UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

Washington, D. C. 20549

FORM 10-Q

(MARK ONE)

þ		QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

FOR THE QUARTERLY PERIOD ENDED SEPTEMBER 30, 2009

o		TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

Commission file number 001-15149

LENNOX INTERNATIONAL INC.

Incorporated pursuant to the Laws of the State of DELAWARE

Internal Revenue Service Employer Identification No. 42-0991521

2140 LAKE PARK BLVD., RICHARDSON, TEXAS, 75080
(972-497-5000)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.

Yes þ No o

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).

Yes o No o

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Securities Exchange Act of 1934.

Large Accelerated Filer þ		Accelerated Filer o		Non-Accelerated Filer o		Smaller Reporting Company o

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Securities Exchange Act of 1934).

Yes o No þ

As of October 19, 2009, the number of shares outstanding of the registrant’s common stock, par value $.01 per share, was 55,972,809.

 

 

LENNOX INTERNATIONAL INC.

FORM 10-Q
For the Three and Nine Months Ended September 30, 2009

INDEX

		Page
Part I. Financial Information
Item 1. Financial Statements
Consolidated Balance Sheets — September 30, 2009 (Unaudited) and December 31, 2008			3
Consolidated Statements of Operations (Unaudited) — Three and Nine Months Ended September 30, 2009 and 2008			4
Consolidated Statements of Stockholders’ Equity and Comprehensive (Loss) Income — Nine Months Ended September 30, 2009 (Unaudited) and Year Ended December 31, 2008			5
Consolidated Statements of Cash Flows (Unaudited) — Nine Months Ended September 30, 2009 and 2008			6
Notes to Consolidated Financial Statements (Unaudited)			7
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations			25
Item 3. Quantitative and Qualitative Disclosures About Market Risk			41
Item 4. Controls and Procedures			42
Part II. Other Information
Item 1. Legal Proceedings			43
Item 1A. Risk Factors			43
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds			44
Item 6. Exhibits			44
Exhibit 31.1
Exhibit 31.2
Exhibit 32.1

PART I — FINANCIAL INFORMATION

Item 1.		Financial Statements.

LENNOX INTERNATIONAL INC. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS
(In millions, except share and per share data)

		As of				As of
		September 30,				December 31,
		2009				2008
		(unaudited)
ASSETS
CURRENT ASSETS:
Cash and cash equivalents		$	101.9			$	122.1
Short-term investments			—				33.4
Accounts and notes receivable, net			387.3				363.4
Inventories, net			274.6				297.3
Deferred income taxes			9.5				24.2
Other assets			51.9				94.8
Total current assets			825.2				935.2
PROPERTY, PLANT AND EQUIPMENT, net			329.9				329.4
GOODWILL			253.1				232.3
DEFERRED INCOME TAXES			104.9				113.5
OTHER ASSETS, net			49.5				49.1
TOTAL ASSETS		$	1,562.6			$	1,659.5
LIABILITIES AND STOCKHOLDERS’ EQUITY
CURRENT LIABILITIES:
Short-term debt		$	5.6			$	6.1
Current maturities of long-term debt			35.6				0.6
Accounts payable			279.7				234.1
Accrued expenses			315.4				331.5
Income taxes payable			—				3.7
Total current liabilities			636.3				576.0
LONG-TERM DEBT			159.9				413.7
POSTRETIREMENT BENEFITS, OTHER THAN PENSIONS			11.9				12.5
PENSIONS			101.7				107.7
OTHER LIABILITIES			75.3				91.0
Total liabilities			985.1				1,200.9
COMMITMENTS AND CONTINGENCIES STOCKHOLDERS’ EQUITY:
Preferred stock, $.01 par value, 25,000,000 shares authorized, no shares issued or outstanding			—				—
Common stock, $.01 par value, 200,000,000 shares authorized, 85,193,639 shares and 84,215,904 shares issued for 2009 and 2008, respectively			0.9				0.8
Additional paid-in capital			831.9				805.6
Retained earnings			560.1				538.8
Accumulated other comprehensive loss			(24.5	)			(98.8	)
Treasury stock, at cost, 29,223,965 shares and 29,109,058 shares for 2009 and 2008, respectively			(790.9	)			(787.8	)
Total stockholders’ equity			577.5				458.6
TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY		$	1,562.6			$	1,659.5

The accompanying notes are an integral part of these consolidated financial statements.

LENNOX INTERNATIONAL INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited, in millions, except per share data)

		For the Three Months								For the Nine Months
		Ended September 30,								Ended September 30,
		2009				2008				2009				2008
NET SALES		$	749.5			$	959.9			$	2,114.0			$	2,702.8
COST OF GOODS SOLD			526.4				690.6				1,525.7				1,967.7
Gross profit			223.1				269.3				588.3				735.1
OPERATING EXPENSES:
Selling, general and administrative expenses			158.4				168.6				477.8				535.0
(Gains) losses and other expenses, net			(2.1	)			3.2				(2.3	)			(4.8	)
Restructuring charges			11.5				8.4				27.4				18.9
Impairment of equity method investment			—				—				—				2.3
Income from equity method investments			(2.4	)			(2.0	)			(5.6	)			(8.0	)
Operational income from continuing operations			57.7				91.1				91.0				191.7
INTEREST EXPENSE, net			2.2				3.9				6.1				10.7
OTHER EXPENSE, net			0.1				0.1				0.2				0.2
Income from continuing operations before income taxes			55.4				87.1				84.7				180.8
PROVISION FOR INCOME TAXES			21.7				32.3				32.8				68.9
Income from continuing operations			33.7				54.8				51.9				111.9
DISCONTINUED OPERATIONS:
Loss (income) from discontinued operations			2.9				(0.1	)			10.2				(0.5	)
Income tax benefit			(0.2	)			—				(3.0	)			—
Loss (income) from discontinued operations			2.7				(0.1	)			7.2				(0.5	)
Net income		$	31.0			$	54.9			$	44.7			$	112.4
EARNINGS PER SHARE — BASIC:
Income from continuing operations		$	0.60			$	0.99			$	0.94			$	1.96
Loss from discontinued operations			(0.05	)			—				(0.13	)			—
Net income		$	0.55			$	0.99			$	0.81			$	1.96
EARNINGS PER SHARE — DILUTED:
Income from continuing operations		$	0.59			$	0.96			$	0.92			$	1.89
(Loss) income from discontinued operations			(0.05	)			—				(0.13	)			0.01
Net income		$	0.54			$	0.96			$	0.79			$	1.90
AVERAGE SHARES OUTSTANDING:
Basic			55.8				55.3				55.5				57.2
Diluted			57.1				57.0				56.3				59.1
CASH DIVIDENDS DECLARED PER SHARE		$	0.14			$	0.14			$	0.42			$	0.42

The accompanying notes are an integral part of these consolidated financial statements.

