LII 10-K & 10-Q changes, risk factors and insider trading

The following risk factors and other information included in this Annual Report on Form 10-K should be carefully considered. We believe these are the principal material risks currently facing our business; however, additional risks and uncertainties not presently known to us or that we presently deem less significant may also impair our business operations. If any of the following risks or those disclosed in our other SECSecurities and Exchange Commission filings occurs, our business, financial condition or results of operations could be materially adversely affected.

Substantially all of the markets in which we operate are competitive. The most significant competitive factors we face are product availability, product reliability, energy efficiency, product performance, service, and price, with the relative importance of these factors varying among our product lines. Other factors that affect competition in the HVACR market include the development and application of new technologies, reputation of our company and brands, global supply chain constraints, and new product introductions. In some of the markets in which we compete, such as parts and supplies, distribution, and service of commercial heating and cooling equipment, barriers to entry are lower, which has led to highly competitive markets consisting of various-sized entities, ranging from small or local operators to large regional businesses. We may not be able to adapt to market changes as quickly or effectively as our current and future competitors. Also, the establishment of manufacturing operations in low-cost countries could provide cost advantages to existing and emerging competitors. Some of our competitors may have greater financial resources than we have, allowing them to invest in more extensive research and development and/or marketing activity and making them better able to withstand adverse HVACR market conditions. Current and future competitive pressures may cause us to reduce our prices or lose market share, or could negatively affect our cash flow, all of which could have a material adverse effect on our results of operations. Negative media reports about us or our businesses, whether accurate or inaccurate, could damage our reputation and relationships with our customers and suppliers, cause customers and suppliers to terminate their relationship with us, or impair our ability to effectively compete, which could adversely affect our business, financial condition, results of operations and cash flows.

Our future success depends on our continued investment in research and new product development as well as our ability to commercialize new HVACR technological advances in domestic and global markets. The integration of any such new products or technologies into our business may also require the development of new processes and the expenditure of significant financial and operational resources. If we are unable to continue to timely and successfully develop and market new products, achieve technological advances, or extend our business model and technological advances into internationalnew markets, our business and results of operations could be adversely impacted.

WeTo remain competitive, we are engaged in various manufacturing rationalization actions designed to achieve our strategic priorities of manufacturing, sourcing, and distribution excellence and of lowering our cost structure. For example, we are continuing to reorganize our North American distribution network in order to better serve our customers’ needs by deploying parts and equipment inventory closer to them. In such case, our results of operations and profitability may be negatively impacted, making us less competitive and potentially causing us to lose market share.

Further, even with all of our facilities running at full production, we could potentially be unable to fully meet demand during an unanticipated period of exceptionally high demand. This inability to fully meet demand would be exacerbated if a single-location production facility is disrupted due to external factors including, but not limited to, a climate-related disaster, pandemic,pandemic or epidemic, geopolitical political instability, or war, among other things.war. Our inability to meet our customers’ demand for our products could have a material adverse effect on our business, financial condition, and results of operations. Conversely, reduced demand for our products and services could unfavorably impact our absorption of fixed costs. Any of these results could materially and adversely affect our business, financial condition, results of operations and cash flows.

We rely upon patent, copyright, trademark and trade secret laws and agreements to establish and maintain intellectual property rights in the products we sell. Our intellectual property rights could be challenged, invalidated, infringed, circumvented, or be insufficient to permit us to take advantage of current market trends or to otherwise provide competitive advantages. Further, the laws of certain countries do not protect proprietary rights to the same extent as the laws of the United States.U.S.

We are committed to attracting, motivating, developing, and retaining our employees to remain an employer of choice. Despite our efforts, we have experienced, and could continue to experience, employee turnover, particularly in our manufacturing and distribution locations. A number of factors may adversely affect the labor force available or increase labor costs, including labor shortages from high employment levels and related competition.competition or labor stoppages due to disputes or strikes. In addition, as of December 31, 2024,2025, approximately 32%26% of our core workforce locations were unionized. Our Marshalltown, Iowa-based union ratified a five-year labor agreement on November 1, 2021; however, the results of future negotiations with unions are uncertain. If we are unsuccessful in meeting these challenges, our results of operations could be materially impacted.

