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LII, Lennox Intl

We are a global leader in energy-efficient climate-control solutions.

We design, manufacture and market a broad range of products for the heating, ventilation, air conditioning and refrigeration ("HVACR") markets.

Our products and services are sold through multiple distribution channels under various brand names.

Latest annual: FY2025 10-K

LII · Lennox Intl

The business

What it sells, where the money comes from, the kind of company it is.

Revenue · FY2025

$5.2B

−2.7% YoY · 7% 5-yr CAGR

Vital signs · TTM, with 5-yr average

Revenue $5.3B 5-yr avg $4.9B

Gross margin 33% 5-yr avg 31%

Operating margin 19.7% 5-yr avg 16.7%

ROIC 31% 5-yr avg 43%

Owner-earnings margin 13% 5-yr avg 11%

Free cash flow margin 13% 5-yr avg 10%

The business in brief

read the 10-K →

What this business is and what moves its needle, from its own SEC filings.

What it is: Revenue is Residential Heating and Cooling (64%) and Commercial Heating and Cooling (36%).
What moves the needle: Gross margin has run about 29% and operating margin about 14% through the cycle, a solid spread between what it charges and what the product costs to make. Inventory runs near 13% of sales, so how fast it turns back into cash — and the risk of writing it down when demand softens — sits alongside the margin. Read this kind of business on the capital-goods cycle and the aftermarket. On its own account, the filing leans hardest on pricing power & competition, set against the numbers in what the filing emphasizes, below.
Is it a good business?: Return on capital has run high across the record (median 44%, above 15% in 10 of 10 years), though buybacks and expensed R&D and brands shrink the capital base, so the figure overstates the underlying economics. The steadier read is owner earnings: roughly 11% of revenue reaches owners as cash, consistently. Whether these returns reflect real pricing power or an accounting artifact is the judgment the 10-K is for.

Every line is arithmetic on the company's filings, shown in full in the sections below.

Where the money comes from

read the 10-K →

Residential Heating and Cooling is 64% of revenue, with Commercial Heating and Cooling the other meaningful segment at 36%.

Revenue by reportable segment, FY2025

Residential Heating and Cooling64%$3.3B
Commercial Heating and Cooling36%$1.9B
Refrigeration0%$0

By geographyUnited States93%Canada7%

From the segment footnote of the company's own 10-K. Shares are of total revenue; the profit bar shows each segment's share of segment operating profit, before unallocated corporate costs.

The record

Ten years of arithmetic, read across the cycle.

