Note 2:

Airedale Facility Fire

On September 6, 2013, a fire caused significant destruction to the Company’s Airedale manufacturing facility and offices in Rawdon (Leeds), United Kingdom. The Company reports Airedale’s financial results within the Building HVAC segment (previously known as Commercial Products). There were no injuries caused by the fire. The Rawdon facility, which was leased, was used to manufacture cooling products and solutions for a variety of applications, including data centers, clean rooms, retail, leisure and process cooling. The fire caused the Company to temporarily suspend manufacturing at the Rawdon site; however, the Company transferred its operations to temporary facilities and has begun rebuilding the leased facility.

The Company maintains insurance coverage for damage to the leased facility, equipment, inventory, other assets, business interruption and lost profits, and recovery-related expenses caused by the fire. The Company believes that reimbursement from its insurance provider is probable for substantially all losses and costs directly attributable to the fire. During the first quarter of fiscal 2015, the Company recorded a $2.6 million recovery from business interruption insurance for fiscal 2014 lost profits. During the third quarter of fiscal 2015, the Company recorded a $2.0 million recovery from business interruption insurance for year-to-date lost profits in fiscal 2015. The Company recorded these recoveries for lost profits within selling, general and administrative (“SG&A”) expenses. Since the date of the fire, the Company has received cumulative cash proceeds of $60.6 million from its insurance provider for covered losses. In addition, the Company has written-off inventory of $4.7 million and equipment with a net book value of $1.4 million and incurred costs directly attributable to the fire totaling $18.9 million. The Company has recorded these losses and costs, which totaled $25.0 million, in the same statement of operations line as the related insurance recovery.

The terms of the Rawdon lease agreement obligate the Company to rebuild the damaged facility. As of December 31, 2014, the Company has capitalized reconstruction costs of $12.9 million, and has recorded this asset on the consolidated balance sheet within other current assets. The Company estimates the total cost of reconstruction to be $56.9 million. As of December 31, 2014, the liability to rebuild the facility was $56.9 million, which was recorded within other current liabilities, and the total receivable from the Company’s insurance provider was $25.9 million, which was recorded within other current assets. As of March 31, 2014, the liability to rebuild the facility was $45.0 million ($37.0 million within other current liabilities and $8.0 million within other noncurrent liabilities), and the receivable from the Company’s insurance provider was $25.4 million ($18.4 million within other current assets and $7.0 million within other noncurrent assets). The Company increased its estimate of the cost to rebuild the Rawdon facility and the associated insurance receivable by $11.9 million during fiscal 2015, primarily due to an increase in costs to prepare the site’s foundation for reconstruction.