.2
— — — (21.4)— — (21.4)
Treasury shares reissued for common stock— (0.3)— — (0.1)2.1 1.8 
Treasury stock purchases— — — — 1.3 (305.1)(305.1)
Balance as of June 30, 2022$0.9 $1,144.0 $2,909.5 $(117.9)51.7 $(4,337.8)$(401.3)
Common Stock IssuedAdditional Paid-In CapitalRetained EarningsAccumulated Other Comprehensive LossTreasury Stock at CostTotal Stockholders' Deficit
(For the six months ended June 30, 2021)
SharesAmount
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— — 254.2 — — — 254.2 
Dividends, $1.69 per share
— — (63.4)— — — (63.4)
Foreign currency translation adjustments— — — 1.6 — — 1.6 
Pension and post-retirement liability changes, net of tax expense of $3.2
— — — (3.4)— — (3.4)
Stock-based compensation expense— 17.5 — — — — 17.5 
Change in cash flow hedges, net of tax expense of $1.2
— — — 5.9 — — 5.9 
Treasury shares reissued for common stock— (1.8)— — (0.1)3.4 1.6 
Treasury stock purchases— — — — 1.3 (410.2)(410.2)
Balance as of June 30, 2021$0.9 $1,128.9 $2,576.6 $(93.1)50.0 $(3,826.6)$(213.3)

The accompanying notes are an integral part of these consolidated financial statements.
5


LENNOX INTERNATIONAL INC. AND SUBSIDIARIES
Consolidated Statements of Cash Flows
(Unaudited)
(Amounts in millions)For the Six Months Ended June 30,
20222021
Cash flows from operating activities:
Net income$260.8 $254.2 
Adjustments to reconcile net income to net cash used in operating activities:
Income from equity method investments(1.4)(7.4)
Dividends from affiliates 3.7 
Restructuring charges, net of cash paid0.5 1.4 
Provision for credit losses2.7 3.5 
Unrealized losses, net on derivative contracts2.0 0.3 
Stock-based compensation expense10.6 17.5 
Depreciation and amortization37.8 35.6 
Deferred income taxes(11.6)(3.6)
Pension expense3.5 5.4 
Pension contributions(0.5)(0.8)
Other items, net(0.9)(0.3)
Changes in assets and liabilities:
Accounts and notes receivable(281.6)(248.2)
Inventories(187.3)7.0 
Other current assets1.2 (9.7)
Accounts payable93.7 67.4 
Accrued expenses14.8 33.7 
Income taxes payable and receivable, net39.4 1.6 
   Leases, net0.9 (0.6)
Other, net14.6 13.8 
Net cash (used in) provided by operating activities(0.8)174.5 
Cash flows from investing activities:
Proceeds from the disposal of property, plant and equipment0.5 0.6 
Purchases of property, plant and equipment(46.7)(45.5)
Proceeds from short-term investments, net 2.3 
Net cash used in investing activities(46.2)(42.6)
Cash flows from financing activities:
Asset securitization borrowings211.0 299.0 
Asset securitization payments(61.0)(44.0)
Long-term debt payments(6.4)(3.1)
Borrowings from credit facility1,331.0 753.0 
Payments on credit facility(1,029.0)(748.5)
Proceeds from employee stock purchases1.8 1.6 
Repurchases of common stock(300.0)(400.0)
Repurchases of common stock to satisfy employee withholding tax obligations(5.1)(10.2)
Cash dividends paid(66.9)(58.6)
Net cash provided by (used in) financing activities75.4 (210.8)
Increase (decrease) in cash and cash equivalents28.4 (78.9)
Effect of exchange rates on cash and cash equivalents(2.0)(0.5)
Cash and cash equivalents, beginning of period31.0 123.9 
Cash and cash equivalents, end of period$57.4 $44.5 
Supplemental disclosures of cash flow information:
Interest paid$14.2 $11.8 
Income taxes paid (net of refunds)$32.9 $62.6 

The accompanying notes are an integral part of these consolidated financial statements.
6


LENNOX INTERNATIONAL INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
1. General:

References in this Quarterly Report on Form 10-Q to "we," "our," "us," "LII," or the "Company" refer to Lennox International Inc. and its subsidiaries, unless the context requires otherwise.

