ALLIED AIR

Lennox International makes sure the temperature is just right. The company makes climate control equipment such as heating, ventilation, air conditioning, and refrigeration (HVACR) units for residential and commercial uses. It sells furnaces, heat pumps, fireplaces, and air conditioners under such brands as Lennox, Armstrong Air, and Aire-Flo; chillers and condensing units are sold under the Bohn and Larkin names. Products are sold through some 7,000 dealers in the US and Canada. Lennox also owns and operates 100 service and installation centers. Lennox has operations in Asia, Australia, Europe, and South America. Named after inventor Dave Lennox, the company was founded in 1895.

The company operates in four segments: residential heating and cooling, commercial heating and cooling, Service Experts (installation and service); and refrigeration. The residential business segment is its largest by sales (40%). That segment's sales declined by 5% in 2011 over 2010 due to several factors, including higher commodity prices on raw materials and components and the fact that federal tax credits were reduced on high-efficiency system replacements in the US and Canada. Lennox put its Service Experts business up for sale in 2012, but will keep the commercial service business called Lennox National Account Services (NAS). NAS accounted for about $80 million of Service Experts $529 million in 2011 sales.

The company's refrigeration segment (about 25% of sales) increased in 2011 to some $805 million compared to $550 million in 2010. The gain in net sales was attributed to the acquisition of supermarket refrigeration equipment manufacturer Kysor/Warren from Manitowoc for nearly $140 million in 2011. Kysor/Warren contributed close to 40% to net sales in 2011.

Its commercial heating & cooling segment (around 20% of sales) increased just over 10% in 2011 compared to 2010. Products like Energence and Strategos supported the increase in sales. The decline in residential HVAC equipment installations in 2011 affected the company's service experts segment (about 15% of sales) with net sales declining some 10% compared to the previous year.

Overall, Lennox's net sales went up 5% to $3.3 billion in 2011 versus $3.1 billion in 2010 partly due to a recovery in the US residential market. The company also cut costs. It adopted lean manufacturing practices and worked to improve efficiency at certain facilities in order to reduce waste. Lennox also divested and consolidated some operations. In 2012 the company sold its Lennox Hearth Products business to private investment firm The Comvest Group in a cash deal. The company transferred its Iowa-based air conditioning operations to a new manufacturing facility it opened in Mexico so that it may more effectively compete, particularly in the Sun Belt region. Lennox also closed manufacturing plants in Illinois, South Carolina, and California. A dozen service centers also were sold in 2010.

Internationally, Lennox is expanding its geographic footprint, especially in developing markets such as China. The company is increasing the size of its manufacturing facilities there in anticipation of growth in the cold storage market. The company currently has manufacturing locations in Germany, France, Brazil, and China. Australia and New Zealand are leading countries that support the company's wholesale distribution business, which in turn serves the refrigeration and HVAC industry.