SEGMENT INFORMATION AND CONCENTRATION OF CREDIT RISK

The Company is a global, diversified company whose many market-leading brands deliver broad capabilities and a wide array of innovative, technology-driven products and solutions for lifestyle improvement at home and at work. The Company's five reporting segments are as follows:


•	the Residential Ventilation (“RESV”) segment,


•	the Technology Solutions (“TECH”) segment,


•	the Display Mount Solutions ("DMS") segment,


•	the Residential Heating and Cooling (“RHC”) segment, and


•	the Custom & Engineered Solutions (“CES”) segment.

Through these segments the Company manufactures and sells, primarily in the United States, Canada, and Europe, with additional manufacturing in China and Mexico, a wide variety of products for the remodeling and replacement markets, the residential and commercial new construction markets, the manufactured housing market, and the personal and enterprise computer markets.

The Company's performance is significantly impacted by the levels of residential remodeling and replacement activity, as well as the levels of new residential and non-residential construction. The level of new construction activity and, to a lesser extent, the level of residential remodeling and replacement activity are affected by seasonality and cyclical factors such as interest rates, inflation, consumer spending, employment levels, and other macroeconomic factors, over which the Company has no control. Performance in any particular period could be impacted by the timing of sales to certain large customers.

The RESV segment primarily manufactures and sells room and whole house ventilation and other products, primarily for the professional remodeling and replacement markets, the residential new construction market, and the do-it-yourself market. The principal products sold by this segment include kitchen range hoods, exhaust fans (such as bath fans and fan, heater and light combination units), and indoor air quality products.

The TECH segment manufactures and distributes a broad array of products designed to provide convenience and security for residential and certain commercial applications. The principal product categories sold in this segment include audio/video distribution and control equipment, and security and access control products.

The DMS segment manufactures and distributes a broad array of products designed with ergonomic features including wall mounts, desk mounts, arms, carts, workstations, and stands that attach to or support a variety of display devices such as computer monitors, notebook computers, and flat panel displays.

The RHC segment manufactures and sells heating, ventilating, and air conditioning systems for site-built residential and manufactured housing structures, and certain commercial markets. The principal products sold by the segment are split-system and packaged air conditioners and heat pumps, air handlers, furnaces, and related equipment.

The CES segment manufactures and sells custom-designed and engineered heating, ventilating and air conditioning products and systems that meet customer specifications. The principal products sold by the segment are air handlers and large custom rooftop cooling and heating products.

Sales of the Company’s kitchen range hoods and exhaust fans within the RESV segment accounted for approximately 10.7% and 9.8%, respectively, of consolidated net sales for 2013, approximately 11.6% and 10.0%, respectively, of consolidated net sales in 2012 and approximately 11.9% and 9.2%, respectively, of consolidated net sales in 2011. Sales of the Company’s commercial air handlers within the CES segment accounted for approximately 15.4%, 14.6% and 11.4% of consolidated net sales in 2013, 2012 and 2011, respectively. Sales of the Company's digital display mounting and mobility products within the DMS segment accounted for approximately 12.0%, 12.9% and 12.7% of consolidated net sales in 2013, 2012 and 2011, respectively. Sales of products sold in the RHC segment accounted for approximately 18.1%, 17.3% and 17.7% of consolidated net sales in 2013, 2012 and 2011, respectively. No other single product class accounts for 10% or more of consolidated net sales.

The accounting policies of the segments are the same as those described in Note 1, “Summary of Significant Accounting Policies”. The Company evaluates segment performance based on operating earnings before allocations of corporate overhead costs. Intersegment net sales and intersegment eliminations are not material for any of the periods presented. The financial statement impact of all acquisition accounting adjustments, including intangible assets amortization and goodwill, are reflected in the applicable operating segment, which are the Company’s reporting units. Unallocated assets consist primarily of cash and cash equivalents, marketable securities, prepaid and deferred income taxes, deferred debt expense and long-term restricted investments and marketable securities.

