Reportable Business Segments

12 Months Ended

Dec. 31, 2019

Segment Reporting, Measurement Disclosures [Abstract]

scription of 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 we provide. The following table describes each segment:



Segment	Products or Services	Markets Served	Geographic Areas
Residential Heating & Cooling	Furnaces, air conditioners, heat pumps, packaged heating and cooling systems, indoor air quality equipment, comfort control products, replacement parts and supplies	Residential Replacement; Residential New Construction	United States Canada
Commercial Heating & Cooling	Unitary heating and air conditioning equipment, applied systems, controls, installation and service of commercial heating and cooling equipment, variable refrigerant flow commercial products	Light Commercial	United States Canada
Refrigeration⁽²⁾	Condensing units, unit coolers, fluid coolers, air- cooled condensers, air handlers, process chillers, controls, and compressorized racks	Light Commercial; Food Preservation; Non-Food/Industrial	United States Canada Europe⁽¹⁾

⁽¹⁾Effective January 1, 2019, we realigned our segment structure. We shifted financial reporting of the European Commercial HVAC business from our Commercial Heating & Cooling segment to our Refrigeration segment as we manage both our commercial HVAC and refrigeration operations in Europe together. We have revised our historical segment results to present them on a comparable basis.

⁽²⁾Descriptions of the products, services, markets and geographic areas of divested businesses were excluded from this table. Refer to Note 7 for details regarding the divestitures of our Australia, Asia, South America and Kysor Warren businesses.

Segment Data

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 our business. We recorded these share-based awards as Corporate costs because they are determined at the discretion of the Board of Directors and based on the historical practice of doing so for internal reporting purposes.

Any intercompany sales and associated profit (and any other intercompany items) are eliminated from segment results. There were no significant intercompany eliminations included in the results presented in the table below.

Net sales and segment profit (loss) by segment, along with a reconciliation of segment profit (loss) to Operating income, are shown below (in millions):



	For the Years Ended December 31,
	2019			2018			2017
Net Sales ⁽¹⁾
Residential Heating & Cooling	$	2,291.1		$	2,225.0		$	2,140.4
Commercial Heating & Cooling	947.4			900.7			819.5
Refrigeration	568.7			758.2			879.7
	$	3,807.2		$	3,883.9		$	3,839.6
Segment profit (loss) ⁽²⁾
Residential Heating & Cooling	$	464.6		$	399.4		$	373.9
Commercial Heating & Cooling	165.4			157.5			149.3
Refrigeration	61.3			68.1			80.6
Corporate and other	(82.4		)	(84.4		)	(89.2		)
Total segment profit	608.9			540.6			514.6
Reconciliation to Operating income:
Special inventory write down	—			0.2			—
Special product quality adjustments	(0.6		)	—			5.4
Loss (gain), net on sale of businesses and related property	10.6			27.0			1.1
Insurance recoveries received for property damage incurred from natural disaster	(79.6		)	(10.9		)	—
Items in (Gains) Losses and other expenses, net that are excluded from segment profit (loss) ⁽²⁾	11.3			11.4			10.4
Restructuring charges	10.3			3.0			3.2
Operating income	$	656.9		$	509.9		$	494.5

⁽¹⁾ On a consolidated basis, no revenue from transactions with a single customer were 10% or greater of our consolidated net sales for any of the periods presented.

⁽²⁾We define segment profit (loss) as a segment’s operating income included in the accompanying Consolidated Statements of Operations, excluding:


•	The following items in Losses (gains) and other expenses, net:


◦	Net change in unrealized losses (gains) on unsettled futures contracts,


◦	Special legal contingency charges,


◦	Asbestos-related litigation,


◦	Environmental liabilities,


◦	Other items, net,


•	Special inventory write down,


•	Special product quality adjustments


•	Loss (gain), net on sale of businesses and related property,


•	Insurance recoveries received for property damage incurred from natural disaster, and


•	Restructuring charges.

Total assets by segment are shown below (in millions):



	As of December 31,
	2019		2018		2017
Total Assets:
Residential Heating & Cooling	$	1,055.7	$	837.4	$	771.3
Commercial Heating & Cooling	409.0		349.5		324.3
Refrigeration	393.3		462.9		626.5
Corporate and other	176.9		167.4		169.4
Total assets	$	2,034.9	$	1,817.2	$	1,891.5

The assets in the Corporate and other segment primarily consist of cash, short-term investments and deferred tax assets. Assets

recorded in the operating segments represent those assets directly associated with those segments.

Total capital expenditures by segment are shown below (in millions):



	For the Years Ended December 31,
	2019		2018		2017
Capital Expenditures:
Residential Heating & Cooling	$	59.2	$	45.2	$	38.9
Commercial Heating & Cooling	11.3		12.5		14.7
Refrigeration	9.4		9.3		11.8
Corporate and other	25.7		28.2		32.9
Total capital expenditures	$	105.6	$	95.2	$	98.3

Depreciation and amortization expenses by segment are shown below (in millions):



	For the Years Ended December 31,
	2019		2018		2017
Depreciation and Amortization:
Residential Heating & Cooling	$	30.0	$	26.6	$	24.9
Commercial Heating & Cooling	12.5		8.6		8.6
Refrigeration	7.9		8.9		11.4
Corporate and other	20.7		21.9		19.7
Total depreciation and amortization	$	71.1	$	66.0	$	64.6

The equity method investments are shown below (in millions):



	For the Years Ended December 31,
	2019		2018		2017
Income from Equity Method Investments:
Residential Heating & Cooling	$	8.8	$	8.5	$	11.7
Commercial Heating & Cooling	1.7		1.4		2.8
Refrigeration	2.9		2.1		3.9
Total income from equity method investments	$	13.4	$	12.0	$	18.4

Geographic Information

Property, plant and equipment, net for each major geographic area in which we operate, based on the domicile of our operations, are shown below (in millions):



	As of December 31,
	2019		2018		2017
Property, Plant and Equipment, net:
United States	$	333.6	$	293.3	$	257.6
Mexico	82.0		86.7		79.8
Canada	2.2		1.7		1.7
Other international	27.6		26.6		58.7
Total Property, plant and equipment, net	$	445.4	$	408.3	$	397.8