LENNOX INTERNATIONAL INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY AND COMPREHENSIVE (LOSS) INCOME
For the Nine Months Ended September 30, 2009 (unaudited) and the Year Ended December 31, 2008
(In millions, except per share data)

																		Accumulated
		Common Stock								Additional								Other				Treasury				Total
		Issued								Paid-In				Retained				Comprehensive				Stock				Stockholders’				Comprehensive
		Shares				Amount				Capital				Earnings				Income (Loss)				at Cost				Equity				(Loss) Income
BALANCE AS OF DECEMBER 31, 2007			81.9			$	0.8			$	760.7			$	447.4			$	63.6			$	(464.0	)		$	808.5
Net income			—				—				—				122.8				—				—				122.8			$	122.8
Dividends, $0.56 per share			—				—				—				(31.4	)			—				—				(31.4	)			—
Foreign currency translation adjustments, net			—				—				—				—				(84.9	)			—				(84.9	)			(84.9	)
Pension and postretirement liability changes, net of tax benefit of $35.1			—				—				—				—				(55.9	)			—				(55.9	)			(55.9	)
Stock-based compensation expense			—				—				11.8				—				—				—				11.8				—
Derivatives and other, net of tax benefit of $12.3			—				—				—				—				(21.6	)			—				(21.6	)			(21.6	)
Common stock issued			2.3				—				19.7				—				—				—				19.7				—
Treasury stock purchases			—				—				—				—				—				(323.8	)			(323.8	)			—
Tax benefits of stock-based compensation			—				—				13.4				—				—				—				13.4				—
Comprehensive loss			—				—				—				—				—				—				—			$	(39.6	)
BALANCE AS OF DECEMBER 31, 2008			84.2			$	0.8			$	805.6			$	538.8			$	(98.8	)		$	(787.8	)		$	458.6
Net income			—				—				—				44.7				—				—				44.7			$	44.7
Dividends, $0.42 per share			—				—				—				(23.4	)			—				—				(23.4	)			—
Foreign currency translation adjustments, net			—				—				—				—				51.0				—				51.0				51.0
Stock-based compensation expense			—				—				9.0				—				—				—				9.0				—
Derivatives and other, net of tax provision of $12.8			—				—				—				—				23.3				—				23.3				23.3
Common stock issued			1.0				0.1				7.6				—				—				—				7.7				—
Treasury stock purchases			—				—				—				—				—				(3.1	)			(3.1	)			—
Tax benefit of stock-based compensation			—				—				4.3				—				—				—				4.3				—
Other tax related items			—				—				5.4				—				—				—				5.4				—
Comprehensive income			—				—				—				—				—				—				—			$	119.0
BALANCE AS OF SEPTEMBER 30, 2009			85.2			$	0.9			$	831.9			$	560.1			$	(24.5	)		$	(790.9	)		$	577.5

The accompanying notes are an integral part of these consolidated financial statements.

LENNOX INTERNATIONAL INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS
For the Nine Months Ended September 30, 2009 and 2008
(Unaudited, in millions)

		2009			2008
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income		$	44.7			$	112.4
Adjustments to reconcile net income to net cash provided by operating activities:
Income from equity method investments			(5.6	)			(8.0	)
Dividends from affiliates			6.8				—
Restructuring expenses, net of cash paid			11.9				(3.2	)
Impairment of assets held for sale and equity method investment			2.1				2.3
Unrealized (gain) loss on derivative contracts			(6.3	)			0.4
Return of collateral posted for hedges			37.9				—
Stock-based compensation expense			9.0				8.3
Depreciation and amortization			39.2				38.4
Deferred income taxes			12.5				8.6
Other items, net			29.4				9.7
Changes in assets and liabilities, net of effect of acquisitions and divestitures:
Accounts and notes receivable			(18.9	)			(78.3	)
Inventories			21.1				(34.1	)
Other current assets			16.2				(1.7	)
Accounts payable			37.3				68.8
Accrued expenses			(1.9	)			(4.2	)
Income taxes payable and receivable			0.4				21.5
Other			(22.5	)			(1.1	)
Net cash provided by operating activities			213.3				139.8
CASH FLOWS FROM INVESTING ACTIVITIES:
Proceeds from the disposal of property, plant and equipment			0.9				0.5
Purchases of property, plant and equipment			(33.9	)			(38.3	)
Proceeds from sales of affiliates			0.5				—
Return of investment			0.7				—
Purchases of short-term investments			(16.9	)			(53.4	)
Proceeds from sales and maturities of short-term investments			50.2				46.7
Net cash provided by (used in) investing activities			1.5				(44.5	)
CASH FLOWS FROM FINANCING ACTIVITIES:
Short-term (payments) borrowing			(1.0	)			0.1
Payments on long-term notes			(1.5	)			(25.2	)
Revolver long-term (payments) borrowings, net			(217.3	)			202.0
Proceeds from stock option exercises			7.6				16.1
Repurchases of common stock			(3.1	)			(307.6	)
Excess tax benefits related to share-based payments			3.4				12.1
Cash dividends paid			(23.2	)			(32.4	)
Net cash used in by financing activities			(235.1	)			(134.9	)
DECREASE IN CASH AND CASH EQUIVALENTS			(20.3	)			(39.6	)
EFFECT OF EXCHANGE RATES ON CASH AND CASH EQUIVALENTS			0.1				1.2
CASH AND CASH EQUIVALENTS, beginning of period			122.1				145.5
CASH AND CASH EQUIVALENTS, end of period		$	101.9			$	107.1
Supplementary disclosures of cash flow information:
Cash paid during the period for:
Interest		$	5.2			$	11.7
Income taxes (net of refunds)		$	13.5			$	27.6

The accompanying notes are an integral part of these consolidated financial statements.

LENNOX INTERNATIONAL INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)

1. General:

References in this Quarterly Report on Form 10-Q to “we,” “our,” “us,” “LII” or the “Company” refer to Lennox International Inc. and its subsidiaries, unless the context requires otherwise.