Recent technological advances in artificial intelligence (“AI”) and machine-learning technology both present opportunities and pose risks to us. If we fail to keep pace with rapidly evolving technological developments in AI, our competitive position and business results may suffer. We face risk of competitive disadvantage if our competitors more effectively use AI to better serve customers, drive internal efficiencies, and/or create new or enhanced products or services. TheWe have begun to incorporate AI capabilities into our operations and the introduction of these technologies, particularly generative AI, into internal processes, customer engagements, and/or new and existing product offerings may result in new or expanded risks and liabilities, including due to enhanced governmental or regulatory scrutiny, litigation, compliance issues, ethical concerns, confidentiality or security risks, as well as other factors that could adversely affect our business, reputation, and financial results. In addition, our personnel could, unbeknownst to us, improperly utilize AI and machine learning-technology while carrying out their responsibilities. The use of AI in the development of our products and services could also cause loss of intellectual property, as well as subject us to risks related to intellectual property infringement or misappropriation, data privacy and cybersecurity. The use of artificial intelligenceAI can lead to unintended consequences, including generating content that appears correct but is factually inaccurate, misleading or otherwise flawed, or that results in unintended biases and discriminatory outcomes, which could harm our reputation and business and expose us to risks related to inaccuracies or errors in the output of such technologies. Finally, multiple jurisdictions have either already put in place laws and regulations governing the use of AI, or are considering such laws and regulations. Compliance with these laws, regulations, and industry frameworks may limit our ability to leverage AI or require us to substantially revise our approach to its use.

We depend on raw materials, such as steel, copper and aluminum, and components purchased from third parties to manufacture our products. Some of these third-party suppliers are located outside of the United States.U.S. We generally concentrate purchases for a given raw material or component with a small number of suppliers. If a supplier is unable or unwilling to meet our supply requirements, including suffering any disruptions at its facilities or in its supply chain, we could experience supply interruptions or cost increases, either of which could have an adverse effect on our results of operations. For example, disruptions have occurred due to supplier capacity constraints, labor shortages, port congestion, logistical problems, the COVID-19 pandemic, and other issues. Some of these disruptions have resulted in supply chain constraints affecting our business including our ability to timely produce and ship our products.

In addition, for some of our HVACR products, we provide warranty terms ranging from one to 20 years to customers for certain components such as compressors or heat exchangers. Warranty claims are not covered by our product liability insurance and certain product liability claims may also not be covered by our product liability insurance. For certain limited products, we providedused to provide lifetime warranties. Warranties of such extended lengths pose a risk to us as actual future costs may exceed our current estimates of those costs. Warranty expense is recorded on the date that revenue is recognized and requires significant assumptions about what costs will be incurred in the future. We may be required to record material adjustments to accruals and expense in the future if actual costs for these warranties are different from our assumptions. Our product warranty liability was $158.4$167.2 million as of December 31, 2024.2025.

The sales, gross margins, and profitability for each of our segments could be directly impacted by changes in legislation, government regulations, or policies (collectively, “LRPs”) relating to global climate change and other environmental initiatives and concerns. These LRPs, implemented under global, national, and sub-national climate objectives or policies, can include changes in environmental and energy efficiency standards and tend to target the global warming potential of refrigerants and hydrofluorocarbons, equipment energy efficiency, and combustion of fossil fuels as a heating source. Many of our products consume energy and use refrigerants and hydroflurocarbons. LRPs that seek to reduce greenhouse gas emissions may require us to make increased capital expenditures to develop or market new products to meet new LRPs. Further, our customers and the markets we serve may impose emissions or other environmental standards through LRPs or consumer preferences that may require additional time, capital investment, or technological advancement. Our inability or delay in developing or marketing products that match customer demand while also meeting applicable LRPs may negatively impact our results.financial condition and results of operations.

Stakeholders are increasingly scrutinizing environmental, social and governance (“ESG”) practices, and stakeholders’ expectations regarding ESG practices are diversediverse, rapidly changing, and rapidlysometimes changing.in conflict. If we are unable to satisfy the increasingevolving ESG-related expectations of certain stakeholders, particularly as it relates to climate change, we may suffer reputational harm, which may cause our stock price to decrease or cause certain investors and financial institutions not to purchase our securities or provide us with capital or credit on favorable terms, which may cause our cost of capital to increase. In addition, our reputation and customer relationships may be damaged as a result of practices that could be associated with ESG, including as it relates to climate-related disclosures. A failure or perceived failure by us in this regard may damage our reputation and adversely affect our results of operations and financial position.condition.

