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Stock-Based Compensation | 12 Months Ended
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Dec. 31, 2025
Share-Based Payment Arrangement [Abstract] |
Stock-Based Compensation | 15. Stock-Based Compensation: Stock-based compensation expense was included in Selling, general and administrative expenses in the accompanying Consolidated Statements of Operations as follows (in millions):
| For the Years Ended December 31,
| 2025 |  | 2024 |  | 2023
Compensation expense | $ | 28.4 |  |  | $ | 28.5 |  |  | $ | 30.1 |
Incentive Plan Under the Lennox International Inc. 2019 Equity and Incentive Compensation Plan, we are authorized to issue awards for 1.7 million shares of common stock. The plan provides for various long-term incentive awards, including performance share units, restricted stock units and stock appreciation rights. A description of these long-term incentive awards and related activity within each award category is provided below. As of December 31, 2025, there were 1.6 million shares available for future issuance. Historically our annual equity awards were granted in December. In 2023, we made the decision to move the annual grant for 2023 to February 2024. Thus, there were no equity grants in 2023. We also made the decision to award the Board of Directors fully vested shares on an annual basis. As a result, approximately $1.1 million and $1.3 million of compensation expense was recognized in 2025 for the 2025 director grant and in 2024 for the 2024 director grant, respectively. Performance Share Units Performance share units are granted to certain employees at the discretion of the Board of Directors with a three-year performance period beginning January 1 st of each year. Upon meeting the performance and vesting criteria, performance share units are converted to an equal number of shares of our common stock. Performance share units vest if, at the end of the three-year performance period, at least the threshold performance level has been attained. To the extent that the payout level attained is less than 100%, the difference between 100% and the units earned and distributed will be forfeited. Eligible participants may also earn additional units of our common stock, which would increase the potential payout up to 200% of the units granted, dependin g on LII’s performance over the three-year performance period. Performance share units are classified as equity awards. Compensation expense is recognized on an earnings curve over the period and is based on the expected number of units to be earned and the fair value of the stock at the date of grant. The fair value of units is calculated as the average of the high and low market price of the stock on the date of grant discounted by the expected dividend rate over the service period. The number of units expected to be earned will be adjusted in future periods as necessary to reflect changes in the estimated number of award to be issued and, upon vesting, the actual number of units awarded. Our practice is to issue new shares of common stock or utilize treasury stock to satisfy performance share unit distributions. The following table provides information on our performance share units:
| For the Years Ended December 31,
| 2025 |  | 2024 |  | 2023
Compensation expense for performance share units (in millions) | $ | 12.8 |  |  | $ | 14.9 |  |  | $ | 15.2 |
Weighted-average fair value of grants, per share | $ | 558.78 |  |  | $ | 403.68 |  |  | $ | — |
Payout ratio for shares paid | 200 | % |  | 189 | % |  | 131 | %
A summary of the status of our undistributed performance share units as of December 31, 2025, and changes during the year then ended, is presented below (in thousands, except per share data):
| Shares |  | Weighted- Average Grant Date Fair Value per Share
Undistributed performance share units as of December 31, 2024 | 99.1 |  |  | $ | 305.14 |
Granted | 18.1 |  |  | $ | 558.78 |
Adjustment to shares paid based on payout ratio | 30.4 |  |  | $ | 245.27 |
Distributed | (42.2) |  |  | $ | 289.77 |
Forfeited | (7.1) |  |  | $ | 387.59 |
Undistributed performance share units as of December 31, 2025 (1) | 98.3 |  |  | $ | 330.10 |
(1) Undistributed performance share units include 36,590 units with a weighted-average grant date fair value of $473.11 per share that had not yet vested and 61,710 units that have vested but were not yet distributed with a fair value of $15.1 million. As of December 31, 2025, we had $11.4 million of total unrecognized compensation cost related to non-vested performance share units that are expected to be recognized over a weighted-average period of 1.78 years. Our weighted-average estimated forfeiture rate for these performance share units was 28.0% as of December 31, 2025. The total fair value of performance share units distributed and the resulting tax deductions to realized tax benefits were as follows (in millions):