Basis of Presentation

The accompanying unaudited Consolidated Balance Sheet as of September 30, 2009, the accompanying unaudited Consolidated Statements of Operations for the quarters and nine months ended September 30, 2009 and 2008, the accompanying unaudited Consolidated Statement of Stockholders’ Equity for the nine months ended September 30, 2009 and the accompanying unaudited Consolidated Statements of Cash Flows for the nine months ended September 30, 2009 and 2008 should be read in conjunction with our audited consolidated financial statements and footnotes included in our Annual Report on Form 10-K for the year ended December 31, 2008. The accompanying unaudited consolidated financial statements have been prepared in accordance with generally accepted accounting principles (“GAAP”) for interim financial information and with the instructions to Form 10-Q and Article 10 of Regulation S-X. The accompanying consolidated financial statements contain all material adjustments, consisting principally of normal recurring adjustments, necessary for a fair presentation of our financial position, results of operations and cash flows. Certain information and footnote disclosures normally included in financial statements prepared in accordance with generally accepted accounting principles have been condensed or omitted pursuant to applicable rules and regulations, although we believe that the disclosures herein are adequate to make the information presented not misleading. The operating results for the interim periods are not necessarily indicative of the results that may be expected for the full year.

Our fiscal year ends on December 31 and our quarters are each comprised of 13 weeks. For convenience, throughout these financial statements, the 13 weeks comprising each quarterly period are denoted by the last day of the respective calendar quarter.

Use of Estimates

The preparation of financial statements in conformity with U.S. GAAP requires us to make estimates and assumptions about future events. These estimates and the underlying assumptions affect the amounts of assets and liabilities reported, disclosures about contingent assets and liabilities, and reported amounts of revenues and expenses. Such estimates include the valuation of accounts receivable, inventories, goodwill, intangible assets, and other long-lived assets, legal contingencies, guarantee obligations, indemnifications, and assumptions used in the calculation of income taxes, pension and postretirement medical benefits, among others. These estimates and assumptions are based on our best estimates and judgment.

We evaluate our estimates and assumptions on an ongoing basis using historical experience and other factors, including the current economic environment. We believe these estimates and assumptions to be reasonable under the circumstances and adjust such estimates and assumptions when facts and circumstances dictate. Declines in the residential and commercial new construction markets and other consumer spending and volatile equity, foreign currency, and commodity markets have combined to increase the uncertainty inherent in such estimates and assumptions. As future events and their effects cannot be determined with precision, actual results could differ significantly from these estimates. Changes in those estimates resulting from continuing changes in the economic environment will be reflected in the financial statements in future periods.

Reclassifications

We have reclassified certain prior period expenses in the Consolidated Statement of Operations from Selling, General and Administrative Expenses to Cost of Goods Sold to conform to the current period’s presentation in the Consolidated Statement of Operations. These costs include global sourcing and supplier development, product liability, workers’ compensation and property leases.

Newly Issued Accounting Pronouncements

In June 2009, the Financial Accounting Standards Board (“FASB”) issued revisions to Accounting Standards Codification (“ASC”) Topic 860 and will require more information about transfers of financial assets, including securitization transactions, and where entities have continuing exposure to the risks related to transferred financial assets. It eliminates the concept of a “qualifying special-purpose entity,” provides for more restrictive requirements for derecognizing financial assets, and requires additional disclosures. The changes will be effective January 1, 2010. Early application is not permitted. We are currently evaluating the effects of these changes on our consolidated financial statements.

2. Accounts and Notes Receivable:

Accounts and Notes Receivable have been reported in the accompanying Consolidated Balance Sheets net of the allowance for doubtful accounts and net of accounts receivable sold under an ongoing asset securitization arrangement. Detailed information regarding the allowance for doubtful accounts is provided below (in millions):

		As of				As of
		September 30,				December 31,
		2009				2008
Allowance for doubtful accounts		$	20.4			$	17.9

		For the								For the
		Three Months Ended								Nine Months Ended
		September 30,								September 30,
		2009				2008				2009				2008
Provision for bad debts		$	3.7			$	3.0			$	11.0			$	13.3

3. Inventories:

Components of inventories are as follows (in millions):

		As of				As of
		September 30,				December 31,
		2009				2008
Finished goods		$	191.7			$	232.5
Work in process			10.5				8.4
Raw materials and repair parts			144.9				132.2
			347.1				373.1
Excess of current cost over last-in, first-out cost			(72.5	)			(75.8	)
Total inventories		$	274.6			$	297.3

The Company recorded income of $2.6 million from LIFO inventory liquidations during the quarter ended September 30, 2009.

4. Goodwill:

The changes in the carrying amount of goodwill for the nine months ended September 30, 2009, in total and by segment, are as follows (in millions):

		Balance at								Balance at
		December 31,								September 30,
Segment		2008				Changes(1)				2009
Residential Heating & Cooling		$	33.7			$	—			$	33.7
Commercial Heating & Cooling			31.2				1.0				32.2
Service Experts			93.8				9.7				103.5
Refrigeration			73.6				10.1				83.7
Total		$	232.3			$	20.8			$	253.1

5. Derivatives:

General

Our earnings and cash flows are subject to fluctuations due to changes in commodity prices, interest rates, and foreign currency exchange rates, and we seek to mitigate a portion of these risks by entering into derivative contracts. The derivatives we use are commodity futures contracts, interest rate swaps, and currency forward contracts. We do not use derivatives for speculative purposes.

The derivatives we enter into may be, but are not always, accounted for as hedges. To qualify for hedge accounting, the derivatives must be highly effective in reducing the risk exposure that they are designed to hedge, and it must be probable that the underlying transaction will occur. For instruments designated as cash flow hedges, we must formally document, at inception, the relationship between the derivative and the hedged item, the risk management objective, the hedging strategy for use of the hedged instrument, and how hedge effectiveness is, and will be, assessed. This documentation also includes linking the derivatives that are designated as cash flow hedges to forecasted transactions. We assess hedge effectiveness at inception and at least quarterly throughout the hedge designation period.

We recognize all derivatives as either assets or liabilities at fair value in the Consolidated Balance Sheets, regardless of whether or not hedge accounting is applied. For more information on the fair value of these derivative instruments, see Note 16. We report cash flows arising from our hedging instruments consistent with the classification of cash flows from the underlying hedged items. Accordingly, cash flows associated with our derivative programs are classified as operating activities in the accompanying Consolidated Statements of Cash Flows.

We monitor our derivative positions and credit ratings of our counterparties and do not anticipate losses due to counterparty non-performance.