Basis of Presentation

The accompanying unaudited Consolidated Balance Sheet as of June 30, 2022, the accompanying unaudited Consolidated Statements of Operations for the three and six months ended June 30, 2022 and 2021, the accompanying unaudited Consolidated Statements of Comprehensive Income for the three and six months ended June 30, 2022 and 2021, the accompanying unaudited Consolidated Statements of Stockholders' Deficit for the three and six months ended June 30, 2022 and 2021, and the accompanying unaudited Consolidated Statements of Cash Flows for the six months ended June 30, 2022 and 2021 should be read in conjunction with our audited consolidated financial statements and footnotes included in our Annual Report on Form 10-K for the year ended December 31, 2021.

The accompanying unaudited consolidated financial statements have been prepared in accordance with generally accepted accounting principles (“GAAP”) for interim financial information and with the instructions to Form 10-Q and Article 10 of Regulation S-X. The accompanying consolidated financial statements contain all material adjustments, consisting principally of normal recurring adjustments, necessary for a fair presentation of our financial position, results of operations and cash flows. Certain information and footnote disclosures normally included in financial statements prepared in accordance with GAAP have been condensed or omitted pursuant to applicable rules and regulations, although we believe that the disclosures herein are adequate to make the information presented not misleading. The operating results for the interim periods are not necessarily indicative of the results that may be expected for a full year.

Our fiscal quarterly periods are comprised of approximately 13 weeks, but the number of days per quarter may vary year-over-year. Our quarterly reporting periods usually end on the Saturday closest to the last day of March, June and September. Our fourth quarter and fiscal year ends on December 31, regardless of the day of the week on which December 31 falls. For convenience, the 13-week periods comprising each fiscal quarter are denoted by the last day of the respective calendar quarter.

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 revenues and expenses. Such estimates include the valuation of accounts receivable, inventories, goodwill, intangible assets and other long-lived assets, contingencies, guarantee obligations, indemnifications, and assumptions used in the calculation of income taxes, pension and post-retirement medical benefits, self-insurance and warranty reserves, 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 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 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. As the pandemic continues, health concern risks remain. 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.

7


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.

2. Reportable Business Segments:

We operate in three reportable business segments of the heating, ventilation, air conditioning and refrigeration (“HVACR”) industry. Our segments are organized primarily by the nature of the products and services we provide. The following table describes each segment:
 
SegmentProduct or ServicesMarkets ServedGeographic Areas
Residential Heating & CoolingFurnaces, air conditioners, heat pumps, packaged heating and cooling systems, indoor air quality equipment, comfort control products, replacement parts and suppliesResidential Replacement;
Residential New Construction
United States
Canada
Commercial Heating & CoolingUnitary heating and air conditioning equipment, applied systems, controls, installation and service of commercial heating and cooling equipment, and variable refrigerant flow commercial productsLight CommercialUnited States
Canada
RefrigerationCondensing units, unit coolers, fluid coolers, air cooled condensers, air handlers, process chillers, controls, and compressorized racksLight Commercial;
Food Preservation;
Non-Food/Industrial
United States
Canada
Europe
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 in the table 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 stock-based incentive awards provided to employees throughout LII. We record these stock-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 for the periods presented.

