The U.S. residential and light commercial HVAC industry is estimated at approximately $9 billion in annual sales and approximately 11 million units shipped in 2004. The top five domestic manufacturers represent approximately 80% of unit sales. Overall, the industry is characterized by relatively stable long-term growth, a well-established, fragmented distribution system, significant challenges for new entrants and compelling growth opportunities related to changes in minimum SEER efficiency standards for central air conditioners and heat pumps that went into effect on January 23, 2006. The market shares of the large, incumbent industry participants have been relatively stable in recent years.

On a unit basis, the HVAC industry has grown at a compounded annual growth rate of approximately 3.4% over the last 20 years, driven primarily by increased central air conditioning penetration in both existing and new homes. According to the U.S. Census Bureau, 88% of new single-family homes completed in 2004 were equipped with central air conditioning, up from 70% in 1985. Air conditioning is currently installed in approximately 99% of new homes in the southern region of the United States. The U.S. Census Bureau reported 1.5 million single-family homes were completed during 2004 and the percentage of homes completed greater than 2,400 square feet increased from 17% in 1985 to approximately 39% in 2004.

Prior to the 1980s, HVAC unit shipments were strongly correlated to new housing construction. As the overall housing base expanded due to increased new home sales and central air conditioning increased its penetration into homes, the HVAC industry became more driven by replacement demand. As older units within the large existing base of homes approach the end of their useful lives, they will need to be replaced by newer and more efficient models, creating a relatively stable base of underlying demand for HVAC products.

A split system air conditioner consists of an outdoor unit that contains a compressor and heat transfer coils and an indoor heat transfer unit with ducting to move air throughout the structure. A split system heat pump is similar to a split system air conditioner, but also includes a reversing device that reverses the flow of refrigerant and thus heats when heating is required and cools when cooling is required.

A gas furnace is typically used with a ducting system to heat a structure. Furnaces apply natural gas to heat air prior to circulation through the structure. Unlike other heating alternatives, a furnace provides heat directly to the structure while the air conditioner unit is turned off.

A packaged unit consists of a condensing unit and an evaporator that are placed outside of the structure to provide both cooling and heating in one package.

An air handler is a blower device used in connection with heating and cooling applications to move air throughout the comfort control system.

A PTAC is a single unit heating and air conditioning system used primarily in hotel and motel rooms, apartments, schools, assisted living facilities and hospitals.

An evaporator coil is a key component of the indoor section of a split system air conditioner or heat pump unit. An evaporator coil is comprised of a heat transfer surface of copper tubes surrounded by aluminum fins in which compressed gas is permitted to expand and absorb heat, thereby cooling the air around it.

Other products include room air conditioners, though-the-wall units, mini-split systems, flexible duct and other HVAC related products and accessories.

Cost of goods sold for the nine months ended September 30, 2005 was $939.3 million, a $144.5 million or 18.2% increase from $794.8 million reported for the nine months ended September 30, 2004.

Operating profit for the nine months ended September 30, 2005 was $87.8 million, a $31.0 million or 26.1% decrease from $118.8 million reported for the nine months ended September 30, 2004.

Interest expense for the nine months ended September 30, 2005 was $56.0 million, an increase of $47.3 million from $8.7 million reported for the nine months ended September 30, 2004.

Net income for the nine months ended September 30, 2005 was $19.8 million, a decrease of $90.9 million from the nine months ended September 30, 2004.