Stock-based compensation expense related to continuing operations was included in Selling, general and administrative expenses in the accompanying Consolidated Statements of Operations as follows (in millions):

Under the Lennox International Inc. 2019 Equity and Incentive Compensation Plan, we are authorized to issue awards for 1.7 million shares of common stock. The plan provides for various long-term incentive awards, including performance share units, restricted stock units and stock appreciation rights. A description of these long-term incentive awards and related activity within each award category is provided below. As of December 31, 2023, there were 1.6 million shares available for future issuance.

Historically our annual equity awards were granted in December. In 2023, we made the decision to move the annual grant for 2023 to February 2024. Thus, there were no equity grants in 2023.

Performance share units are granted to certain employees at the discretion of the Board of Directors with a three-year performance period beginning January 1st of each year. Upon meeting the performance and vesting criteria, performance share units are converted to an equal number of shares of our common stock. Performance share units vest if, at the end of the three-year performance period, at least the threshold performance level has been attained. To the extent that the payout level attained is less than 100%, the difference between 100% and the units earned and distributed will be forfeited. Eligible participants may also earn additional units of our common stock, which would increase the potential payout up to 200% of the units granted, depending on LII’s performance over the three-year performance period.

Performance share units are classified as equity awards. Compensation expense is recognized on an earnings curve over the period and is based on the expected number of units to be earned and the fair value of the stock at the date of grant. The fair

value of units is calculated as the average of the high and low market price of the stock on the date of grant discounted by the expected dividend rate over the service period. The number of units expected to be earned will be adjusted in future periods as necessary to reflect changes in the estimated number of award to be issued and, upon vesting, the actual number of units awarded. Our practice is to issue new shares of common stock or utilize treasury stock to satisfy performance share unit distributions.


	For the Years Ended December 31,
	2023			2022			2021
Compensation expense for performance share units (in millions)	$	15.2		$	6.9		$	10.8
Weighted-average fair value of grants, per share	$	—		$	237.68		$	314.27
Payout ratio for shares paid	131		%	126		%	100		%

A summary of the status of our undistributed performance share units as of December 31, 2023, and changes during the year then ended, is presented below (in thousands, except per share data):


	Shares	Weighted- Average Grant Date Fair Value per Share
Undistributed performance share units as of December 31, 2022	124.7	$	257.55
Granted	—	$	—
Adjustment to shares paid based on payout ratio	17.8	$	265.96
Distributed	(30.7)	$	245.06
Forfeited	(5.4)	$	270.84
Undistributed performance share units as of December 31, 2023 (1)	106.4	$	261.91

(1) Undistributed performance share units include approximately 68.8 thousand units with a weighted-average grant date fair value of $259.70 per share that had not yet vested and 37.6 thousand units that have vested but were not yet distributed.

As of December 31, 2023, we had $9.2 million of total unrecognized compensation cost related to non-vested performance share units that are expected to be recognized over a weighted-average period of 1.7 years years. Our weighted-average estimated forfeiture rate for these performance share units was 17.9% as of December 31, 2023.


	For the Years Ended December 31,
	2023		2022		2021
Fair value of performance share units distributed	$	13.5	$	6.1	$	10.8
Realized tax benefits from tax deductions	$	3.3	$	1.5	$	2.7

Restricted stock units are issued to attract and retain key employees. Generally, at the end of a three-year retention period, the units will vest and be distributed in shares of our common stock to the participant. Our practice is to issue new shares of common stock or utilize treasury stock to satisfy restricted stock unit vestings. Restricted stock units are classified as equity awards. The fair value of units granted is the average of the high and low market price of the stock on the date of grant discounted by the expected dividend rate over the service period. Units are amortized to compensation expense ratably over the service period.


	For the Years Ended December 31,
	2023		2022		2021
Compensation expense for restricted stock units	$	10.8	$	11.0	$	8.7
Weighted-average fair value of grants, per share	$	—	$	240.87	$	315.70

A summary of our non-vested restricted stock units as of December 31, 2023 and changes during the year then ended is presented below (in thousands, except per share data):


	Shares	Weighted- Average Grant Date Fair Value per Share
Non-vested restricted stock units as of December 31, 2022	131.0	$	270.86
Granted	—	$	—
Vested	(39.9)	$	275.58
Forfeited	(8.8)	$	272.57
Non-vested restricted stock units as of December 31, 2023 (1)	82.3	$	268.39

(1) As of December 31, 2023, we had $11.4 million of total unrecognized compensation cost related to non-vested restricted stock units that are expected to be recognized over a weighted-average period of 1.7 years. Our estimated forfeiture rate for restricted stock units was 20.3% as of December 31, 2023.