We are subject to income taxes in the United StatesU.S. as well as certain foreign jurisdictions. Tax laws and regulations are continuously evolving with corporate tax reform, base-erosion efforts, global minimum tax, and increased transparency continuing to be high priorities in many tax jurisdictions in which we operate. We continue to monitor new tax legislation or other developments since significant changes in tax legislation, or in the interpretation of existing legislation, could materially and adversely affect our financial condition and results of operations.

Certain countries in which we have operations have implemented, or are in the process of implementing, legislation or practices inspired by the base erosion and profit shifting project undertaken by the Organization for Economic Co-operation and Development (“OECD”). In December 2021, the OECD issued its guidance on the Global Anti-Base Erosion (“GloBE”) rules with the purpose of ensuring multinational companies pay a minimum level tax on the income generated in each of the jurisdictions where they operate (“Pillar Two”). In December 2022, the European Council attained a consensus on Pillar Two to implement a global minimum corporate tax rate of 15%, and many European Union and G20 countries havebegan specifiedincorporating theirand plan to adhere to theimplementing OECD guidelines starting in 2024. Our effective tax rate for 20242025 incorporates our estimated Pillar Two tax liability. We are continuing to evaluate the potential impact on future periods of the Pillar Two framework, pending legislative adoption by individual countries, as such changes could result in an increase in our effective tax rate.

The U.S. government has made changes in U.S. trade policy over the past several years. These changes include renegotiating and terminating certain existing bilateral or multi-lateral trade agreements, such as the U.S.-Mexico-Canada Agreement,Agreement (“USMCA”), and initiating tariffs on certain foreign goods from a variety of countries and regions.countries. In addition, the newU.S. presidential administration has articulated that it may impose substantial new orimposed increased tariffs on foreign imports into the U.S., particularly from Canada and Mexico.Mexico for goods not covered by the USMCA. The USMCA is subject to review and renewal in 2026, and there can be no assurance that any newly negotiated terms in the USMCA will not adversely affect our business or operations. These changes in U.S. trade policy have historically resulted in,led, and may continueagain lead, to result in, one or more foreign governments adoptingenacting responsive trade policies that makeincrease itthe more difficultdifficulty or costlycost forof usdoing to dointernational business in or importtrade. orAs exporta ourconsequence, products or components from those countries. Thethe sales, gross margins, and profitability for each of our segments could be directly impacted by changes in tariffs and trade agreements.

We cannot predict the extent to which the U.S. or other countries will impose new or additional quotas, duties, tariffs, taxestaxes, non-tariff barriers, or other similar restrictions upon the import or export of our products in the future, nor can we predict future trade policy or the terms of any renegotiated trade agreements and their impact on our business. The continuing adoption or expansion of trade restrictions, the occurrence of a trade war,tensions, or other governmental actionactions related to tariffs or trade agreements or policiestrade haspolicies, themay potentialnegatively to adversely impactaffect demand for our products, our costs, our customers, our suppliers, and the U.S. economy, which in turn could have a material adverse effect on our business, results of operations, and financial condition.

The Company’sOur business may be materially and adversely impacted by changes in U.S. or global economic conditions, including recessions, economic downturns, inflation, deflation, fluctuations in interest rates, consumer spending rates, energy availability and commodity prices, and the effects of governmental initiatives to manage economic conditions. Disruptions in U.S. or global financial and credit markets or increases in the costs of capital may also have an adverse impact on our business. The tightening, unavailability or increased cost of credit adversely affects the ability of our customers to obtain financing for significant purchases and operations, resulting in a decrease in sales of our products and services and may impact the ability of our customers to make payments to us. Similarly, tightening of available credit may adversely affect our supplier base and increase the potential for one or more of our suppliers to experience financial distress or bankruptcy. Our business may also be adversely affected by future decreases in the general level of economic activity and increases in borrowing costs, which may cause our customers to cancel, decrease or delay their purchases of our products and services.

Extraordinary Events Beyond our Control, Including Conflicts, Wars, Natural Disasters, Public Health Crises, or Terrorist Acts, or Other Civil or Political Disruptions, Could Negatively Impact our Business, Which May Affect our Financial Condition, Results of Operations or Cash Flows.

