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## TO OUR STOCKHOLDERS 

2013 was a year of strong growth and record profitability for Lennox International. Revenue grew 8 percent to $3.2 billion, and GAAP diluted earnings per share from continuing operations increased 35 percent to a record $3.55. Total segment profit margin expanded 180 basis points to a record 9.4 percent for the year. 

GLYPH<T_h> e company’s performance in 2013 was led by our Residential business, which again outpaced the market on strength in both replacement and new construction business. Residential profit was up 75 percent on 15 percent revenue growth. Residential margin expanded 390 basis points to 11.4 percent. 

Our Commercial business also outpaced the market in 2013 on growth in national account equipment and service, as well as from our strategic expansion in the emergency replacement market. Commercial profit rose 19 percent on 8 percent revenue growth. Commercial margin expanded 130 basis points to a record 14.0 percent. 

Our Refrigeration business had strong operational performance despite choppy market conditions globally in 2013. Refrigeration revenue was down 2 percent, but profit increased 10 percent as segment margin rose 130 basis points to 11.7 percent. 

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GLYPH<T_h> e company had solid cash generation for the year with cash from operations of $210 million. With the company’s strong performance throughout the year and solid balance sheet, we repurchased $125 million of stock and raised the dividend 20 percent in 2013. Capital expenditures were $78 million compared to $50 million in the prior year as we continued to make transformational investments in the business. Focused on our five strategic initiatives, we continued in 2013 to position the company for further growth and profitability. 

## INNOVATIVE PRODUCT SYSTEMS AND SOLUTIONS 

GLYPH<T_h> e company continued its consistent increase in Research and Development investment, an important factor in maintaining our leadership in energy-e ffi cient climate control systems across our businesses. With a stronger consumer environment and housing market in 2013, we saw a larger percentage of Residential sales coming from our high-e ffi ciency systems. Sales of our Ultimate Comfort System ™ , the most advanced and e ffi cient air conditioning, heating, and air quality system ever created, exceeded expectations. GLYPH<T_h> e system includes our most advanced controls—our iharmony ® zoning system configured with our new icomfort Wi-Fi ®  to control the entire system by smartphone, tablet, or computer for the most precise, e ffi cient and comfortable heating and cooling in the home. 

Our Commercial business acquired 18 new national accounts in 2013 as customers continue to select Lennox for our leading high-e ffi ciency rooftops, Energence ®  and Strategos ® , and our advanced Prodigy ® controls. In the emergency replacement market, we expanded the range of our Raider ®  rooftops up to 12.5 ton units to further capitalize on the opportunities in that market. 

In Refrigeration, we continue to advance our leadership position with energy-e ffi cient and environmentally friendly platforms. Our products include innovative alternative refrigerant systems used globally by food retailers, and a composite mechanical enclosure that utilizes recycled materials and is 40 percent lighter. 

