Reportable Business Segments

6 Months Ended

Jun. 30, 2011

Reportable Business Segments [Abstract]

14. Reportable Business Segments:

We operate in four reportable business segments of the heating, ventilation, air conditioning and refrigeration (“HVACR”) industry. Our segments are organized primarily by the nature of the products and services provided. The table below details the nature of the operations for each reportable segment:


Segment	Product or Services	Markets Served	Geographic Areas
Residential Heating & Cooling	Heating Air Conditioning Hearth Products	Residential Replacement Residential New Construction	United States Canada

Commercial Heating & Cooling	Rooftop Products Chillers Air Handlers	Light Commercial	United States Canada Europe

Service Experts	Equipment Sales Installation Maintenance Repair	Residential Light Commercial	United States Canada

Refrigeration	Unit Coolers Condensing Units Other Commercial Refrigeration Products Display Cases and Systems	Light Commercial Food Preservation and Non-Food/Industrial	United States Canada Europe Asia Pacific South America

Transactions between segments, such as products sold to Service Experts by the Residential Heating & Cooling segment, are recorded on an arm’s-length basis using the market price for these products. The eliminations of these intercompany sales and any associated profit are noted in the reconciliation of segment results to the income from continuing operations before income taxes below.

We use segment profit or loss as the primary measure of profitability to evaluate operating performance and to allocate capital resources. We define segment profit or loss as a segment’s income or loss from continuing operations before income taxes included in the accompanying Consolidated Statements of Operations excluding certain items. The reconciliation below details the items excluded.

Our corporate costs include those costs related to corporate functions such as legal, internal audit, treasury, human resources, tax compliance and senior executive staff. Corporate costs also include the long-term share-based incentive awards provided to employees throughout LII. We recorded these share-based awards as Corporate costs as they are determined at the discretion of the Board of Directors and based on the historical practice of doing so for internal reporting purposes.

Net sales and segment profit (loss) by business segment, along with a reconciliation of segment profit (loss) to Income from Continuing Operations Before Income Taxes are shown below (in millions):


	For the Three Months						For the Six Months Ended
	Ended June 30,						June 30,
	2011			2010			2011			2010
Net Sales
Residential Heating & Cooling	$	395.1		$	413.4		$	667.1		$	697.6
Commercial Heating & Cooling		198.3			175.8			337.1			295.4
Service Experts		145.4			167.6			261.9			294.7
Refrigeration		217.5			139.8			392.6			271.2
Eliminations (1)		(19.3	)		(24.5	)		(34.0	)		(42.7	)

	$	937.0		$	872.1		$	1,624.7		$	1,516.2


Segment Profit (Loss)(2)
Residential Heating & Cooling	$	33.2		$	52.5		$	32.0		$	59.6
Commercial Heating & Cooling		27.1			27.8			33.0			31.3
Service Experts		3.2			12.8			(5.0	)		8.2
Refrigeration		21.4			15.3			35.0			30.2
Corporate and other		(11.6	)		(19.6	)		(26.0	)		(32.8	)
Eliminations (1)		0.2			(0.3	)		(0.3	)		(0.2	)

Subtotal that includes segment profit and eliminations		73.5			88.5			68.7			96.3
Reconciliation to income from continuing operations before income taxes:
Special product quality adjustment		(2.4	)		—			(2.4	)		—
Items in losses and other expenses, net that are excluded from segment profit (3)		1.0			6.0			2.0			6.2
Restructuring charges		2.4			3.2			3.6			10.3
Interest expense, net		4.3			3.1			8.4			5.6
Other expense, net		0.1			0.1			0.1			0.1


Income from continuing operations before income taxes	$	68.1		$	76.1		$	57.0		$	74.1


(1)		Eliminations consist of intercompany sales between business segments, such as products sold to Service Experts by the Residential Heating & Cooling segment.

(2)		We define segment profit and loss as a segment’s income or loss from continuing operations before income taxes included in the accompanying Consolidated Statements of Operations: Excluding:

	•		Special product quality adjustments.

	•		Items within Losses and Other Expenses, net that are noted in ⁽³⁾.

	•		Restructuring charges.

	•		Goodwill and equity method investment impairments.

	•		Interest expense, net.

	•		Other expense, net.


(3)		Items in Losses and Other Expenses, net that are excluded from segment profit are net change in unrealized gains and/or losses on open futures contracts, discount fee on accounts sold, realized gains and/or losses on marketable securities, special legal contingency charge, and other items.

Total assets by business segment are shown below (in millions). The assets in the Corporate segment are primarily comprised of cash and deferred tax assets. Assets recorded in the operating segments represent those assets directly associated with those segments.


	As of			As of
	June 30,			December 31,
	2011			2010
Total Assets
Residential Heating & Cooling	$	669.7		$	519.8
Commercial Heating & Cooling		316.1			252.7
Service Experts		197.7			186.2
Refrigeration		590.0			389.7
Corporate and other		257.4			354.9
Eliminations⁽¹⁾		(11.9	)		(11.3	)

Total assets	$	2,019.0		$	1,692.0


(1)		Eliminations consist of net intercompany receivables and intercompany profit included in inventory from products sold between business segments, such as products sold to Service Experts by the Residential Heating & Cooling segment.