Hedge Accounting

The derivatives that we use as hedges of commodity prices and movements in interest rates are accounted for as cash flow hedges. The effective portion of the gain or loss on the derivatives accounted for as hedges is recorded, net of applicable taxes, in accumulated other comprehensive loss (“AOCL”), a component of Stockholders’ Equity in the accompanying Consolidated Balance Sheets. When earnings are affected by the variability of the underlying cash flow, the applicable offsetting amount of the gain or loss from the derivatives that is deferred in AOCL is reclassified into earnings into the same financial statement line item that the hedged item is recorded in. Ineffectiveness, if any, is recorded in earnings each period. If the hedging relationship ceases to be highly effective, the net gain or loss shall remain in AOCL and will be reclassified into earnings when earnings are affected by the variability of the underlying cash flow. If it becomes probable that the forecasted transaction will not occur by the end of the originally specified period or within two months thereafter, the net gain or loss remaining in AOCL will be reclassified to earnings immediately.

Accounting for Derivatives When Hedge Accounting is Not Applied

We may also enter into derivatives that economically hedge certain of our risks, even though hedge accounting does not apply or we elect not to apply hedge accounting to these instruments. The changes in fair value of the derivatives act as an economic offset to changes in the fair value of the underlying items. Changes in the fair value of instruments not designated as cash flow hedges are recorded in earnings throughout the term of the derivative instrument and are reported in (Gains) Losses and Other Expenses, net in the accompanying Consolidated Statements of Operations.

Objectives and Strategies for Using Derivative Instruments

Commodity Price Risk

We utilize a cash flow hedging program to mitigate the exposure to volatility in the prices of metal commodities we use in our production processes. The hedging program includes the use of futures contracts, and we enter into these contracts based on our hedging strategy. We use a dollar cost averaging strategy for our hedge program. As part of this strategy, a higher percentage of commodity price exposures are hedged near term with lower percentages hedged at future dates. This strategy provides us with protection against near-term price volatility caused by market speculators and market forces, such as supply variation, while allowing us to adjust to market price movements over time. Upon entering into futures contracts, we lock in prices and are subject to derivative losses should the metal commodity prices decrease and gains should the prices increase. During 2008, metal commodity prices decreased considerably in a short time period, which resulted in significant derivative loss positions. As a result of these loss positions, we were required to post collateral of $37.9 million as of December 31, 2008. During the first three quarters of 2009, metal commodity prices remained relatively stable and as a result our commodity contracts that were in loss positions at December 31, 2008 have expired and we were no longer required to post collateral as of September 30, 2009. The collateral posted was treated as a prepaid expense and recorded in Other Assets in the accompanying Consolidated Balance Sheets. The unrealized derivative losses were recorded in AOCL.

Interest Rate Risk

The majority of our debt bears interest at variable interest rates and therefore we are subject to variability in the cash paid for interest expense. In order to mitigate a portion of this risk, we use a hedging strategy to eliminate the variability of cash flows in the interest payments associated with the first $100 million of the total variable-rate debt outstanding under our Credit Agreement that is solely due to changes in the benchmark interest rate. This strategy allows us to fix a portion of our interest payments while also taking advantage of historically low interest rates.

On June 12, 2009, we entered into a $100 million pay-fixed, receive-variable interest rate swap with a large financial institution at a fixed interest rate of 2.66%. The variable portion of the interest rate swap is tied to the 1-Month LIBOR (the benchmark interest rate). The interest rates under both the interest rate swap and the underlying debt are reset, the swap is settled with the counterparty, and interest is paid, on a monthly basis. The interest rate swap expires October 12, 2012. We account for the interest rate swap as a cash flow hedge.

Foreign Currency Risk

Foreign currency exchange rate movements create a degree of risk by affecting the U.S. dollar value of assets and liabilities arising in foreign currencies. Our objective for entering into foreign currency forward contracts is to mitigate the impact of short-term currency exchange rate movements on certain short-term intercompany transactions. In order to meet that objective, we periodically enter into foreign currency forward contracts that act as economic hedges against changes in foreign currency exchange rates. These forward contracts are not designated as hedges and generally expire during the quarter that we entered into them.

Cash Flow Hedges

We include (gains) losses in AOCL in connection with our commodity cash flow hedges. The (gains) losses related to commodity price hedges are expected to be reclassified into earnings within the next 18 months based on the prices of the commodities at settlement date. Assuming that commodity prices remain constant, $2.9 million of derivative gains are expected to be reclassified into earnings within the next 12 months. Commodity futures contracts that are designated as cash flow hedges and are in place as of September 30, 2009 are scheduled to mature through December 2010.

The (gains) losses related to our interest rate swap are expected to be reclassified into earnings within the next 37 months based on the term of the swap. Assuming that the benchmark interest rate remains constant, $1.2 million of derivative losses are expected to be reclassified into earnings within the next 12 months.

We recorded the following amounts related to our cash flow hedges (in millions):

		As of				As of
		September 30,				December 31,
		2009				2008
Commodity Price Hedges:
(Gains) Losses included in AOCL, net of tax		$	(3.0	)		$	21.3
Tax expense (benefit)			1.7				(11.9	)
Interest Rate Swap:
Losses included in AOCL, net of tax		$	1.6			$	—
Tax benefit			(0.9	)			—

		As of				As of
		September 30,				December 31,
		2009				2008
		(pounds)				(pounds)
Copper			11.4				23.1

Derivatives not Designated as Cash Flow Hedges

For commodity derivatives not designated as cash flow hedges, we follow the same hedging strategy as for derivatives designated as cash flow hedges. We elect not to designate these derivatives as cash flow hedges at inception of the arrangement. We had the following outstanding commodity futures contracts not designated as cash flow hedges (in millions):

		As of				As of
		September 30,				December 31,
		2009				2008
		(pounds)				(pounds)
Copper			1.1				2.9
Aluminum			1.1				3.2

During the third quarter of 2009, we entered into foreign currency forward contracts with notional amounts of $23.3 million, of which $11.9 million were still outstanding at the end of the third quarter of 2009.

