Reportable Business Segments

9 Months Ended

Sep. 30, 2012

Segment Reporting, Measurement Disclosures [Abstract]

Reportable Business Segments

Reportable Business Segments:

We operate in three 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. In September 2012, the Company announced the planned sale of its Service Experts business. The Service Experts business had previously been reported within the Company’s Service Experts segment along with its commercial service business called Lennox National Account Services (NAS). Beginning in the third quarter of 2012, Service Experts is included in discontinued operations and NAS is included in the Company's Commercial Heating & Cooling segment. Segment results for prior periods have been restated to conform with this new presentation.

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	Residential Replacement Residential New Construction	United States Canada
Commercial Heating & Cooling	Rooftop Products Chillers Air Handlers Equipment Sales Installation Maintenance Repair	Light Commercial	United States Canada Europe
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 are recorded on an arm’s-length basis using the relevant market prices. The eliminations of any intercompany sales and associated profit or any other items 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 Ended September 30,						For the Nine Months Ended September 30,
	2012			2011			2012			2011
Net Sales
Residential Heating & Cooling	$	386.3		$	353.8		$	1,070.7		$	979.7
Commercial Heating & Cooling	219.7			223.6			597.9			596.4
Refrigeration	203.7			223.8			595.9			616.3
	$	809.7		$	801.2		$	2,264.5		$	2,192.4
Segment Profit (Loss)
Residential Heating & Cooling	$	37.7		$	31.3		$	90.7		$	70.9
Commercial Heating & Cooling	32.5			31.1			74.1			67.2
Refrigeration	25.1			20.5			60.6			55.5
Corporate and other	(14.3		)	(15.1		)	(43.7		)	(41.5		)
Subtotal that includes segment profit and eliminations	81.0			67.8			181.7			152.1
Reconciliation to income from continuing operations before income taxes:
Special product quality adjustment	0.9			—			1.0			(2.4		)
Items in (Gains) losses and other expenses, net that are excluded from segment profit (1)	(1.2		)	3.2			(2.0		)	5.5
Restructuring charges	0.4			8.0			3.1			11.3
Interest expense, net	4.4			4.1			13.4			12.5
Other expense, net	—			—			0.1			0.1
Income from continuing operations before income taxes	$	76.5		$	52.5		$	166.1		$	125.1

(1) Items in (Gains) 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 fees on accounts sold, and realized gains and/or losses on marketable securities.