The record, 2016–2025

realized figures from each filing · older years to the left

2016’16	2017’17	2018’18	2019’19	2020’20	2021’21	2022’22	2023’23	2024’24	2025’25	TTMTTMMar 2026
											Income statement
$3.6B	$3.8B	$3.9B	$3.8B	$3.6B	$4.2B	$4.7B	$5.0B	$5.3B	$5.2B	$5.3B	RevenueRevenue
30%	29%	29%	28%	29%	28%	27%	31%	33%	33%	33%	Gross marginGross mgn
17%	17%	16%	15%	15%	14%	13%	14%	14%	13%	13%	SG&A / revenueSG&A/rev
2%	2%	2%	2%	2%	2%	2%	2%	2%	2%	2%	R&D / revenueR&D/rev
$429M	$495M	$510M	$657M	$479M	$590M	$656M	$792M	$1.0B	$1.0B	$1.0B	Operating incomeOp. inc.
11.8%	12.9%	13.1%	17.3%	13.2%	14.1%	13.9%	15.9%	19.5%	20.0%	19.7%	Operating marginOp. mgn
$278M	$306M	$359M	$409M	$356M	$464M	$497M	$591M	$811M	$806M	$793M	Net incomeNet inc.
31%	34%	23%	20%	20%	17%	19%	20%	19%	19%	19%	Effective tax rateTax rate
											Cash flow & returns
$374M	$325M	$496M	$396M	$612M	$516M	$302M	$736M	$946M	$758M	$810M	Operating cash flowOp. cash
$58M	$65M	$66M	$71M	$73M	$72M	$78M	$86M	$95M	$113M	$116M	DepreciationDeprec.
$6M	($70M)	$44M	($105M)	$159M	($45M)	($295M)	$29M	$11M	($190M)	($129M)	Working capital & otherWC & other
$84M	$98M	$95M	$106M	$79M	$107M	$101M	$250M	$164M	$119M	$149M	CapexCapex
2.3%	2.6%	2.5%	2.8%	2.2%	2.5%	2.1%	5.0%	3.1%	2.3%	2.8%	Capex / revenueCapex/rev
$316M	$261M	$430M	$325M	$534M	$443M	$224M	$650M	$851M	$639M	$693M	Owner earningsOwner earn.
8.7%	6.8%	11.1%	8.5%	14.7%	10.6%	4.8%	13.1%	15.9%	12.3%	13.2%	Owner earnings marginOE mgn
$290M	$227M	$400M	$291M	$534M	$409M	$201M	$486M	$782M	$639M	$661M	Free cash flowFCF
8.0%	5.9%	10.3%	7.6%	14.7%	9.7%	4.3%	9.8%	14.6%	12.3%	12.6%	Free cash flow marginFCF mgn
—	—	—	—	—	$0	$0	$95M	$0	$545M	$545M	AcquisitionsAcquis.
$69M	$80M	$94M	$111M	$118M	$127M	$142M	$153M	$160M	$173M	$177M	Dividends paidDiv. paid
$300M	$250M	$450M	$400M	$100M	$600M	$300M	$0	$54M	$482M	—	BuybacksBuybacks
35%	33%	46%	55%	46%	52%	42%	39%	50%	33%	31%	ROICROIC
731%	610%	—	—	—	—	—	150%	84%	69%	65%	Return on equityROE
549%	451%	—	—	—	—	—	111%	68%	54%	51%	Retained to equityRetained/eq
											Balance sheet
$50M	$68M	$46M	$40M	$129M	$37M	$61M	$69M	$422M	$35M	$50M	Cash & investmentsCash+inv
$470M	$507M	$473M	$478M	$448M	$508M	$609M	$595M	$661M	$579M	$648M	ReceivablesReceiv.
$419M	$484M	$510M	$544M	$439M	$511M	$753M	$842M	$853M	$1.2B	$1.2B	InventoryInvent.
$361M	$349M	$433M	$372M	$340M	$402M	$427M	$375M	$490M	$438M	$465M	Accounts payablePayables
$527M	$642M	$549M	$650M	$547M	$617M	$934M	$1.1B	$1.0B	$1.3B	$1.4B	Operating working capitalOper. WC
$1.0B	$1.1B	$1.1B	$1.1B	$1.1B	$1.2B	$1.5B	$1.6B	$2.0B	$1.9B	$2.0B	Current assetsCur. assets
$889M	$655M	$1.0B	$1.0B	$701M	$827M	$1.6B	$1.0B	$1.3B	$1.2B	$1.3B	Current liabilitiesCur. liab.
1.1×	1.7×	1.1×	1.1×	1.6×	1.4×	0.9×	1.6×	1.5×	1.6×	1.6×	Current ratioCurr. ratio
$195M	$201M	$187M	$187M	$187M	$187M	$186M	$222M	$220M	$497M	$504M	GoodwillGoodwill
$1.8B	$1.9B	$1.8B	$2.0B	$2.0B	$2.2B	$2.6B	$2.9B	$3.6B	$4.1B	$4.3B	Total assetsAssets
$868M	$1.0B	$1.0B	$1.2B	$981M	$1.2B	$1.5B	$1.3B	$1.1B	$1.4B	$1.5B	Total debtDebt
$818M	$936M	$995M	$1.1B	$852M	$1.2B	$1.5B	$1.2B	$725M	$1.4B	$1.5B	Net debt / (cash)Net debt
15.9×	16.2×	13.3×	13.8×	16.9×	23.6×	17.0×	15.3×	26.9×	25.5×	20.8×	Interest coverageInt. cov.
$38M	$50M	($150M)	($170M)	($17M)	($269M)	($203M)	$393M	$962M	$1.2B	$1.2B	Shareholders’ equityEquity
0.9%	0.6%	0.7%	0.6%	0.7%	0.6%	0.5%	0.6%	0.5%	0.6%	0.6%	Stock comp / revenueSBC/rev
											Per share
44.0M	42.8M	41.1M	39.4M	38.6M	37.5M	35.8M	35.7M	35.8M	35.4M	35.0M	Shares out (diluted)Shares
$82.76	$89.71	$94.50	$96.63	$94.15	$111.84	$131.80	$139.55	$149.20	$146.76	$150.22	Revenue / shareRev/sh
$6.31	$7.14	$8.73	$10.37	$9.23	$12.37	$13.89	$16.56	$22.66	$22.76	$22.67	EPS (diluted)EPS
$7.18	$6.09	$10.45	$8.25	$13.83	$11.82	$6.27	$18.21	$23.76	$18.05	$19.81	Owner earnings / shareOE/sh
$6.58	$5.30	$9.74	$7.37	$13.83	$10.90	$5.62	$13.61	$21.85	$18.05	$18.88	Free cash flow / shareFCF/sh
$1.57	$1.86	$2.28	$2.80	$3.06	$3.37	$3.97	$4.30	$4.48	$4.89	$5.07	Dividends / shareDiv/sh
$1.92	$2.30	$2.32	$2.68	$2.03	$2.85	$2.82	$7.01	$4.57	$3.36	$4.25	Cap. spending / shareCapex/sh
$0.86	$1.17	$-3.64	$-4.32	$-0.44	$-7.17	$-5.67	$11.01	$26.87	$32.86	$34.68	Book value / shareBVPS

