What Lennox International Inc. told the SEC could break it.

Lennox makes many products at single-location production facilities and relies on key suppliers that may themselves be single-location or sole-source for unique necessary products; an interruption, lost relationship or terminated key-supplier contract could hurt delivery and profitability.

“We manufacture many of our products at single-location production facilities. In certain instances, we heavily rely on suppliers who also may concentrate production in single locations or source unique, necessary products from only one supplier. As a result, any significant interruptions in production at one or more of our facilities or at a facility of one of our key suppliers, any failure to maintain favorable relationships with our suppliers, or any termination of a key supplier relationship, could negatively impact our profitability and ability to deliver our products to our customers.”

Lennox's HVAC manufacturing consumes large volumes of aluminum and copper (87.6 million pounds notional hedged); a 10% move in metal forward prices changes the fair value of its commodity futures by ~$13.2 million, indicating material input-cost exposure.

“Information about our exposure to metal commodity price market risks and a sensitivity analysis related to our metal commodity hedges is presented below (in millions): Notional amount (pounds of aluminum and copper) 87.6 Carrying amount and fair value of net asset $ 23.6 Change in fair value from 10% change in forward prices $ 13.2”

The AIM Act gives the EPA authority to phase down high-GWP HFC refrigerants; the transition to refrigerants with GWP ≤700 for most commercial/residential HVAC products became effective January 1, 2025, requiring Lennox to redesign and re-certify products.

“In 2020, in response to a global agreement to reduce greenhouse gasses, the bipartisan American Innovation and Manufacturing Act gave the U.S. Environmental Protection Agency (“EPA”) authority to regulate HFCs and begin the phase down of refrigerants with a higher global warming potential (“GWP”). Transition to refrigerants with a GWP of 700 or less for most commercial and residential HVAC products became effective January 1, 2025.”