	For the Years Ended December 31,
	2023		2022		2021
Fair value of restricted stock units vested	$	15.0	$	9.7	$	11.0
Realized tax benefits from tax deductions	$	3.7	$	2.4	$	2.7

Stock appreciation rights are issued to certain key employees. Each recipient is given the “right” to receive compensation, paid in shares of our common stock, equal to the future appreciation of our common stock price. Stock appreciation rights generally vest in one-third increments beginning on the first anniversary date after the grant date and expire after seven years. Our practice is to issue new shares of common stock or utilize treasury stock to satisfy the exercise of stock appreciation rights.


	For the Years Ended December 31,
	2023		2022		2021
Compensation expense for stock appreciation rights	$	4.1	$	3.9	$	4.8
Weighted-average fair value of grants, per share	$	—	$	64.54	$	70.50

Compensation expense for stock appreciation rights is based on the fair value on the date of grant, estimated using the Black-Scholes-Merton valuation model, and is recognized over the service period. We used historical stock price data to estimate the expected volatility. We determined that the recipients of stock appreciation rights can be combined into one employee group that has similar historical exercise behavior and we used our historical pattern of award exercises to estimate the expected life of the awards for the employee group. The risk-free interest rate was based on the zero-coupon U.S. Treasury yield curve with a maturity equal to the expected life of the awards at the time of grant.

The fair value of the stock appreciation rights granted in 2022 and 2021 were estimated on the date of grant using the following assumptions. In 2023 there were no stock appreciation rights granted:

A summary of our stock appreciation rights as of December 31, 2023, and changes during the year then ended, is presented below (in thousands, except per share data):


	Shares	Weighted-Average Exercise Price per Share
Outstanding stock appreciation rights as of December 31, 2022	487.9	$	247.77
Granted	—	$	—
Exercised	(176.5)	$	212.53
Forfeited	(18.9)	$	285.73
Outstanding stock appreciation rights as of December 31, 2023	292.5	$	266.57
Exercisable stock appreciation rights as of December 31, 2023	214.4	$	263.11

The following table summarizes information about stock appreciation rights outstanding as of December 31, 2023 (in millions, except per share data and years; shares in thousands):


	Stock Appreciation Rights Outstanding				Stock Appreciation Rights Exercisable
Range of Exercise Prices	Shares	Weighted-Average Remaining Contractual Term (in years)	Aggregate Intrinsic Value		Shares (1)	Weighted-Average Remaining Contractual Life (in years)	Aggregate Intrinsic Value
$156.94 to $214.63	53.9	1.60	$	12.7	53.9	1.60	$	12.7
$257.08 to $278.00	93.4	3.52	$	16.8	93.4	3.52	$	16.8
$259.56 to $328.65	145.2	5.61	$	23.4	67.1	5.44	$	10.0

As of December 31, 2023, we had $5.3 million of unrecognized compensation cost related to non-vested stock appreciation rights that is expected to be recognized over a weighted-average period of 1.7 years. Our estimated forfeiture rate for stock appreciation rights was 13.6% as of December 31, 2023.


	For the Years Ended December 31,
	2023		2022		2021
Intrinsic value of stock appreciation rights exercised	$	19.8	$	3.5	$	31.2
Realized tax benefits from tax deductions	$	4.8	$	0.9	$	7.7

On May 24, 2022, the Company commenced a new Employee Stock Purchase Plan to succeed the prior agreement from 2012. Under the 2022 Employee Stock Purchase Plan (“ESPP”), all employees who meet certain service requirements are eligible to purchase our common stock through payroll deductions at the end of three month offering periods. The purchase price for such shares is 95% of the fair market value of the stock on the last day of the offering period. A maximum of 1.0 million shares is authorized for purchase until issuance of all shares available under the plan, unless terminated earlier at the discretion of the Board of Directors. Employees purchased approximately 12,200 shares under the ESPP during the year ended December 31, 2023. Approximately 0.9 million shares remain available for purchase under the ESPP as of December 31, 2023.