Per-share growththe realized rate an owner's share compounded

	9-yr	5-yr
Revenue / share	+6.6%/yr	+9.3%/yr
Owner earnings / share	+10.8%/yr	+5.5%/yr
EPS	+15.3%/yr	+19.8%/yr
Dividends / share	+13.5%/yr	+9.8%/yr
Capital spending / share	+6.4%/yr	+10.5%/yr
Book value / share	+49.8%/yr	—

The record, charted

FY2016–2025

Each measure over its full record; the current point and the worst year marked.

Share count

35Mpeak FY2016

ROIC

33%low FY2017

Gross margin

33%low FY2022

Net debt ÷ owner earnings

2.1×peak FY2022

Owner earnings vs. net income

Owner earningsNet income

The accountant's number, and the cash an owner can take; the gap is the tell.

$639Mowner earningsvs.$806Mnet incomelow FY2022

Where the cash went

ReinvestBuybacksDividendsAcquisitionsRetainedBeyond op. cash

Each year's outlays against its operating cash: the mix, and how it drifts. The hatched cap is spending beyond that year's operating cash — financed from the balance sheet or borrowing, not operations.

FY2016FY2025

Owner-earnings bridge

FY2021–FY2025cash-flow statement, SEC EDGAR →

Net income is the accountant's number; owner earnings is the cash an owner could take out. The walk between them, off the cash-flow statement, and whether the gap is widening or holding.

In fiscal 2025 the business reported $806M of profit but $639M of owner earnings: $167M less than the profit line, taken out by capital spending and the timing of cash.

