GEOGRAPHIC EXPANSION MANUFACTURING AND SOURCING EXCELLENCE EXPENSE REDUCTION DISTRIBUTION EXCELLENCE 3 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. 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. 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.  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.  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. 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. Todd M. Bluedorn Chairman of the Board & Chief Executive O ffi cer 