Net sales, operating earnings (loss) and (loss) earnings before (benefit) provision for income taxes for the Company’s reporting segments for the three years ended December 31, 2013 were as follows:



	For the year ended December 31,
	2013			2012			2011
	(Dollar amounts in millions)
Net sales:
RESV	$	600.5		$	598.3		$	591.2
TECH	526.9			422.7			455.2
DMS	274.5			284.6			280.6
RHC	415.2			381.8			378.6
CES	470.8			513.9			434.9
Consolidated net sales	$	2,287.9		$	2,201.3		$	2,140.5

Operating earnings (loss):
RESV	$	63.1		$	73.3		$	32.6
TECH	7.6			14.2			35.4
DMS	38.2			33.1			22.2
RHC	13.1			8.5			1.4
CES	26.2			42.9			12.0
Subtotal	148.2			172.0			103.6
Executive retirement	—			—			(8.7		)
Unallocated, net	(60.3		)	(44.4		)	(31.8		)
Consolidated operating earnings	87.9			127.6			63.1
Interest expense	(99.4		)	(96.5		)	(105.6		)
Loss from debt retirement	—			(6.4		)	(33.8		)
Investment income	0.1			0.1			0.1
(Loss) earnings before (benefit) provision for income taxes	$	(11.4	)	$	24.8		$	(76.2	)

Depreciation expense, amortization expense and capital expenditures for the Company’s segments are presented in the table that follows for the periods presented:



	For the year ended December 31,
	2013		2012		2011
	(Dollar amounts in millions)
Depreciation Expense:
RESV	$	12.0	$	13.7	$	13.6
TECH	6.8		4.4		5.4
DMS	4.8		5.3		4.0
RHC	9.0		8.9		11.6
CES	6.9		6.0		6.4
Unallocated	1.1		0.2		0.2
Consolidated depreciation expense	$	40.6	$	38.5	$	41.2
Amortization expense:
RESV ⁽¹⁾	$	15.4	$	15.3	$	15.3
TECH ⁽²⁾	20.0		10.2		10.1
DMS ⁽³⁾	12.9		12.1		20.2
RHC ⁽⁴⁾	0.8		1.7		1.2
CES	5.5		5.9		5.9
Unallocated	—		—		—
Consolidated amortization expense	$	54.6	$	45.2	$	52.7
Capital Expenditures:
RESV	$	7.6	$	5.7	$	4.9
TECH	10.5		4.2		3.4
DMS	3.5		4.5		5.1
RHC	6.1		1.4		2.6
CES	11.0		6.5		5.0
Unallocated ⁽⁵⁾	5.2		2.7		0.1
Consolidated capital expenditures	$	43.9	$	25.0	$	21.1


(1)	Includes an increase to cost of goods sold for inventory acquired in business combinations of approximately $0.2 million for 2013.


(2)	Includes an increase to cost of goods sold for inventory acquired in business combinations of approximately $3.1 million (related to the acquisition of 2GIG) and $0.2 million for 2013 and 2011, respectively.


(3)	Includes an increase to cost of goods sold for inventory acquired in business combinations of approximately $7.3 million for 2011.


(4)	Includes an increase to cost of goods sold for inventory acquired in business combinations of approximately $0.9 million and $0.4 million for 2012 and 2011, respectively.


(5)	Includes capital expenditures financed under capital leases of approximately $0.1 million and $0.9 million for 2013 and 2012, respectively.

Segment assets at December 31, 2013 and 2012 for the Company’s reporting segments are presented in the table that follows:



	December 31, 2013		December 31, 2012
	(Dollar amounts in millions)
Segment Assets:
RESV	$	610.7	$	647.0
TECH	476.6		313.3
DMS	378.4		393.4
RHC	175.0		134.5
CES	199.0		189.5
	1,839.7		1,677.7
Unallocated:
Cash and cash equivalents, including current restricted cash	83.8		144.9
Deferred tax assets	29.7		29.3
Other assets, including long-term restricted investments and marketable securities	37.7		36.2
Consolidated assets	$	1,990.9	$	1,888.1

Foreign net sales were approximately 16.5%, 18.8%, and 19.7% of consolidated net sales for 2013, 2012, and 2011, respectively. Foreign net sales are attributed based on the location of the Company’s subsidiary responsible for the sale. Excluding financial instruments and deferred income taxes, foreign long-lived assets were approximately 9.3% and 10.4% of consolidated long-lived assets at December 31, 2013 and 2012, respectively.

The Company operates internationally and is exposed to market risks from changes in foreign exchange rates. Financial instruments, which potentially subject the Company to concentrations of credit risk, consist principally of temporary cash investments and trade receivables. The Company places its temporary cash investments with high credit quality financial institutions and limits the amount of credit exposure to any one financial institution. Concentrations of credit risk with respect to trade receivables are limited due to the large number of customers comprising the Company’s customer base and their dispersion across many different geographical regions. These risks are not significantly dissimilar among the Company’s five reporting segments. Accounts receivable from customers related to foreign operations was approximately 20.0% and 25.0% of total accounts receivable at December 31, 2013 and 2012, respectively.

No single customer accounts for 10% or more of consolidated net sales or accounts receivable.