Reported net income$806M

Owner earnings$639M · 12% of revenue

	FY2025	FY2024	FY2023	FY2022	FY2021
Reported net income	$806M	$811M	$591M	$497M	$464M
Depreciation & amortizationnon-cash charge added back	+$113M	+$95M	+$86M	+$78M	+$72M
Stock-based compensationreal costnon-cash, but a real cost	+$29M	+$29M	+$30M	+$22M	+$24M
Working capital & othertiming of cash in and out, other non-cash items	−$190M	+$11M	+$29M	−$295M	−$45M
Cash from operations	$758M	$946M	$736M	$302M	$516M
Maintenance capital expenditurethe spending needed just to hold position and volume	−$119M	−$95M	−$86M	−$78M	−$72M
Owner earnings	$639M	$851M	$650M	$224M	$443M
Growth capital expenditurediscretionary; spent to get bigger, not to stand still	—	−$69M	−$164M	−$23M	−$34M
Free cash flow	$639M	$782M	$486M	$201M	$409M
Owner-earnings marginowner earnings ÷ revenue	12%	16%	13%	5%	11%

Owner earnings is the cash an owner could pull out without starving the business: operating cash less the capital it must spend to hold its position . The cash-flow statement also adds stock comp back as non-cash, but it is a real cost paid in shares; counted as the expense it is (less $29M), owner earnings is nearer $610M.

Maintenance capex is estimated as depreciation where a growing business invests above it; free cash flow is the figure the scorecard's free-cash margin reads.

III

Quality & stewardship

Returns, the balance sheet, capital allocation, and pay.

Owner’s Scorecard

FY2025 10-K · source on SEC EDGAR →

Will it survive?

Can it pay its interest? 25.5×

Comfortable

Operating income $1.0B ÷ interest expense $41M

What this means
Operating profit covers interest with the kind of margin Graham wanted for a defensive holding. Necessary, not sufficient, it says solvent, not cheap.
How heavy is the debt, net of cash? $1.4B · 1.3× operating profit

Modest net debt

Cash $34M + ST investments $500K − debt $1.4B

What this means
Netting $35M of cash and short-term investments against $1.4B of debt leaves $1.4B owed, about 1.3× a year's operating profit. Net debt is the leverage figure that matters: the cash is already set against the debt. Strategic or illiquid investments aren't counted here.
How long is cash tied up? 116d

Long (60+ days)

DSO 41 + DIO 122 − DPO 46 days

What this means
Days cash is tied up between paying suppliers and collecting from customers. Lower is better; a long cycle means growth itself eats cash.

Is it a good business?

Return on invested capital 42%

Very high (≥25%) through the cycle

10-yr median, range 33%–55%; 33% latest = NOPAT $842M ÷ invested capital $2.5B

Industry peers: median 11%

What this means
The rate the business earns on the money tied up in it, Buffett's north star, because over time a stock tracks the ROIC beneath it. Above ~15% sustained hints at a moat; a return below the cost of capital (~8%) erodes value as a business grows rather than building it — the test Buffett weighs most. The headline is the median of the last 10 years (it ran 33% most recently), so one peak or trough year doesn't set the verdict. Asset-light businesses (R&D expensed, little capital) read artificially high, pair this with Owner Earnings.
Owner-earnings margin 11%

Solid through the cycle

10-yr median margin, range 5%–16%; latest $639M = operating cash $758M − maintenance capex $119M

Industry peers: median 7%

What this means
What an owner could take out without starving the business: operating cash less the maintenance capital it must spend to hold its position — Buffett's owner earnings. That's 12% of revenue this year, a 11% median across 10 years. Treating stock comp as the real expense it is (less $29M of SBC) leaves $610M.
Are earnings backed by cash? 0.94×

Mostly cash-backed

Cash from ops $758M ÷ net income $806M

What this means
How much of reported profit showed up as operating cash. Above 1× is reassuring; well below suggests earnings lean on accruals. One year is noisy, growth and working-capital swings distort it, and this is operating cash, not free cash. Watch the multi-year trend.

How is the cash used?

Where do the earnings go? 103%

Returned more than it generated

Dividends + buybacks $655M ÷ Owner Earnings $639M

What this means
The company returned more than it generated: against $639M of Owner Earnings, $655M (103%) went back to shareholders, $173M dividends, $482M buybacks — the excess came from the balance sheet or borrowing, not the year's operations. Net of $29M stock comp, the real buyback was about $453M. Sustained, that pattern draws down cash or adds debt; the net-debt line above shows where it stands.
Investing or harvesting? 1.06×

Maintaining

Capex $119M ÷ depreciation $113M

What this means
Descriptive, not a grade. Above ~1× means investing faster than assets wear out (growth, or, sustained for years, today's earnings carrying less depreciation than tomorrow's will). Below means spending less than it's wearing out (efficiency, or a melting asset base). The ratio won't tell you which; the filings will.