Information About the Location and Amounts of Derivative Instruments

For information on the location and amounts of derivative fair values in the Consolidated Balance Sheets and derivative gains and losses in the Consolidated Statements of Operations, see the tabular information presented below (in millions):

Fair Values of Derivative Instruments

		As of September 30,						As of December 31,
		2009						2008
		Balance Sheet Location		Fair Value				Balance Sheet Location		Fair Value
Asset Derivatives
Derivatives designated as hedging instruments under FASB ASC Topic 815
Commodity futures contracts		Other Assets (Current)		$	4.7			Other Assets (Current)		$	—
Commodity futures contracts		Other Assets (Non-current)			0.2			Other Assets (Non-current)			—
					4.9						—
Derivatives not designated as hedging instruments under FASB ASC Topic 815
Commodity futures contracts		Other Assets (Current)			0.5			Other Assets (Current)			—
					0.5						—
Total Asset for Derivatives				$	5.4					$	—
Liability Derivatives
Derivatives designated as hedging instruments under FASB ASC Topic 815
Commodity futures contracts		Accrued Expenses		$	0.2			Accrued Expenses		$	31.0
Interest rate swap		Accrued Expenses			1.8			Accrued Expenses			—
Interest rate swap		Other Liabilities			0.7			Other Liabilities			—
Commodity futures contracts		Other Liabilities			—			Other Liabilities			2.6
					2.7						33.6
Derivatives not designated as hedging instruments under FASB ASC Topic 815
Commodity futures contracts		Accrued Expenses			0.2			Accrued Expenses			5.5
Commodity futures contracts		Other Liabilities			—			Other Liabilities			0.3
					0.2						5.8
Total Liability for Derivatives				$	2.9					$	39.4

The Effect of Derivative Instruments on the Consolidated Statements of Operations

						Amount of Loss or (Gain) Reclassified
						from AOCL into Income
						(Effective Portion)
Derivatives in FASB ASC		Location of Loss or (Gain) Reclassified				For the Three Months								For the Nine Months
Topic 815 Cash Flow		from AOCL into Income				Ended September 30,								Ended September 30,
Hedging Relationships		(Effective Portion)				2009				2008				2009				2008
Commodity futures contracts		Cost of Goods Sold				$	2.8			$	(2.6	)		$	19.7			$	(10.5	)
Interest rate swap		Interest Expense, net					0.6				—				0.7				—
						$	3.4			$	(2.6	)		$	20.4			$	(10.5	)

						Amount of Loss or (Gain) Recognized
						in Income on Derivatives
						(Ineffective Portion)
Derivatives in FASB ASC		Location of Loss or (Gain) Recognized				For the Three Months								For the Nine Months
Topic 815 Cash Flow		in Income on Derivatives				Ended September 30,								Ended September 30,
Hedging Relationships		(Ineffective Portion)				2009				2008				2009				2008
Commodity futures contracts		(Gains) Losses and Other Expenses, net				$	—			$	0.1			$	(0.1	)		$	0.1

						Amount of (Gain) or Loss Recognized in Income on
						Derivatives
Derivatives Not Designated		Location of (Gain) or Loss				For the Three Months								For the Nine Months
as Hedging Instruments under		Recognized in Income on				Ended September 30,								Ended September 30,
FASB ASC Topic 815		Derivatives				2009				2008				2009				2008
Commodity futures contracts		(Gains) Losses and Other Expenses, net				$	(0.8	)		$	2.7			$	(2.6	)		$	(0.6	)
Foreign currency forward contracts		(Gains) Losses and Other Expenses, net					0.9				—				3.2				—
						$	0.1			$	2.7			$	0.6			$	(0.6	)

6. Income Taxes:

As of September 30, 2009, we had approximately $7.5 million in total gross unrecognized tax benefits. Of this amount, $5.3 million (net of federal benefit on state issues), if recognized, would be recorded in the Consolidated Statement of Operations. Also included in the balance of unrecognized tax benefits as of September 30, 2009 are liabilities of $1.0 million that, if recognized, would be recorded as an adjustment to stockholders’ equity. As of September 30, 2009, we had recognized $0.3 million (net of federal tax benefits) in interest and penalties in income tax expense.

The Internal Revenue Service (“IRS”) completed its examination of our consolidated tax returns for the years ended 2004 and 2005 and issued a Revenue Agent’s Report (“RAR”) on July 31, 2008. The IRS has proposed certain significant adjustments to our insurance deductions and research tax credits. We disagree with the RAR, which is currently under review by the administrative appeals division of the IRS, and anticipate resolution by the end of 2009. It is possible that a reduction in the unrecognized tax benefits may occur, but an estimate of the impact on the Consolidated Statement of Operations cannot be made at this time.

The IRS also completed its examination of our consolidated tax returns for the years ended 2006 and 2007 and issued an RAR on June 1, 2009. We reached a settlement with the IRS in the third quarter that resulted in an immaterial impact to the Consolidated Statement of Operations.

We are subject to examination by numerous taxing authorities in jurisdictions such as Australia, Belgium, Canada, Germany, and the United States. We are generally no longer subject to U.S. federal, state and local, or non-U.S. income tax examinations by taxing authorities for years before 2002.

Since January 1, 2009, numerous states, including Wisconsin, California, Virginia, North Dakota, and Oregon, have enacted legislation effective for tax years beginning on or after January 1, 2009, including requirements for combined reporting, changes to apportionment methods, and surtaxes. We believe any adjustments will be immaterial.

7. Commitments and Contingencies:

We are subject to contingencies that arise in the normal course of business, including product warranties and other product-related contingencies, pending litigation, environmental matters, and other guarantees or claims.

We use a combination of third-party insurance and self-insurance plans (large deductible or captive) to provide protection against claims relating to contingencies such as workers’ compensation, general liability, product liability, property damage, aviation liability, directors’ and officers’ liability, auto liability, physical damage, and other exposures. Of these exposures, we use self-insurance plans for workers’ compensation/employers’ liability, general liability, product liability, and auto liability. Prior to the third quarter of 2009, these policies were written through a third-party insurance provider, which was then reinsured by our captive insurance subsidiary. Starting with the third quarter of 2009, these policies have been fronted by a commercial insurance company, and we then pay the premium directly into our captive insurance company. We believe that the liability limits retained by the captive are customary for a company of our size and in our industry, and are appropriate for our business.

In addition, we use third-party insurance plans for property damage, aviation liability, directors’ and officers’ liability, and other exposures. Each of these policies includes per occurrence limits. However, we also carry umbrella or excess liability insurance for all third-party and self-insurance plans, except for directors’ and officers’ liability and property insurance. We believe the limit within our excess policy is adequate for a company of our size and in our industry.

The self-insurance expense, and liabilities are actuarially determined based on our historical claims information, as well as industry factors and trends, and because we have a captive insurance company, we are required to maintain specified levels of liquid assets from which we must pay claims. The majority of our self-insured risks (excluding auto liability and physical damage) will be paid over an extended period of time. The self-insurance liabilities recorded in Accrued Expenses in the accompanying Consolidated Balance Sheets were $63.3 million at September 30, 2009 and $63.2 million as of December 31, 2008.