8


Segment Data

Net sales and segment profit (loss) for each segment, along with a reconciliation of segment profit (loss) to Operating income, are shown below (in millions):
 For the Three Months Ended June 30,For the Six Months Ended June 30,
 2022202120222021
Net sales
Residential Heating & Cooling$977.5 $838.0 $1,659.6 $1,444.2 
Commercial Heating & Cooling219.6 252.8 407.3 452.0 
Refrigeration169.2 148.2 312.8 273.2 
$1,366.3 $1,239.0 $2,379.7 $2,169.4 
Segment profit (loss) (1)
Residential Heating & Cooling$216.3 $189.7 $324.0 $286.1 
Commercial Heating & Cooling17.2 45.3 23.5 72.6 
Refrigeration23.4 13.5 37.5 21.4 
Corporate and other(27.1)(26.9)(40.6)(42.9)
Total segment profit229.8 221.6 344.4 337.2 
Reconciliation to Operating income:
Items in Losses (gains) and other expenses, net that are excluded from segment profit (loss) (1)
2.4 4.4 4.6 5.9 
Restructuring charges0.5 1.2 1.0 1.3 
Operating income$226.9 $216.0 $338.8 $330.0 
(1) We define segment profit (loss) as a segment's operating income included in the accompanying Consolidated Statements of Operations, excluding:
The following items in Losses (gains) and other expenses, net:
Net change in unrealized losses (gains) 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, and
Restructuring charges.

3. 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.

9


The computations of basic and diluted earnings per share were as follows (in millions, except per share data):
 For the Three Months Ended June 30,For the Six Months Ended June 30,
 2022202120222021
Net income $177.2 $170.0 $260.8 $254.2 
Weighted-average shares outstanding – basic35.6 37.4 36.0 37.7 
Add: Potential effect of dilutive securities attributable to stock-based payments0.1 0.3 0.1 0.3 
Weighted-average shares outstanding – diluted35.7 37.7 36.1 38.0 
Earnings per share – Basic:$4.97 $4.55 $7.25 $6.74 
Earnings per share – Diluted:$4.96 $4.51 $7.23 $6.70 

The following stock appreciation rights and restricted stock units were outstanding but not included in the diluted earnings per share calculation because the assumed exercise of such rights would have been anti-dilutive (in millions, except for per share data):
 For the Three Months Ended June 30,For the Six Months Ended June 30,
 2022202120222021
Weighted-average number of shares0.3  0.3  
Price per share
$257.08-$328.65
$
$257.08-$328.65
$
    
4. Commitments and Contingencies:

Leases
We determine if an arrangement is a lease at inception. Operating leases are included in our Consolidated Balance Sheets as Right-of-use assets from operating leases, Current operating lease liabilities and Long-term operating lease liabilities. Finance leases are included in Property, plant and equipment, Current maturities of long-term debt and Long-term debt in our Consolidated Balance Sheets. We do not recognize a right-of-use asset and lease liability for leases with a term of 12 months or less. We do not separate non-lease components from lease components to which they relate and have accounted for the combined lease and non-lease components as a single lease component.

Many of our lease agreements contain renewal options; however, we do not recognize right-of-use assets or lease liabilities for renewal periods unless it is determined that we are reasonably certain of renewing the lease at inception or when a triggering event occurs. Some of our lease agreements contain rent escalation clauses (including index-based escalations), rent holidays, capital improvement funding or other lease concessions. We recognize our minimum rental expense on a straight-line basis based on the fixed components of a lease arrangement. We amortize this expense over the term of the lease beginning with the date of initial possession. Variable lease components represent amounts that are not fixed in nature and are not tied to an index or rate, and are recognized as incurred. Under certain of our third-party service agreements, we control a specific space or underlying asset used in providing the service by the third-party service provider. These arrangements meet the definition under ASC 842 and therefore are accounted for under ASC 842.

In determining our right-of-use assets and lease liabilities, we apply a discount rate to the minimum lease payments within each lease agreement. ASC 842 requires us to use the rate of interest that a lessee would have to pay to borrow on a collateralized basis over a similar term an amount equal to the lease payments in a similar economic environment. When we cannot readily determine the discount rate implicit in the lease agreement, we utilize our incremental borrowing rate. To estimate our specific incremental borrowing rates over various tenors (ranging from 1-year through 30-years), a comparable market yield curve consistent with our credit quality was calibrated to our publicly outstanding debt instruments.

We lease certain real and personal property under non-cancelable operating leases. Approximately 79% of our right-of-use assets and lease liabilities relate to our leases of real estate with the remaining amounts primarily relating to our leases of IT equipment, fleet vehicles and manufacturing and distribution equipment.
10



Product Warranties and Product Related Contingencies

We provide warranties to customers for some of our products and record liabilities for the estimated future warranty-related costs based on failure rates, cost experience and other factors. We periodically review the assumptions used to determine the product warranty liabilities and will adjust the liabilities in future periods for changes in experience, as necessary.