Graham’s defensive tests · 4 of 6 met

Graham’s numerical criteria for the defensive investor (The Intelligent Investor, ch. 14), run on the filings. A floor of safety, not a buy signal; many fine modern businesses fail his strictest liquidity rules by design.

Adequate size Pass

Revenue ≥ $2B · $5.2B

What this means
Big enough to weather a storm. Graham's 1972 floor was ~$100M of sales (≈ $700M today); we use a $2B revenue line as a conservative modern stand-in.
Strong liquidity Near

Current ratio ≥ 2× · 1.60×

What this means
Current assets at least twice current liabilities, near-term bills covered without touching the business. Strict by design: many cash-rich modern firms run leaner and miss it, holding their cushion in longer-dated securities.
Conservative debt Miss

Debt ≤ working capital · $1.4B vs $712M WC

What this means
Graham's rule that borrowings not exceed net current assets. Capital-heavy and buyback-heavy firms routinely fail it, read it next to interest coverage, not alone.
Earnings stability Pass

A profit every year (10-yr record) · no losses

What this means
Graham wanted earnings in each of the past ten years, the stability a defensive owner leans on.
Dividend record Pass

Uninterrupted dividends · paid every year (10)

What this means
An unbroken dividend was Graham's mark of durability. He wanted twenty years; the filings show about ten, and a single suspension breaks the streak. Non-payers, many fine modern compounders, fall outside his defensive net by design.
Earnings growth Pass

Earnings +33% over the record · +134%

What this means
At least a third more earnings than a decade ago, averaging three years at each end. Net income (not per-share), so stock splits don't distort it, buybacks and dilution show up in the share-count line instead.
Moderate price —

P/E ≤ 15 and P/E × P/B ≤ 22.5 · decided by the price

What this means
Graham's valuation gate, the wall he kept between a sound business and a sound investment. Three-year average earnings are $21.15/share (latest year $23.16), the averaged base the calculator's gate runs on, and book value is $33.42/share. Enter a price in “What the price implies” just below for the P/E, P/B, and whether it clears. But this is the rule Buffett outgrew: there's no hard P/E law, and a wonderful business can deserve a far richer multiple if the thesis holds, treat it as the bargain-hunter's floor, not a verdict on the price.

Durability & moat, 2016–2025

Whether the record’s returns held, and what the capital reinvested earned.

Profitable years 10 of 10

What this means
Never lost money over the record, the earnings stability Graham insisted on.
Return on capital ≥ 15% 10 of 10 yrs

What this means
A moat shows up as a high return on invested capital that holds year after year, not one good vintage.
Operating margin 13% → 18% (3-yr avg ends)

In the filing’s words The record and the words agree: the margin widened and the filing attributes the gain to its own pricing, not volume alone.

What this means
Through the cycle the operating margin widened — about 13% early to 18% lately, median 14% — pricing power intact or improving.
Reinvestment, incremental ROIC 41%

What this means
Every extra dollar the business reinvested came back at a high incremental return — the lens GBM read for a moat that reinvests rather than merely harvests. The record and the 10-K are where you check whether the rate holds.
Owner earnings growth +11%/yr

What this means
Owner earnings grew about 11% a year over the record.
Worst year 2016 · 11.8% op. margin

What this means
Stayed profitable even in its hardest year, the resilience that survives recessions.
Share count −2.4%/yr

What this means
The share count is shrinking, buybacks are quietly growing your slice of the business.
Dividend record rising

What this means
Paid and raised the dividend across the record, the continuity Graham prized.

Does AI threaten the moat?