Conflicts,External disruptions, including, but not limited to, conflicts, wars, natural disasters (the nature and severity of which may be impacted by climate change), public health crises, terrorist acts, or terroristother actscivil or political disruptions, may cause significant damage or disruption to our operations, employees, facilities, systems, suppliers, supply chain, distributors, resellers, or customers in the United StatesU.S. and internationally for extended periods of time and could also affect demand for our products. The extent to which any extraordinary event impacts us depends on numerous factors and future developments that we are not able to predict, including the duration and scope of the event; governmental, business, and individuals’ actions in response to the event; our ability to maintain sufficient qualified personnel; global supply chain disruptions caused by the event; and the impact on economic activity, including financial market instability.

In addition to the currency exchange risks inherent in operating in foreign countries, our international sales and operations are also sensitive to changes in foreign national priorities, including government budgets, as well as to geopolitical and economic instability. Net sales outside of the United StatesU.S. comprised approximately 6%7% of our total net sales in 2024.2025. International transactions may involve increased financial and legal risks due to differing legal systems and customs in foreign countries. The ability to manage these risks could be difficult and may limit our operations and make the manufacture and sale of our products internationally more difficult, which could negatively affect our business and results of operations.

Our information systems and those of our business partners are important to our business activities. We also outsource various information systems, including data management, to third-party service providers. Despite our security measures as well as those of our business partners and third-party service providers, the information systems we rely upon may be vulnerable to interruption or damage from cyber attacks, computer viruses, worms or other destructive or disruptive software, process breakdowns, denial of service attacks, malicious social engineering or other malicious activities, or any combination thereof. Further, as AI technologies advance, new and increasingly sophisticated attack methods are emerging, including fraud involving impersonation technologies or other forms of generative AI that enhance the scale, frequency, and effectiveness of cyber threats. Attempts have been made to attack our information systems, but we do not believe that material harm has resulted. While we have implemented controls and taken other preventative actions to strengthen these systems against future attacks, we can give no assurance that these controls and preventative actions will be effective. Any breach of data security could result in a disruption of our services orservices, improper disclosure of personal data or confidential information, or online fraud or cybertheft, which could harm our reputation, require us to expend resources to remedy such a security breach or defend against further attacksattacks, or subject us to liability under laws that protect personal data, resulting in increased operating costs or loss of revenue.

From time to time, we may seek to complement or expand our businesses through strategic acquisitions, joint ventures, and strategic relationships. For example, in 2025, we completed the acquisition of Duro Dyne and Supco. The success of thesethis and any other transactions will depend, in part, on our ability to timely identify those relationships, negotiate and close the transactions and then integrate, manage, and operate those businesses profitably. If we are unable to successfully docomplete thosethese things,actions, we may not realize the anticipated benefits associated with such transactions, which could adversely affect our business and results of operations.

•general economic conditions in the United StatesU.S. and abroad;

•extraordinary events beyond our control, such as conflicts, wars, natural disasters, public health crises, terrorist acts, or terroristother actscivil or political disruptions;

In the fourth quarter of 2023, we completed the sale of our European businesses. The European businesses were presented with the Corporate and Other business segment until their divestiture.

•Net sales increaseddecreased $359$146 million, or 7%,3%, to $5,195 million in 2025 from $5,341 million in 2024 from $4,982 million in 2023.2024.

•Net income in 20242025 increaseddecreased to $807$806 million from $590$811 million in 2023.2024.

•We returned $160$173 million to shareholders through dividend payments and repurchased $482 million as part of our Share Repurchase Plans in 2024.2025.

The Home Comfort Solutions segment experienced ana 11%7% increasedecrease in net sales and a $150$32 million increasedecrease in segment profit in 20242025 as compared to 20232024 primarily driven by favorable price and mix and higherlower sales volumes. Our Building Climate Solutions segment saw an increase in net sales of 17%5% and a $56$33 million increase in segment profit in 20242025 compared to 2023,2024, primarily due to favorable price and mix. As a result of the transition to low GWP refrigerants, customers pre-purchased R-410A equipment, which is estimated to have positively impacted revenue by $125 million.

Gross profit margins for 2024 increased 210220 basis points (“bps”) to 33.2%33.3% compared to 31.1% in 2023. Gross profit margin increased 250 bps from higher price and favorable mix, which was partially offset by 4030 bps from higher freight and distribution costs and product costs.