| For the Years Ended December 31,
| 2025 |  | 2024 |  | 2023
Fair value of performance share units distributed | $ | 21.2 |  |  | $ | 19.5 |  |  | $ | 13.5 |
Realized tax benefits from tax deductions | $ | 5.2 |  |  | $ | 4.8 |  |  | $ | 3.3 |
Restricted Stock Units Restricted stock units are issued to attract and retain key employees. Generally, at the end of a three-year retention period, the units will vest and be distributed in shares of our common stock to the participant. Our practice is to issue new shares of common stock or utilize treasury stock to satisfy restricted stock unit vestings. Restricted stock units are classified as equity awards. The fair value of units granted is the average of the high and low market price of the stock on the date of grant discounted by the expected dividend rate over the service period. Units are amortized to compensation expense ratably over the service period. The following table provides information on our restricted stock units (in millions, except per share data):
| For the Years Ended December 31,
| 2025 |  | 2024 |  | 2023
Compensation expense for restricted stock units | $ | 10.5 |  |  | $ | 9.4 |  |  | $ | 10.8 |
Weighted-average fair value of grants, per share | $ | 551.56 |  |  | $ | 404.91 |  |  | $ | — |
A summary of our non-vested restricted stock units as of December 31, 2025 and changes during the year then ended is presented below (in thousands, except per share data):
| Shares |  | Weighted- Average Grant Date Fair Value per Share
Non-vested restricted stock units as of December 31, 2024 | 70.9 |  |  | $ | 306.01 |
Granted | 24.1 |  |  | $ | 551.56 |
Vested | (40.6) |  |  | $ | 243.07 |
Forfeited | (8.9) |  |  | $ | 388.26 |
Non-vested restricted stock units as of December 31, 2025 (1) | 45.5 |  |  | $ | 474.46 |
(1) As of December 31, 2025, we had $12.1 million of total unrecognized compensation cost related to non-vested restricted stock units that are expected to be recognized over a weighted-average period of 1.87 years. Our estimated forfeiture rate for restricted stock units was 20.0% as of December 31, 2025. The total fair value of restricted stock units vested and the resulting tax deductions to realized tax benefits were as follows (in millions):
| For the Years Ended December 31,
| 2025 |  | 2024 |  | 2023
Fair value of restricted stock units vested | $ | 17.9 |  |  | $ | 17.3 |  |  | $ | 15.0 |
Realized tax benefits from tax deductions | $ | 4.4 |  |  | $ | 4.2 |  |  | $ | 3.7 |
Stock Appreciation Rights Stock appreciation rights are issued to certain key employees. Each recipient is given the “right” to receive compensation, paid in shares of our common stock, equal to the future appreciation of our common stock price. Stock appreciation rights generally vest in one-third increments beginning on the first anniversary date after the grant date and expire after seven years. Our practice is to issue new shares of common stock or utilize treasury stock to satisfy the exercise of stock appreciation rights. The following table provides information on our stock appreciation rights (in millions, except per share data):
| For the Years Ended December 31,
| 2025 |  | 2024 |  | 2023
Compensation expense for stock appreciation rights | $ | 5.1 |  |  | $ | 4.2 |  |  | $ | 4.1 |
Weighted-average fair value of grants, per share | $ | 161.50 |  |  | $ | 136.37 |  |  | $ | — |
Compensation expense for stock appreciation rights is based on the fair value on the date of grant, estimated using the Black-Scholes-Merton valuation model, and is recognized over the service period. We used historical stock price data to estimate the expected volatility. We determined that the recipients of stock appreciation rights can be combined into one employee group that has similar historical exercise behavior and we used our historical pattern of award exercises to estimate the expected life of the awards for the employee group. The risk-free interest rate was based on the zero-coupon U.S. Treasury yield curve with a maturity equal to the expected life of the awards at the time of grant. The fair value of the stock appreciation rights granted in 2025 and 2024 were estimated on the date of grant using the following assumptions.