Low contestability

The moat is physical, regulated or balance-sheet-funded, the kind AI cuts costs within but does not contest.

In its own filing Named as a competitive risk

Its FY2025 10-K names artificial intelligence as a competitive threat.

“If we fail to keep pace with rapidly evolving technological developments in AI, our competitive position and business results may suffer.”

AI is unlikely to contest a moat that is physical, regulated or balance-sheet-funded; here it reads more as a cost tool than a threat.

Read from the filing's own risk factors, paired with the industry's structure under its SIC code; the durability is read above, the price below.

All figures as filed; the source filing is linked above.

Current Position

as of the latest quarter, Mar 31, 2026

Can the business pay what it owes this year, off the freshest balance sheet: the quality of the assets, the debt actually coming due, and what a low ratio means here.

Current assets$2.0B

Cash & short-term investments$50M
Receivables$648M
Inventory$1.2B
Other current assets$124M

Current liabilities$1.3B

Debt due within a year$18M
Accounts payable$465M
Other current liabilities$810M

Current ratio1.57×all current assets ÷ what's due · Graham looked for 2×

Quick ratio0.64×stricter: inventory excluded

Cash ratio0.04×strictest: cash alone against what's due

Working capital$740Mthe cushion left after near-term bills

Debt due this year vs. cash$18M due · $50M cash covered by cash on hand, no refinancing forced · both figures from the Mar 31, 2026 balance sheet

Revenue, latest quarter vs. a year ago+5.8%the freshest read on whether the business is still growing

Current ratio, recent quarters1.6× → 1.6×

Deeper floors

Tangible book value$441Mequity stripped of goodwill & intangibles

Net current asset value($1.0B)Graham's net-net: current assets less all liabilities

Debt incl. operating leases$450M$432M of it operating leases; with finance leases, “total fixed claims” below reaches $1.8B (annual-report basis)

Deferred revenue$20Mcustomer cash collected before delivery; operating float

From the company's latest filing.

Debt maturity

the debt note, SEC EDGAR →

Not how much it owes, but when it falls due, and against what. The ladder the company files, beside cash on hand and a year's owner earnings.

'26$99M

'27$81M

'28$69M

'29$58M

'30$41M

later$83M

Bars scaled to the largest single year; “later” is everything due after 2030, shown apart since it dwarfs the years.

Due in the next 12 months$99Mthe first rung: what must be repaid or rolled over within the year

Within two years$180Mthe near wall, the part most exposed to today’s credit conditions

Biggest single year$99Min 2026the lumpiest maturity, where a refinancing, if needed, is largest

Total scheduled principal$430Mevery year plus what lies beyond, as the footnote totals it

Against what the business has and earns

Cash & short-term investments, Mar 31, 2026$50M

One year of owner earnings (FY2025)$639M

Together, against $99M due next year7.0×

Cash on hand as of Mar 31, 2026 plus a year’s owner earnings comes to $689M against the $99M due in the twelve months after the Dec 31, 2025 schedule: 7.0 times it.

Maturity schedule extracted from the company’s Dec 31, 2025 annual report and reconciled to the total the table states.

Lease obligations

the lease note, SEC EDGAR →

Debt by another name. What the business owes on the property, aircraft, stores and equipment it rents rather than owns is a fixed claim due on a schedule; added back to the debt, it is the true leverage. That ladder, operating and finance leases together, and what it adds to the debt on the page above.

Operating leasesFinance leases

'26$120M

'27$98M

'28$82M

'29$78M

'30$44M

later$83M

Lease payments by year, scaled to the largest; “later” is everything beyond year five, shown apart. These are the contractual cash payments, before the interest the filing imputes back out to the balance-sheet liability.

Due in the next 12 months$120Ma fixed cash payment, owed whether or not the business has a good year

Total lease payments$505Mevery year plus the tail, undiscounted: the full cash the leases will take

On the balance sheet$451Mthe present value of those payments, the recognised lease liability

True leverage: debt plus leases

On-balance-sheet debt$1.4B

Lease obligations (present value)$451M

Total fixed claims on the business$1.8B

Counting the leases the way Buffett does, the fixed claims on this business come to $1.8B, of which the leases are 25%. The lease wall above and the debt schedule together are the calendar of what must be paid, and when.