Losses (Gains) and Other Expenses, Net

Losses (gains) and other expenses, net for 2024 and 2023 included the following (in millions):

The net change in unrealized (gains) losses on unsettled futures contracts was due to changes in commodity prices relative to the unsettled futures contract prices. For more information on our derivatives, see Note 9 in the Notes to the Consolidated Financial Statements. Foreign currency exchange losses increased in 2024 primarily due to changes in foreign exchange rates in our primary markets. Environmental liabilities and special legal contingencylitigation charges in 2024 relate to estimated remediation costs at some of our facilities and outstanding legal settlements including asbestos. Refer to Note 5 in the Notes to the Consolidated Financial Statements for more information on litigation, including asbestos-related litigation, and environmental liabilities.

Net interest expense of $39 million in 2024 decreased from $52 million in 2023 primarily due to decreased borrowings on our revolving credit facility as a result of increased cash flow.

The income tax provision was $187$188 million in 2024 compared to $147$148 million in 2023, and the effective tax rate was 18.8% in 2024 compared to 20.0% in 2023. The 2024 and 2023 effective tax rates differ from the statutory rate of 21% primarily due to lower foreign tax rates.taxes. Refer to Note 12 in the Notes to the Consolidated Financial Statements for more information on income taxes.

Segment profit in 2024 increased $150$149 million compared to 2023 primarily due to $122 million from higher price and favorable mix, $90 million from higher sales volumes and $10$9 million from factory productivity and favorable product costs, including LIFO.costs. Partially offsetting these increases were $37 million from higher SG&A costs, $20 million from higher freight and distribution costs, $9 million from unfavorable foreign currency, and $6 million from miscellaneous other items.

Segment profit in 2024 increased $56$61 million compared to 2023 primarily due to $44 million from higher sales volumes, $39 million from price and mix benefit, and $15 million from our AES acquisition. Partially offsetting these increases were $33$28 million in expenses from higher factory inefficiencies, which includes costs related to the ramp up of our new facility in Mexico, and slightly higher product costs, which includes LIFO, and $9 million of inflationary wage impacts.

Results for the firstsecond quarter of 2026 were mixed as our Home Comfort Solutions segment faced volume headwinds driven by market softness. Overall our net sales increased 6%3% and our segment profit was relatively flat as compared to prior year. For our Home Comfort Solutions segment, net sales decreased 10%7% and segment profit decreased $37$30 million. For our Building Climate Solutions segment, net sales increased 38%24% and segment profit increased $37$35 million.

•Net sales of $1,135$1,545 million in the firstsecond quarter of 2026 reflected a 6%3% increase as compared to the same period in 2025.

•Operating income in the firstsecond quarter of 2026 decreasedincreased $5$6 million to $163$355 million as lowerfavorable sales volumesmix and higher product costsprice were partially offset by favorablelower mixsales volumes, higher product costs and price.higher freight and distribution costs.

•Net income for the firstsecond quarter of 2026 was $117$269 million.

•Diluted earnings per share was $3.35$7.72 per share in the firstsecond quarter of 2026 as compared to $3.63$7.71 per share in the same period in 2025.

•For the threesix months ended MarchJune 31,30, 2026, we returned $45$91 million to shareholders through dividend payments and repurchased $20$151 million of common stock through our share repurchase program.

Throughout 2025,2025 and 2026, the U.S. government implemented new tariff measures under various authorities, including the International Emergency Economic Powers Act ("IEEPA") and SectionSections 232122, 232, and 301 of the Trade Expansion Act of 1962 (“Section 232”).1962.

In February 2026, the U.S. Supreme Court ruled against tariffs imposed under IEEPA. The ruling did not address refunds of tariffs paid, nor did it repeal Section 232 tariffs on steel and aluminum. Following this ruling, the U.S. presidential administration imposed a temporary surcharge, known as Section 122, which appliesapplied a 10 percent10% global tariff on most imported products.products, Theseeffective through July 24, 2026. The temporary surcharge was replaced by a new Section 301 forced labor tariffs applyframework broadlyof to10% manufacturedor 12.5%, covering imports from 60 trading partners. Section 232 articles and qualifying USMCA goods andare componentexcluded parts.from this new framework. Section 232 tariffs on steel and aluminum also continued to evolve, with modifications implemented in April and June 2026. The Company is evaluating the potential impact of all tariff actions on future material costs and sourcing decisions.