Liabilities for estimated product warranty costs related to continuing operations are included in the following captions on the accompanying Consolidated Balance Sheets (in millions):
As of June 30, 2022As of December 31, 2021
Accrued expenses$39.5 $37.2 
Other liabilities109.4 97.0 
Total warranty liability$148.9 $134.2 
The changes in product warranty liabilities related to continuing operations for the six months ended June 30, 2022 were as follows (in millions):
Total warranty liability as of December 31, 2021$134.2 
Warranty claims paid(16.5)
Changes resulting from issuance of new warranties27.6 
Changes in estimates associated with pre-existing liabilities4.3 
Changes in foreign currency translation rates and other(0.7)
Total warranty liability as of June 30, 2022
$148.9 

Litigation

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 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 for a particular period.

5. Stock Repurchases:

In July 2021, our Board of Directors authorized an additional $1.0 billion, for a total of $4.0 billion, to repurchase shares of our common stock (collectively referred to as the "Share Repurchase Plans"). Under this program, we may 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 repurchase program does not require the repurchase of a specific number of shares and may be terminated at any time. As of June 30, 2022, $546 million was available for repurchase under the Share Repurchase Plans.

In February 2022, we entered into a fixed dollar accelerated share repurchase transaction with Wells Fargo Bank, to effect an accelerated stock buyback of our common stock. We paid Wells Fargo Bank $200.0 million and Wells Fargo Bank initially delivered to us approximately 87% of the shares expected to be purchased. The ASR was completed in April 2022 and Wells Fargo Bank delivered a total of 0.8 million shares of common stock repurchased under this ASR Agreement.

In May 2022, we entered into a fixed dollar accelerated share repurchase transaction with Bank of America, to effect an accelerated stock buyback of our common stock. We paid Bank of America $100.0 million and Bank of America delivered to us common stock representing approximately 85% of the shares expected to be purchased. The ASR was completed in June 2022 and Bank of America delivered a total of 0.5 million shares of common stock repurchased under this ASR Agreement.

We also repurchased shares for $5.1 million during the six months ended June 30, 2022 from employees who tendered their shares to satisfy minimum tax withholding obligations upon the vesting and exercise of stock-based compensation awards.
11



6. Revenue Recognition:

The following table disaggregates our revenue by business segment by geography which provides information as to the major source of revenue. See Note 2 for additional information on our reportable business segments and the products and services sold in each segment.

For the Three Months Ended June 30, 2022
Primary Geographic MarketsResidential Heating & CoolingCommercial Heating & CoolingRefrigerationConsolidated
United States$901.8 $207.2 $107.7 $1,216.7 
Canada75.7 12.4  88.1 
Other international  61.5 61.5 
Total$977.5 $219.6 $169.2 $1,366.3 

For the Three Months Ended June 30, 2021
Primary Geographic MarketsResidential Heating & CoolingCommercial Heating & CoolingRefrigerationConsolidated
United States$763.0 $228.7 $82.2 $1,073.9 
Canada75.0 23.9  98.9 
Other international 0.2 66.0 66.2 
Total$838.0 $252.8 $148.2 $1,239.0 
For the Six Months Ended June 30, 2022
Primary Geographic MarketsResidential Heating & CoolingCommercial Heating & CoolingRefrigerationConsolidated
United States$1,531.4 $384.0 $199.6 $2,115.0 
Canada128.2 22.8  151.0 
Other international 0.5 113.2 113.7 
Total$1,659.6 $407.3 $312.8 $2,379.7 
For the Six Months Ended June 30, 2021
Primary Geographic MarketsResidential Heating & CoolingCommercial Heating & CoolingRefrigerationConsolidated
United States$1,321.8 $411.0 $157.9 $1,890.7 
Canada122.4 40.8  163.2 
Other international 0.2 115.3 115.5 
Total$1,444.2 $