Lease ladder read from the ASC 842 tags in the company’s Dec 31, 2025 annual report and reconciled: the yearly buckets sum to the undiscounted total, which less the imputed interest equals the balance-sheet liability; a ladder that doesn’t tie out is withheld.

How the cash was used, 2016–2025

Over the record, the business generated $5.5B of operating cash; how management split it reads as a cash returner, paying most of what it earns straight back to owners.

Reinvested$1.2B · 22%
Dividends$1.2B · 22%
Buybacks$2.9B · 54%
Retained (debt / cash)$95M · 2%

Returned to owners$4.2B
89% of the owner earnings the business produced over the span, $1.2B as dividends and $2.9B as buybacks.
Average price paid for buybacks—
Buybacks ran $2.9B over the span, but a stock split in the window left the reported buyback-share counts on a basis the diluted-share count doesn't match, so a comparable average price can't be drawn.
Net change in share count−20.5%
The diluted count fell from 44M to 35M, so the buybacks outran the stock issued to staff.
Dividend record$4.89/sh
Paid in 10 of the years on record, the per-share dividend growing about 13% a year. It was never cut over the span.
Return on what it retained53%
Of the earnings it kept rather than paid out ($714M over the span), annual owner earnings (first three years vs last three) grew $378M, so each retained $1 added about 0.53 of yearly owner earnings. Buffett's test, run on owner earnings instead of market value.

Buybacks are gross of stock issued to staff; the share-count line above is the net of that, the figure that decides whether owners gained. The average price paid blends a year of purchases (and any accelerated repurchase), so it is close, not exact. The record of where the cash went and on what terms.

Acquisitions & goodwill

from the balance sheet & the 10-year cash-flow record

Goodwill grows only when a company acquires and falls only when it concedes it overpaid. The size of that bet, the cash put into buying rather than building, and how much has already been written off.

Goodwill & intangibles$770M19% of all assets; the premium carried on the balance sheet for businesses acquired

Against book equity43%goodwill is this share of book equity; the rest is the company’s own retained and paid-in capital

Cash spent acquiring$642Mover 10 years buying other businesses, against $1.2B of capital spent building

$12M written down across 1 year (2018): goodwill the company has already conceded it overpaid for, charged against earnings. A write-down costs no cash (the cash went out when the deal was signed), but it is management marking its own past judgment to market.

Goodwill, acquired intangibles and equity from the latest balance sheet; acquisition spend and write-downs summed across the 10-year record, from the company's own filings.

Management, ownership & pay

read the proxy →

From the proxy: how much of the business the people running it own, and how they are paid.

Insider ownership<1%
The stake all directors and executive officers hold together, per the 2026 proxy: skin in the game, the first thing Munger reads.
CEO pay ratio133:1
What the chief earns for every dollar the median employee makes, per the 2026 proxy. A high ratio alone settles nothing; some businesses are genuinely top-heavy in scarce skill. A runaway figure is where Buffett starts asking whether the board is doing its job.
Stock-based compensation$29M
The slice of the business handed to employees in shares this year, 1% of revenue, equal to 3% of operating profit. Buffett's oldest accounting fight: this is compensation, compensation is an expense, real whether or not the headline earnings admit it. One trap: the cash-flow statement adds SBC back, so the operating cash, and the owner earnings drawn from it, are flattered by exactly this amount; counted as the cost it is, what an owner keeps is lower.

Inverting the record

Invert: instead of why Lennox Intl is a good business, the question is what would make owning it a mistake, and whether those marks are in the record. Disconfirming tests across 2016–2025.

1 of the 6 tests turned up something to look into; the other 5 came back clean.