Three Months Ended MarchJune 31,30, 2026 Compared to Three Months Ended MarchJune 31,30, 2025 - Consolidated Results

Net sales for the firstsecond quarter of 2026 increased 6%3% as compared to the same period in 2025 primarily due to a 9%3% increase from favorable mix and price and a 5%4% increase in sales volumes from completed acquisitions, which were partially offset by ana 8%4% decrease in sales volumes.

Gross profit margins in the firstsecond quarter of 2026 decreasedincreased 9040 basis points ("bps") to 30.9%34.9% as compared to 31.8%34.5% in the same period in 2025. Gross margins decreasedincreased 300120 bps from favorable mix and price and 40 bps from sales volumes from completed acquisitions, which were partially offset by 80 bps from higher product costs, primarily relatedreflecting to inflationary impactsinflation and factory under absorption, net of $30 million in tariff refunds, and 40 bps from higher freight and distribution inflation and investments, which were partially offset by 250 bps from favorable mix and price.investments.

Selling, general and administrative expenses ("SG&A") increased $14$10 million to $185$183 million in the firstsecond quarter of 2026 as compared to $171$173 million in the same period in 2025, primarily attributable to higher discretionary and employee-related costs and the acquisition of Duro Dyne and Supco in the fourth quarter of 2025.

Losses (Gains) losses and Other Expenses, Net

Losses (gains) and other expenses, net for the firstsecond quarter of 2026 and 2025 included the following (in millions):

Investments over which we do not exercise control but have significant influence are accounted for using the equity method of accounting. Income from equity method investments was de minimis in the firstsecond quarter of 2026, consistent with 2025.

Interest expense, net increased to $15 million in the firstsecond quarter of 2026 from $6$8 million in the same period in 2025 primarily due to increased borrowings on our commercial paper facility and our term loan agreement entered into in October of 2025.

Our effective tax rate was 20.2%20.8% for the firstsecond quarter of 2026 as compared to 19.4% in the same period in 2025. The increase in the rate is primarily due to higher income in higher tax jurisdictions.

FirstSecond Quarter of 2026 Compared to FirstSecond Quarter of 2025 - Results by Segment

The following table presents our Home Comfort Solutions segment's net sales and profit for the firstsecond quarter of 2026 and 2025 (dollars in millions):

Net sales decreased 10%7% in the firstsecond quarter of 2026 as compared to the same period in 2025 primarily due to a 21%12% decrease in sales volumes, which was partially offset by a 9%3% increase from favorable mix and price and a 2% increase in sales volumes from completed acquisitions.

Segment profit in the firstsecond quarter of 2026 decreased $37$30 million as compared to the same period in 2025, primarily due to lower sales volumes, resultingwhich resulted in a $56$49 million profit headwind, $23$3 million infrom increased freight and distribution costs, $2 million from product cost inflation and lower factory absorption, andnet $1of $25 million in tariff refunds, and $8 million from miscellaneous other costs. These impacts were partially offset by a $41$24 million benefit from favorable mix and priceprice, and $2$5 million from completed acquisitions.acquisitions, and $3 million from SG&A improvement.

The following table presents our Building Climate Solutions segment's net sales and profit for the firstsecond quarter of 2026 and 2025 (dollars in millions):

Net sales increased 38%24% in the firstsecond quarter of 2026 as compared to the same period in 2025 primarily due to a 17%12% increase in sales volumes, a 12%9% increase in sales volumes from completed acquisitions, and 9%3% from favorable mix and price.

Segment profit in the firstsecond quarter of 2026 increased $37$35 million as compared to the same period in 2025 primarily due to $24$23 million profit benefit from higher sales volumesvolumes, and $22$15 million increase infrom favorable mix and price, and $7$11 million profit benefit from sales volumes from completed acquisitions, which were partially offset by $8$9 million in product cost inflation and lower factory absorption, net of $5 million in tariff refunds, and $8$5 million from other costs.

The following table summarizes our cash flow activity for the threesix months ended MarchJune 31,30, 2026 and 2025 (in millions):

Net Cash Provided By (Used In) Operating Activities - The change in net cash provided by operating activities for the threesix months ended MarchJune 31,30, 2026 compared to the net cash usedprovided inby operating activities for the same period in 2025 is primarily due to favorable working capital changes.

Net Cash Used In Investing Activities - Capital expenditures were $56$91 million for the threesix months ended MarchJune 31,30, 2026 compared to $26$54 million in the same period of 2025. The increase in capital expenditures was primarily relateddriven toby strategic investments in land and buildingbuildings purchases.that will support future product innovation centers.

