Reportable Business Segments

12 Months Ended

Dec. 31, 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, we announced the planned sale of our Service Experts business. The Service Experts business had previously been reported within our Service Experts segment along with a commercial service business called Lennox National Account Services (NAS). Beginning in the third quarter of 2012, the Service Experts business was included in discontinued operations, NAS was included in our Commercial Heating & Cooling segment, and the Service Experts reportable segment was eliminated. Segment results for all periods have been revised to conform to 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	Furnaces, air conditioners, heat pumps, packaged heating and cooling systems, indoor air quality equipment, comfort control products, replacement parts	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	Light Commercial	United States Canada Europe
Refrigeration	Condensing units, unit coolers, fluid coolers, air cooled condensers, air handlers, process chillers, controls, compressorized racks, supermarket display cases and systems	Light Commercial Food Preservation; Non-Food/Industrial	United States Canada Europe Asia Pacific South America

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 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.

As they arise, transactions between segments are recorded on an arm’s-length basis using the relevant market prices. 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 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 Years Ended December 31,
	2012			2011			2010
Net Sales (1)
Residential Heating & Cooling	$	1,375.8		$	1,259.5		$	1,338.5
Commercial Heating & Cooling	785.4			776.2			695.8
Refrigeration	788.2			805.2			550.9
	$	2,949.4		$	2,840.9		$	2,585.2
Segment Profit (Loss) (2)
Residential Heating & Cooling	$	102.9		$	87.6		$	146.8
Commercial Heating & Cooling	99.5			87.6			77.8
Refrigeration	81.9			77.5			61.4
Corporate and other	(60.1		)	(54.9		)	(66.0		)
Subtotal that includes segment profit and eliminations	224.2			197.8			220.0
Reconciliation to income from continuing operations before income taxes:
Special product quality adjustment	1.1			(4.3		)	(0.2		)
Items in (Gains) losses and other expenses, net that are excluded from segment profit (3)	(0.2		)	5.2			4.3
Restructuring charges	4.2			12.5			11.4
Interest expense, net	17.1			16.8			12.8
Other expense, net	0.3			0.3			1.0
Income from continuing operations before income taxes	$	201.7		$	167.3		$	190.7

⁽¹⁾ On a consolidated basis, no revenues 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 and loss as a segment's income or loss from continuing operations before income taxes included in the accompanying Consolidated Statements of Operations, excluding the following:

• Special product quality adjustments;

• Items in (Gains) losses and other expenses, net (see table note 3 below);

• Restructuring charges;

• Goodwill, long-lived asset, and equity method investment impairments;

• Interest expense, net;

• Other expense, net.

⁽³⁾ Items in (Gains) losses and other expenses, net that are excluded from segment profit include the following: asset impairment, net change in unrealized gains and/or losses on open futures contracts, special legal contingency charge, and other items.

Total assets by business segment are shown below (in millions). 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.

	As of December 31,
	2012		2011		2010
Total Assets
Residential Heating & Cooling	$	457.5	$	453.2	$	474.6
Commercial Heating & Cooling	321.9		306.4		299.1
Refrigeration	585.3		558.2		389.7
Corporate and other	228.6		227.4		349.7
Total assets	1,593.3		1,545.2		1,513.1
Discontinued operations (See Note 17)	98.6		160.5		178.9
Total assets	$	1,691.9	$	1,705.7	$	1,692.0

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

	For the Years Ended December 31,
	2012		2011		2010
Capital Expenditures
Residential Heating & Cooling	$	13.7	$	10.9	$	17.2
Commercial Heating & Cooling	8.7		6.7		6.5
Refrigeration	15.6		13.2		6.9
Corporate and other	12.2		10.6		12.5
Total capital expenditures	$	50.2	$	41.4	$	43.1

There were no significant new capital leases in 2012, 2011 or 2010.

The depreciation and amortization expenses by business segment are shown below (in millions):

	For the Years Ended December 31,
	2012		2011		2010
Depreciation and Amortization
Residential Heating & Cooling	$	19.9	$	19.6	$	18.8
Commercial Heating & Cooling	8.5		8.6		8.5
Refrigeration	13.0		14.8		8.7
Corporate and other	14.0		13.6		12.9
Total depreciation and amortization	$	55.4	$	56.6	$	48.9

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

	For the Years Ended December 31,
	2012		2011		2010
Income from Equity Method Investments
Refrigeration	$	2.6	$	2.5	$	1.3
Corporate and other(1)	7.9		7.1		8.8
Total income from equity method investments	$	10.5	$	9.6	$	10.1

⁽¹⁾ A significant portion of income for equity method investments is allocated to our Residential Heating & Cooling and Commercial Heating & Cooling segments. We allocated $5.0 million, $4.9 million and $5.6 million to those segments in 2012, 2011 and 2010 respectively.

The following tables set forth certain financial information relating to our operations by geographic area based on the domicile of our operations (in millions):

	For the Years Ended December 31,
	2012		2011		2010
Net Sales to External Customers by Point of Shipment
United States	$	2,147.2	$	2,018.1	$	1,866.4
Canada	226.7		219.2		214.5
International	575.5		603.6		504.3
Total net sales to external customers	$	2,949.4	$	2,840.9	$	2,585.2

	As of December 31,
	2012		2011		2010
Property, Plant and Equipment, net
United States	$	227.9	$	233.4	$	215.0
Mexico	28.0		28.0		33.0
Canada	0.6		0.6		0.7
International	41.7		38.7		59.8
Total property, plant and equipment, net	$	298.2	$	300.7	$	308.5