Total liabilities for estimated warranty are included in the following captions on the accompanying Consolidated Balance Sheets (in millions):

		As of				As of
		September 30,				December 31,
		2009				2008
Accrued Expenses		$	29.5			$	29.8
Other Liabilities			51.6				64.3
		$	81.1			$	94.1

The changes in the total warranty liabilities for the nine months ended September 30, 2009 were as follows (in millions):

Total warranty liability as of December 31, 2008		$	94.1
Payments made in 2009			(20.7	)
Changes resulting from issuance of new warranties			19.1
Changes in estimates associated with pre-existing liabilities			(12.8	)
Changes in foreign currency exchange rates			1.4
Total warranty liability as of September 30, 2009		$	81.1

At the end of each accounting period, we evaluate our warranty liabilities and during the second quarter of each year, we perform a complete reevaluation of our warranty liabilities. As a result of our annual evaluation, we recorded a reduction in warranty liabilities in the second quarter of 2009 that is the principal amount contained within the changes in estimates associated with pre-existing liabilities of $12.8 million above. The reduction to our warranty liabilities was principally caused by lower than expected failure rates, reductions to future cost estimates, and new experience data.

We incur the risk of liability claims for the installation and service of heating and air conditioning products, and we maintain liabilities for those claims that we self-insure. We are involved in various claims and lawsuits related to our products. Our product liability insurance policies have limits that, if exceeded, may result in substantial costs that could have an adverse effect on our results of operations. In addition, warranty claims are not covered by our product liability insurance and certain product liability claims may also not be covered by our product liability insurance. There have been no material changes in the circumstances since our latest fiscal year-end.

We also may incur costs related to our products that may not be covered under our warranties and are not covered by insurance, and we may, from time to time, repair or replace installed products experiencing quality issues in order to satisfy our customers and to protect our brand. These product quality issues may be caused by vendor-supplied components that fail to meet required specifications. We have identified a product quality issue in a heating and cooling product line produced during a limited time period that we believe results from a vendor-supplied component that failed to meet required specifications. During the first nine months of 2009, we have recorded an expense of $5.1 million for the portion of the issue that is probable and can be reliably estimated based upon the current data available. The expense for this product quality issue, and the related liability, is not included in the tables related to our estimated warranty liabilities. We are working to determine the scope and nature of the issue. Any additional liability resulting from the product quality issue and any related recovery from the vendor cannot be reasonably estimated at this time.

We estimate the costs to settle pending litigation based on experience involving similar claims and specific facts known. We do not believe that any current or pending or threatened litigation will have a material adverse effect on our financial position. Litigation and arbitration, however, involve uncertainties and it is possible that the eventual outcome of litigation could adversely affect our results of operations for a particular period.

Applicable environmental laws can potentially impose obligations to remediate hazardous substances at our properties, at properties formerly owned or operated by us, and at facilities to which we have sent or send waste for treatment or disposal. We are aware of contamination at some facilities; however, we do not presently believe that any future remediation costs at such facilities will be material to our results of operations. There have been no material changes to the reserve balances since our latest fiscal year-end.

On June 22, 2006, we entered into an agreement with a financial institution to lease our corporate headquarters in Richardson, Texas for a term of seven years (the “Lake Park Lease”). The leased property consists of an office building of approximately 192,000 square feet, land and related improvements. Our obligations under the Lake Park Lease are secured by a pledge of our interest in the leased property and are also guaranteed by us and certain of our subsidiaries. The Lake Park Lease, as amended, contains restrictive covenants that are consistent with those of our domestic revolving credit facility. We are in compliance with these financial covenants as of September 30, 2009.

8. Lines of Credit and Financing Arrangements:

Long-Term Debt and Lines of Credit

The following tables summarize our outstanding debt obligations and the classification in the accompanying Consolidated Balance Sheets (in millions):

Description of Obligation		Short-Term				Current				Long-Term
As of September 30, 2009		Debt				Maturities				Maturities				Total
Domestic promissory notes (1)		$	—			$	35.0			$	—			$	35.0
Domestic revolving credit facility			—				—				142.5				142.5
Capital lease obligations			—				0.5				17.1				17.6
Foreign obligations			5.6				0.1				0.3				6.0
Total debt		$	5.6			$	35.6			$	159.9			$	201.1

Description of Obligation		Short-Term				Current				Long-Term
As of December 31, 2008		Debt				Maturities				Maturities				Total
Domestic promissory notes (1)		$	—			$	—			$	35.0			$	35.0
Domestic revolving credit facility			—				—				359.8				359.8
Capital lease obligations			—				0.3				18.6				18.9
Foreign obligations			6.1				0.3				0.3				6.7
Total debt		$	6.1			$	0.6			$	413.7			$	420.4

As of September 30, 2009, we had outstanding borrowings of $142.5 million and an additional $95.9 million committed to standby letters of credit under our $650.0 million domestic revolving credit facility. All of the remaining $411.6 million was available for future borrowings. The facility matures in October 2012.

Our domestic revolving credit facility includes a subfacility for swingline loans of up to $50.0 million and provides for the issuance of letters of credit for the full amount available under the domestic revolving credit facility. Our weighted average borrowing rate on the domestic revolving credit facility was 0.94% and 2.26% as of September 30, 2009 and December 31, 2008, respectively.

Our domestic revolving credit facility contains financial covenants relating to leverage and interest coverage. Other covenants contained in our domestic revolving credit facility restrict, among other things, mergers, asset dispositions, guarantees, debt, liens, acquisitions, investments, affiliate transactions and our ability to make restricted payments. The financial covenants require us to maintain defined levels of Consolidated Indebtedness to Adjusted EBITDA Ratio and a Cash Flow (defined as EBITDA minus capital expenditures) to Net Interest Expense Ratio. The required ratios as of September 30, 2009 are detailed below:

Consolidated Indebtedness to Adjusted EBITDA Ratio no greater than			3.5 : 1.0
Cash Flow to Net Interest Expense Ratio no less than			3.0 : 1.0

Our domestic revolving credit facility contains customary events of default. These events of default include nonpayment of principal or interest, breach of covenants or other restrictions or requirements, default on any other indebtedness or receivables securitizations (cross default), and bankruptcy. A cross default could occur if:

	•		we fail to pay any principal or interest when due on any other indebtedness or receivables securitization of at least $40.0 million; or
	•		we are in default on any other indebtedness or receivables securitization in an aggregate principal amount of at least $40.0 million; and
	•		such default gives the holders the right to declare such indebtedness due and payable prior to its stated maturity.

If a cross default was to occur, it could have a wider impact on our liquidity than might otherwise occur from a default of a single debt instrument or lease commitment.

If any event of default occurs and is continuing, lenders with a majority of the aggregate commitments may require the administrative agent to terminate our right to borrow under the our domestic revolving credit facilityand accelerate amounts due under our domestic revolving credit facility (except for a bankruptcy event of default, in which case such amounts will automatically become due and payable and the lenders’ commitments will automatically terminate).