|  | 2025 |  | 2024
Expected dividend yield |  | 0.97 | % |  | 1.23 | %
Risk-free interest rate |  | 4.28 | % |  | 4.05 | %
Expected volatility |  | 29.95 | % |  | 34.89 | %
Expected life (in years) |  | 4.09 |  | 4.18
A summary of our stock appreciation rights as of December 31, 2025, and changes during the year then ended, is presented below (in thousands, except per share data):
| Shares |  | Weighted-Average Exercise Price per Share
Outstanding stock appreciation rights as of December 31, 2024 | 203.7 |  |  | $ | 306.61 |
Granted | 37.3 |  |  | $ | 576.28 |
Exercised | (37.3) |  |  | $ | 281.41 |
Forfeited | (14.1) |  |  | $ | 417.89 |
Outstanding stock appreciation rights as of December 31, 2025 | 189.6 |  |  | $ | 356.37 |
Exercisable stock appreciation rights as of December 31, 2025 | 153.1 |  |  | $ | 317.79 |
The following table summarizes information about stock appreciation rights outstanding as of December 31, 2025 (in millions, except per share data and years; shares in thousands):
|  | Stock Appreciation Rights Outstanding |  | Stock Appreciation Rights Exercisable
Range of Exercise Prices |  | Shares |  | Weighted-Average Remaining Contractual Term (in years) |  | Aggregate Intrinsic Value |  | Shares (1) |  | Weighted-Average Remaining Contractual Life (in years) |  | Aggregate Intrinsic Value
$214.63 to $257.08 |  | 19.9 |  |  | 1.0 |  | $ | 4.6 |  |  | 19.9 |  |  | 1.0 |  | $ | 5.1 |
$278.00 to $328.65 |  | 46.5 |  |  | 2.54 |  | $ | 8.4 |  |  | 46.5 |  |  | 2.54 |  | $ | 14.2 |
$259.56 to $418.69 |  | 90.3 |  |  | 4.45 |  | $ | 14.6 |  |  | 76.8 |  |  | 4.33 |  | $ | 23.6 |
$576.28 |  | 32.9 |  |  | 6.1 |  | $ | — |  |  | 9.9 |  |  | 6.1 |  | $ | 5.7 |
(1) Share amounts are rounded but the balance accurately reflects the actual amount of exercisable stock appreciation rights as of December 31, 2025. As of December 31, 2025, we had $5.7 million of unrecognized compensation cost related to non-vested stock appreciation rights that is expected to be recognized over a weighted-average period of 1.75 years. Our estimated forfeiture rate for stock appreciation rights was 20.0% as of December 31, 2025. The total intrinsic value of stock appreciation rights exercised and the resulting tax deductions to realize tax benefits were as follows (in millions):
| For the Years Ended December 31,
| 2025 |  | 2024 |  | 2023
Intrinsic value of stock appreciation rights exercised | $ | 10.7 |  |  | $ | 25.4 |  |  | $ | 19.8 |
Realized tax benefits from tax deductions | $ | 2.6 |  |  | $ | 6.2 |  |  | $ | 4.8 |
Employee Stock Purchase Plan Effective July 1, 2025, the Company amended the 2022 Employee Stock Purchase Plan (“ESPP”) to increase the discount percentage for which all employees who meet certain service requirements are eligible to purchase our common stock through payroll deductions at the end of six month offering periods. The purchase price for such shares decreased from 95% to 85% of the fair market value of the stock at the lower of the fair market value of the shares at the subscription date (first date of offering period) or the purchase date (last date of offering period) making the plan compensatory. For the year ended December 31, 2025, we recognized $0.7 million in compensation expense under the amended ESPP. A maximum of 1.0 million shares is authorized for purchase until issuance of all shares available under the plan, unless terminated earlier at the discretion of the Board of Directors. Employees purchased approximately 11,300 shares under the ESPP during the year ended December 31, 2025. Approximately 960,000 shares remain available for purchase under the ESPP as of December 31, 2025.

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