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Additionally, we introduced an industry-first unit cooler platform that maximizes walk-in space with a height reduction of 30 percent, reduces refrigerant 40 percent, and provides an improved level of serviceability for food service customers. 

## MANUFACTURING AND SOURCING EXCELLENCE 

Our Saltillo, Mexico manufacturing facility has been a world-class operation since we opened it in 2008, ramping up over the years to handle approximately 40 percent of our residential cooling products volume and at significant savings. In 2013, we moved forward with plans to expand the facility and operations there as we in-source sheet metal fabrication and transfer certain furnace production to Mexico. We expect these operations to commence in 2014 and provide up to $15 million in annualized savings by 2016. In our global sourcing initiative, we purchase nearly half of our components from low-cost countries and are realizing significant savings on components of equal or better quality. In 2013, we opened a new strategic sourcing o ffi ce in Shanghai, China to support our sourcing activities in Asia. 

## DISTRIBUTION EXCELLENCE 

Systematic expansion of the Lennox residential and commercial distribution networks has been a force for market share gains and a key reason we outpaced the industry again in 2013. We added 25 new Lennox PartsPlus ®  stores to end the year at 135 locations on our path to more than 215 in 2016. GLYPH<T_h> ese stores sell Lennox residential equipment, as well as parts, supplies and accessories needed by dealer-contractors. In our Commercial business, we continue to add distribution locations to support our growth in the emergency replacement market with our Raider ® rooftop unit. From 11 distribution locations in 2011, we ended 2013 with 32 commercial regional and local distribution centers. We plan to add more commercial locations in the coming years, as well as increasingly leverage the Lennox PartsPlus ® store footprint across North America. 

## GEOGRAPHIC EXPANSION 

In a choppy global market environment, the company still managed to grow revenue outside of North America by 2 percent at constant currency in 2013. European markets were soft to start the year but improved in the second half. Our HVAC and refrigeration revenue in that region was down slightly for the full year at constant currency. Australia revenue was up in 2013 at constant currency, but the macroeconomic environment and refrigeration market in Australia softened considerably over the course of the year. South America and Asia both saw strong double-digit percent growth at constant currency for the year on the continued build-out of the cold chain in those regions. 

## EXPENSE REDUCTION 

In 2013, the company realized approximately $30 million in savings from global sourcing programs and engineering-led cost reductions, and we expect a comparable level of savings in 2014. In SG&A, the company had higher volume-related selling expenses and incentive compensation due to performance targets being exceeded in 2013. Long term, we continue to expect significant leverage from SG&A with growth targeted at half the rate of revenue growth. 

In closing, Lennox International delivered strong revenue growth and record profit in 2013 – taking performance to the next level. We continued to make significant investments in the company and remain well-positioned to capitalize on growth in our major end markets, capture additional market share, and drive increased profitability through our operational initiatives in 2014 and future years. 

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