Look hereDid receivables and inventory outpace sales?24% → 35% of sales
Receivables and inventory grew from $888M to $1.9B while revenue grew 44%: working capital is climbing faster than sales (24% of revenue then, 35% now). That can mean customers paying slower, stock building up, or revenue pulled forward. The filing's cash-flow and receivables notes say which.

And these came back clean

Is it less profitable than it was?
Did the share count rise anyway?
Did debt outgrow the business?
Did reported profit become cash?
Are "one-time" charges a yearly habit?

Each test is read from the filings and is noisy alone; a flag can mark a cyclical trough or a year of heavy investment as easily as a problem. The filing says which.

Peers, Building Products

The same industry, side by side on owner economics. Each figure is a through-cycle median, so a peak or trough year can’t distort it; the group median at the foot is the line to read each against.

Company	Revenue	Gross margin	Op. margin	ROIC	Owner earn. margin
CARRCarrier Global Corporation Common Stock	$21.7B	27%	13.1%	14%	9%
TEXTerex	$5.4B	20%	8.6%	11%	5%
ZBRAZebra Technologies	$5.4B	47%	13.7%	13%	15%
BCBrunswick	$5.4B	27%	11.1%	13%	7%
LIILennox Intl	$5.2B	29%	14.0%	44%	11%
WFRDWeatherford International plc	$4.9B	56%	3.2%	5%	5%
FLSFlowserve	$4.7B	30%	7.7%	7%	6%
MIDDMiddleby	$3.2B	38%	16.9%	9%	15%
Group median	—	30%	12.1%	12%	8%

The price

What a price has to assume.

What the price implies

reverse-DCF

Type today's close and see the owner-earnings growth you'd have to believe to justify it, beside what Lennox Intl has delivered.

Today’s price $

Through the cycle, Lennox Intl earns about $562M on its 10.8% median owner-earnings margin. This year’s 12.3% margin runs in line with that. Normalize, below, values the price on that through-cycle figure rather than the latest year.

Base Normalize · through-cycle ($562M) Net of stock comp (−$29M) Steady-state · maintenance capex ($691M)

—

The assumptions Required return 9% Years of high growth 10 Terminal growth 2.5%

9.0% = the 4.55% 10-year Treasury (Jul 15, 2026) + 4.45 points of equity premium. The rate you require is yours to set.

Enter a price above to run it.

Implied by the price—

Owner-earnings growth · ’21→’25+22%/yr

Owner-earnings growth · ’16→’25+12%/yr

Owner-earnings yield—

P/E (3-yr earnings ’23–’25)—

P/B—

Graham’s price gate—

Graham capped the multiple at 15×; Buffett and Munger let that rule go: a wonderful business can deserve 50× if the thesis holds. The gate marks the bargain-hunter's floor.

Against a high-grade bond: Graham’s yardstick bond yield%

Prefilled with the 10-year Treasury (4.55%, as of Jul 15, 2026). Edit it for today’s exact figure, or a AAA corporate yield.

Graham measured a stock against the bond you could own instead, the heart of his margin of safety. Enter a price above to weigh the owner-earnings yield against this bond.

Free cash flow $661M on 35M shares outstanding, per the 10-Q cover, as of 2026-04-22; net debt $1.5B. The base is the latest year by default; Normalize values it on the through-cycle median owner-earnings margin (to avoid paying on a peak year). Net of stock comp treats option pay as the expense it is. Capex ($149M) runs well above depreciation ($116M), so this is a build-out; Steady-state swaps total capex for maintenance (≈ depreciation), lifting the base to about $691M, the cash it would throw off if it stopped expanding. The dials set the multiple a growth belief justifies; the price, and every dollar on this page, is yours.

Weigh LII against another business →

The owners of LII: the meeting and the votes →

Cite: Owner Scorecard, "Lennox Intl (LII), the owner's record," https://ownerscorecard.com/c/LII, data as of 2026-07-09.

Manual order: ← LIFE its page in the Manual LILA →

Industry order: ← JHX the Building Products chapter MAS →