Net Cash Provided By (Used In) Financing Activities - Net cash providedused byin financing activities for the threesix months ended MarchJune 31,30, 2026 increaseddecreased to $57$76 million as compared to $141$368 million used in during the same period of 2025. The change was primarily due to changes in net borrowings and repayments of long-term debt and repurchases of common stock through our share repurchase program. We repurchased $20$151 million of shares for the threesix months ended MarchJune 31,30, 2026 and returned $45$91 million to shareholders through dividend payments.

The following table details our lines of credit and financing arrangements as of MarchJune 31,30, 2026 (in millions):

We utilize a commercial paper program (the "Program") pursuant to which we may issue short-term, unsecured commercial paper notes (the "CP Notes") under the exemption from registration contained in Section 4(a)(2) of the Securities Act of 1933, as amended. Amounts available under the Program may be borrowed, repaid, and re-borrowed from time to time, with the aggregate face or principal amount of the CP Notes outstanding under the Program at any time not to exceed $500.0 million. The CP Notes have maturities of up to 397 days from the date of issue and rank pari passu with all of our other unsecured and unsubordinated indebtedness. The net proceeds from issuances of the CP Notes are typically used for general corporate purposes. Our revolving credit facility serves as a liquidity backstop for the repayment of CP Notes outstanding under the Program. There are $361.0$412.0 million CP Notes outstanding under the Program as of MarchJune 31,30, 2026.

On May 9, 2025, we entered into an Amendment and Restatement Agreement (the "Credit Agreement") to our existing unsecured revolving credit facility with JPMorgan Chase Bank, N.A., as administrative agent, and the other lenders party thereto. The Credit Agreement decreased our total revolving commitments from $1.1 billion to $1.0 billion with an option to increase the revolving commitments by up to $350 million at our request, subject to the terms and conditions of the Credit Agreement. The Credit Agreement also extended the maturity date of the revolving commitments from July 2026 to May 2030. We had no outstanding borrowings and no$1.7 amountsmillion committed to standby letters of credit as of MarchJune 31,30, 2026. Subject to covenant limitations, $639.0$586.3 million was available for future borrowings after taking into consideration outstanding borrowings under our Program. Availability under the Credit Agreement is reduced by borrowings under the Program. The Credit Agreement includes a subfacility for swingline loans up to $65.0 million. Maturity of the Credit Agreement may be extended by the lenders pursuant to two one-year extension options that we may request under the Credit Agreement.

We periodically review our capital structure to ensure the appropriate levels of leverage and liquidity. We may access the capital markets, as necessary, based on business needs and to take advantage of favorable interest rate environments or other market conditions. We also evaluate our debt-to-capital and debt-to-EBITDA ratios to determine, among other considerations, the appropriate targets for capital expenditures and share repurchases under our share repurchase programs. Our debt-to-total-capital ratio increased to 56%55% at MarchJune 31,30, 2026, as compared to 54% at December 31, 2025.

As of MarchJune 31,30, 2026, our senior credit ratings were Baa1 with a stable outlook, and BBB with a stable outlook, by Moody's Investors Service, Inc. ("Moody's") and Standard & Poor's Rating Group ("S&P"), respectively. The security ratings are not a recommendation to buy, sell or hold securities and may be subject to revision or withdrawal at any time by the assigning rating agency. Each rating should be evaluated independently of any other rating. Our goal is to maintain investment grade ratings from Moody's and S&P to help ensure the capital markets remain available to us.

We believe our cash and cash equivalents of $48.2$51.5 million, future cash generated from operations and available borrowing capacity are sufficient to fund operations, planned capital expenditures, future contractual obligations, potential share repurchases and dividends, and other needs in the foreseeable future. In July 2026, we acquired Heat Controller for approximately $205 million. For more information, see Note 14 in the Notes to the Consolidated Financial Statements. Included in our cash and cash equivalents of $48.2$51.5 million as of MarchJune 31,30, 2026 was $19.3$21.8 million of cash held in foreign locations. Our cash held in foreign locations is used for investing and operating activities in those locations, and we generally do not have the need or intent to repatriate those funds to the United States. An actual repatriation in the future from our non-U.S. subsidiaries could be subject to foreign withholding taxes and U.S. state taxes.