Reportable Business Segments

6 Months Ended

Jun. 30, 2022

Segment Reporting, Measurement Disclosures [Abstract]

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 we provide. The following table describes each 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 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, and variable refrigerant flow commercial products	Light Commercial	United States Canada
Refrigeration	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

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 in the table 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 stock-based incentive awards provided to employees throughout LII. We record these stock-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 for the periods presented.

Segment Data

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

	For the Three Months Ended June 30,				For the Six Months Ended June 30,
	2022		2021		2022		2021
Net sales
Residential Heating & Cooling	$	977.5	$	838.0	$	1,659.6	$	1,444.2
Commercial Heating & Cooling	219.6		252.8		407.3		452.0
Refrigeration	169.2		148.2		312.8		273.2
	$	1,366.3	$	1,239.0	$	2,379.7	$	2,169.4
Segment profit (loss) (1)
Residential Heating & Cooling	$	216.3	$	189.7	$	324.0	$	286.1
Commercial Heating & Cooling	17.2		45.3		23.5		72.6
Refrigeration	23.4		13.5		37.5		21.4
Corporate and other	(27.1)		(26.9)		(40.6)		(42.9)
Total segment profit	229.8		221.6		344.4		337.2
Reconciliation to Operating income:
Items in Losses (gains) and other expenses, net that are excluded from segment profit (loss) (1)	2.4		4.4		4.6		5.9
Restructuring charges	0.5		1.2		1.0		1.3
Operating income	$	226.9	$	216.0	$	338.8	$	330.0

(1) 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,

▪Environmental liabilities and special litigation charges,

▪Charges incurred related to COVID-19 pandemic, and

▪Other items, net,

◦Special product quality adjustments, and

◦Restructuring charges.