The domestic promissory notes contain the same financial covenant restrictions as the domestic revolving credit facility listed above. As of September 30, 2009, we were in compliance with all covenant requirements. Our domestic revolving credit facility and promissory notes are guaranteed by our material subsidiaries.

We have additional borrowing capacity through several foreign facilities governed by agreements between us and various banks, used primarily to finance seasonal borrowing needs of our foreign subsidiaries. Available capacity at September 30, 2009 and December 31, 2008 on foreign facilities were $12.2 million and $11.1 million, respectively.

During 2008, we expanded our Tifton, Georgia manufacturing facility using the proceeds from Industrial Development Bonds (“IDBs”). We entered into a lease agreement with the owner of the property and the issuer of the IDBs, and through our lease payments fund the interest payments to investors in the IDBs. We also guaranteed the repayment of the IDBs and entered into letters of credit totaling $14.5 million to fund a potential repurchase of the IDBs in the event that investors exercised their right to tender the IDBs to the trustee of the IDB’s. At September 30, 2009 and December 31, 2008, we recorded both a capital lease asset and a corresponding long-term obligation of $14.3 million and $15.3 million, respectively, related to these transactions.

Credit Rating

At September 30, 2009, our senior credit rating was Ba1, with a stable outlook, by Moody’s and BB+, with a stable outlook, by Standard & Poor’s Rating Group (“S&P”).

Asset Securitization

Under a revolving period asset securitization arrangement (“ASA”), we are eligible to sell beneficial interests in a portion of our trade accounts receivable to participating financial institutions for cash. The arrangement expires November 25, 2009, and is subject to renewal. Our continued involvement in the transferred assets is limited to servicing, which includes collection and administration of the transferred beneficial interests. The accounts receivable sold under the ASA are high-quality domestic customer accounts that have not aged significantly and the program takes into account an allowance for uncollectable accounts. The receivables represented by the retained interest that we service are exposed to the risk of loss for any uncollectable amounts in the pool of receivables sold under the ASA. The fair values assigned to the retained and transferred interests are based on the sold accounts receivable carrying value given the short term to maturity and low credit risk.

The ASA contains certain restrictive covenants relating to the quality of our accounts receivable and cross-default provisions in our domestic revolving credit facility. The administrative agent under the ASA is also a lender in our domestic revolving credit facility. The participating financial institution has an investment-grade credit rating. We continue to evaluate its credit rating and perform its obligations under the ASA. As of September 30, 2009, we were in compliance with all covenant requirements.

The ASA provides for a maximum securitization amount of $125.0 million or 100% of the net pool balance as defined by the ASA. However, eligibility for securitization is limited based on the amount and quality of the accounts receivable and is calculated monthly. The beneficial interest sold cannot exceed the maximum amount even if our qualifying accounts receivable is greater than the maximum amount at any point in time. The eligible amounts available were as follows (in millions):

		As of				As of
		September 30,				December 31,
		2009				2008
Eligible amount available under the ASA on qualified accounts receivable		$	85.9			$	91.0
Beneficial interest sold			(30.0	)			(30.0	)
Remaining amount available		$	55.9			$	61.0

Under the ASA, we pay certain discount fees to use the program and have the facility available to us. These fees relate to both the used and unused portions of the securitization. The used fee is based on the beneficial interest sold and calculated on the average floating commercial paper rate determined by the purchaser of the beneficial interest, plus a program fee of 0.75%. The rate as of September 30, 2009 and December 31, 2008 was 0.32% and 2.14%, respectively. The unused fee is based on 102% of the maximum available amount less the beneficial interest sold and calculated at 0.3% fixed rate throughout the term of the agreement. We recorded these fees in (Gains) Losses and Other Expenses, net and Selling, General and Administrative Expenses in the accompanying Consolidated Statements of Operations. The amounts recorded were as follows (in millions):

		For the Three Months Ended								For the Nine Months Ended
		September 30,								September 30,
		2009				2008				2009				2008
Discount fees		$	0.1			$	—			$	0.6			$	0.1

9. Pension and Postretirement Benefit Plans:

The components of net periodic benefit cost were as follows (in millions):

		For the Three Months Ended September 30,
		2009				2008				2009				2008
		Pension Benefits								Other Benefits
Service cost		$	1.4			$	1.8			$	0.2			$	0.2
Interest cost			4.4				4.2				0.2				0.2
Expected return on plan assets			(4.1	)			(4.6	)			—				—
Amortization of prior service cost			0.2				0.1				(0.5	)			(0.5	)
Amortization of net loss			2.2				1.2				0.3				0.3
Settlements or curtailments			0.5				0.6				—				—
Total net periodic pension cost		$	4.6			$	3.3			$	0.2			$	0.2

		For the Nine Months Ended September 30,
		2009				2008				2009				2008
		Pension Benefits								Other Benefits
Service cost		$	4.2			$	5.2			$	0.5			$	0.6
Interest cost			13.1				12.4				0.7				0.6
Expected return on plan assets			(12.2	)			(13.6	)			—				—
Amortization of prior service cost			0.5				0.5				(1.5	)			(1.5	)
Amortization of net loss			6.8				3.6				0.9				0.9
Settlements or curtailments			0.8				2.2				—				—
Total net periodic pension cost		$	13.2			$	10.3			$	0.6			$	0.6

10. Comprehensive Income:

Comprehensive income was computed as follows (in millions):

		For the								For the
		Three Months Ended								Nine Months Ended
		September 30,								September 30,
		2009				2008				2009				2008
Net income		$	31.0			$	54.9			$	44.7			$	112.4
Foreign currency translation adjustments			23.8				(35.2	)			51.0				(19.3	)
Derivatives and other			5.3				(9.6	)			23.3				(3.5	)
Total comprehensive income		$	60.1			$	10.1			$	119.0			$	89.6

11. Stock-Based Compensation:

Our Amended and Restated 1998 Incentive Plan provides for various long-term incentive awards, which include stock options, performance share units, restricted stock units, and stock appreciation rights.

Stock-based compensation expense of $3.8 million and $9.0 million was recognized for the quarter and nine months ended September 30, 2009, respectively, and is included in Selling, General and Administrative Expenses in the accompanying Consolidated Statements of Operations. Stock-based compensation expense of $1.7 million and $8.3 million was recognized for the quarter and nine months ended September 30, 2008, respectively. The increase in stock-based compensation expense was primarily due to a prior year decrease in the estimated pay-out percentage on outstanding performance share units in the quarter ended September 30, 2008. Cash flows from the tax benefits related to share-based payments of $3.4 million and $12.1 million were included in cash flows from financing activities for the nine months ended September 30, 2009 and 2008, respectively.

