Reportable Business Segments

9 Months Ended

Sep. 30, 2023

Segment Reporting, Measurement Disclosures [Abstract]

Reportable Business Segments

2. Reportable Business Segments:

We operate in two 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	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	Unitary heating and air conditioning equipment, applied systems, controls, installation and service of commercial heating and cooling equipment, variable refrigerant flow commercial products, condensing units, unit coolers, fluid coolers, air cooled condensers, air handlers, controls, and compressorized racks	Light Commercial; Food Preservation; Non-Food/Industrial	United States Canada

Prior to January 1, 2023, we operated in three reportable business segments. In November 2022, we announced the decision to explore strategic alternatives for our European commercial HVAC and refrigeration businesses. We will continue to invest in our Heatcraft Worldwide Refrigeration business which became part of the Commercial segment effective on January 1, 2023 while the European portfolio will be presented with Corporate and Other until disposition. The consolidation of our Heatcraft business within the Commercial segment provides the opportunity to leverage synergies and create long-term growth opportunities by integrating entities with similar products, end consumers and financial performance metrics under the same management. The change in segment reporting better aligns with how the businesses are managed and evaluated given the change in portfolio. Recast Segment Results were presented in our March 31, 2023 Form 10-Q for both the previously presented segment results as well as the recast financial information to reflect the change in our segment presentation.

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 our European operations, as well as our corporate functions such as legal, internal audit, treasury, human resources, tax compliance and senior executive staff. 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 Net Sales and Profit (Loss)

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 September 30,				For the Nine Months Ended September 30,
	2023		2022 (2)		2023		2022 (2)
Net sales
Residential	$	896.3	$	835.3	$	2,513.6	$	2,494.9
Commercial (2)	405.5		352.3		1,121.5		959.2
Corporate and other (2)	64.5		57.3		192.0		170.5
	$	1,366.3	$	1,244.9	$	3,827.1	$	3,624.6
Segment profit (loss) (1)
Residential	$	181.4	$	153.8	$	495.2	$	477.7
Commercial (2)	97.3		52.4		250.3		117.4
Corporate and other (2)	(23.4)		(16.9)		(65.2)		(61.4)
Total segment profit	255.3		189.3		680.3		533.7
Reconciliation to Operating income:
Impairment on assets held for sale	$	63.2	—		$	63.2	—
Items in Losses (gains) and other expenses, net that are excluded from segment profit (loss) (1)	5.0		3.3		12.1		7.9
Restructuring charges	0.3		0.2		0.2		1.2
Operating income	$	186.8	$	185.8	$	604.8	$	524.6

(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 (gains) losses on unsettled futures contracts,

▪Environmental liabilities and special litigation charges, and;

▪Other items, net

◦Restructuring charges and;

◦Impairment on assets held for sale

(2) 2022 results have been recast to reflect the realignment of our reportable segments.