12. Restructuring Charges:

As part of our strategic priorities of manufacturing and sourcing excellence and expense reduction, we have initiated various manufacturing rationalization actions designed to lower our cost structure. We also continue to reorganize our North American distribution network in order to better serve our customers’ needs by deploying parts and equipment inventory closer to them. We have also initiated a number of activities that rationalize and reorganize various support and administrative functions to reduce ongoing selling and administrative expenses.

Information on Total Restructuring Charges and Related Reserves

Restructuring charges (reversals) incurred as results of these actions include the following amounts (in millions):

		For the Three Months								For the Nine Months
		Ended September 30,								Ended September 30,
		2009				2008				2009				2008
Manufacturing rationalizations		$	9.7			$	4.7			$	18.7			$	14.3
Reorganization of distribution network			(0.5	)			—				(0.3	)			—
Reorganizations of corporate and business unit selling and administrative functions			2.3				3.7				9.0				4.6
Total		$	11.5			$	8.4			$	27.4			$	18.9

The components of the restructuring charges recorded in the third quarter and first nine months of 2009 are discussed below.

The restructuring charges recorded during the third quarter and first nine months of 2008 related to the transition of production of certain Refrigeration products then manufactured near Madrid, Spain to another facility in Genas, France; the transition of production of certain Residential Heating & Cooling products then manufactured in Blackville, South Carolina to another facility in Orangeburg, South Carolina; the transition of production of selected Refrigeration products manufactured in Milperra, Australia to our facility in Wuxi, China; the closure and consolidation of our Refrigeration manufacturing, support and warehouse functions located in Danville, Illinois, Tifton, Georgia and Stone Mountain, Georgia operations; the closure of certain Residential Heating & Cooling operations in Lynwood, California; and the consolidation of factory-built fireplace manufacturing operations into our facility in Union City, Tennessee.

Restructuring reserves are included in Accrued Expenses in the accompanying Consolidated Balance Sheets. The table below details activity within the restructuring reserves for the first three quarters of 2009 (in millions):

		Balance as of				Charged								Non-Cash				Balance as of
		December 31,				to				Cash				Utilization				September 30,
Description of Reserves		2008				Earnings				Utilization				and Other				2009
Severance and related expense (1)		$	9.3			$	17.7			$	(10.4	)		$	—			$	16.6
Asset write-offs and accelerated depreciation			—				4.3				—				(4.3	)			—
Equipment moves			—				1.4				(1.4	)			—				—
Lease termination			0.6				0.8				(0.8	)			—				0.6
Other (2)			1.0				3.2				(2.9	)			—				1.3
Total restructuring reserves		$	10.9			$	27.4			$	(15.5	)		$	(4.3	)		$	18.5

Manufacturing Rationalization Activities

Information regarding the restructuring charges related to manufacturing rationalizations is as follows (in millions):

										Total
		Charges				Charges				Charges
		Incurred in				Incurred to				Expected to
		2009				Date				be Incurred
Severance and related expense		$	10.7			$	22.5			$	23.3
Asset write-offs and accelerated depreciation			4.2				9.1				11.4
Equipment moves			1.2				4.7				6.6
Other			2.6				12.7				15.9
Total		$	18.7			$	49.0			$	57.2

Restructuring expense for manufacturing rationalization activities related to the following:

•

In the third quarter of 2009, we initiated the consolidation of certain Commercial Heating & Cooling manufacturing operations located in Mions, France into our existing manufacturing operations in Longvic, France. As a result of significant headcount reductions for this action, we recorded severance charges of $7.5 million during the third quarter of 2009. Total anticipated restructuring charges related to this action are $9.7 million and consist principally of severance, recruiting and relocation costs. All of these charges require future cash expenditures, and we intend to fund these with operating cash. We expect to complete this action during the first half of 2010.

•

In the first quarter of 2009, we began the consolidation of Residential Heating & Cooling manufacturing operations from Blackville, South Carolina into our operations in Orangeburg, South Carolina and Saltillo, Mexico. The consolidation is expected to be completed within two years. Total restructuring charges recorded related to this action in the third quarter of 2009 were $1.5 million. Total restructuring charges recorded related to this action in the first nine months of 2009 were $7.6 million. These charges were primarily composed of accelerated depreciation, severance, and previously received economic development grants that will be returned as a result of the Blackville plant closure.

•

In the fourth quarter of 2007, we announced plans to close our Refrigeration operations in Danville, Illinois and consolidate Danville manufacturing, support, and warehouse functions into our Tifton, Georgia and Stone Mountain, Georgia operations. The operations at Danville ceased as of the end of the first quarter of 2009, and the transition was completed in the second quarter of 2009. Total restructuring charges recorded in the first three quarters of 2009 related to this action were $2.1 million. These charges were primarily composed of facility clean-up costs, equipment moving costs, and manufacturing inefficiencies incurred prior to the plant closure.

•

In the third quarter of 2008, we announced the transition of production of certain Residential Heating & Cooling products from our Marshalltown, Iowa manufacturing facility to our manufacturing operations in Saltillo, Mexico. Total restructuring charges recorded in the third quarter of 2009 related to this action were $0.2 million. Total restructuring charges recorded in the first nine months of 2009 related to this action were $0.8 million. The transition was completed in the third quarter of 2009.

Reorganization of Distribution Network

In the fourth quarter of 2008, we commenced the transition of activities then performed at our North American Parts Center in Des Moines, Iowa to other locations, including our North American Distribution Center in Marshalltown, Iowa. We reversed $0.5 million of restructuring charges recorded during the third quarter and $0.3 million of restructuring charges during the first three quarters of 2009 related to this transition. These reversals were primarily due to changes in previous severance estimates. To date, we have incurred $2.7 million of costs to this transition, which was composed primarily of severance. We expect the total cost to be $4.1 million related to this restructuring activity, consisting of severance of $3.0 million, equipment moving costs of $0.3 million and other costs of $0.8 million. The transition is expected to be completed in the first quarter of 2010.

Reorganizations of Corporate and Business Unit Selling and Administrative Functions

Information regarding the restructuring charges related to the reorganization of corporate and business unit selling and administrative functions is as follows (in millions):

										Total
		Charges				Charges				Charges
		Incurred in				Incurred to				Expected to
		2009				Date				be Incurred
Severance and related expense		$	7.5			$	11.5			$	12.4
Asset write-offs and accelerated depreciation			0.1				0.9				1.0
Lease termination			0.7				1.0				1.3
Other			0.7				1.4				3.7
Total		$	9.0			$	14.8			$	18.4