Table of Contents

Table of Contents

Table of Contents

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark one)

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

For the quarterly period ended ~~September~~March 3031, ~~2009~~2010

ORor

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

For the transition period from to

Commission File No. 1-32850

LOGO

GOODMAN GLOBAL, INC.

(Exact name of registrant as specified in our charter)

Delaware		20-1932219
(State or other jurisdiction of incorporation or organization)		(I.R.S. Employer Identification No.)
5151 San Felipe, Suite 500 Houston, Texas		77056
(Address of principal executive offices)		(Zip Code)

5151 San Felipe, Suite 500

Houston, Texas

77056

(Address of principal executive offices)

(Zip Code)

713-861-2500

(Registrant’s telephone number, including area code)

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 ¨ No x Although Goodman Global, Inc. is not required to file reports pursuant to Section 13 or 15(d) of the Exchange Act, the company has filed all Securities Exchange Act reports for the preceding 12 months.

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate web site, if any, every ~~Inactive~~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 ¨ No ¨

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 definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ¨ No x

As of ~~October~~May 311, ~~2009~~2010, there were ten (10) shares outstanding of Goodman Global, Inc.’s common stock, par value $0.01 per share.

GOODMAN GLOBAL, INC.

Part I. Financial Information
ITEM 1.	Financial Statements	3
	Consolidated Condensed Balance Sheets as of September 30, 2009 (Unaudited) and December 31, 2008	3
	Consolidated Condensed Statements of Income for Three and Nine Months Ended September 30, 2009 (Successor) (Unaudited), for the Three Months ended September 30, 2008 (Successor) (Unaudited) and for the periods February 14, 2008 to September 30, 2008 (Successor) (Unaudited) and January 1 to February 13, 2008 (Predecessor) (Unaudited)	4
	Consolidated Condensed Statement of Shareholders’ Equity at September 30, 2009 (Unaudited) and at December 31, 2008	5
	Consolidated Condensed Statements of Cash Flows for the Nine Months Ended September 30, 2009 (Unaudited) and for the periods February 14, 2008 to September 30, 2008 (Successor) (Unaudited) and January 1 to February 13, 2008 (Predecessor) (Unaudited)	6
	Notes to Consolidated Condensed Financial Statements (Unaudited)	7
ITEM 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	22
ITEM 3.	Quantitative and Qualitative Disclosures About Market Risk	27
ITEM 4.	Controls and Procedures	28
Part II. Other Information
ITEM 1.	Legal Proceedings	29
ITEM 1A.	Risk Factors	29
ITEM 2.	Unregistered Sales of Equity Securities and Use of Proceeds	29
ITEM 3.	Defaults Upon Senior Securities	29
ITEM 4.	Submission of Matters to a Vote of Security Holders	29
ITEM 5.	Other Information	29
ITEM 6.	Exhibits	29

QUARTERLY REPORT ON FORM 10-Q FOR THE QUARTER ENDED MARCH 31, 2010

TABLE OF CONTENTS


Part I. Financial Information

ITEM 1.	Financial Statements	3

	Consolidated Condensed Balance Sheets as of March 31, 2010 (Unaudited) and December 31, 2009	3

	Consolidated Condensed Statements of Income for the Three Months Ended March 31, 2010 and 2009 (Unaudited)	4

	Consolidated Condensed Statement of Shareholders’ Equity at March 31, 2010 (Unaudited) and at December 31, 2009	5

	Consolidated Condensed Statements of Cash Flows for the Three Months Ended March 31, 2010 and 2009 (Unaudited)	6

	Notes to Consolidated Condensed Financial Statements (Unaudited)	7

ITEM 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	21

ITEM 3.	Quantitative and Qualitative Disclosures About Market Risk	25

ITEM 4.	Controls and Procedures	26

Part II. Other Information

ITEM 1.	Legal Proceedings	27

ITEM 1A.	Risk Factors	27

ITEM 2.	Unregistered Sales of Equity Securities and Use of Proceeds	27

ITEM 3.	Defaults Upon Senior Securities	27

ITEM 4.	Submission of Matters to a Vote of Security Holders	27

ITEM 5.	Other Information	27

ITEM 6.	Exhibits	27

Part I. Financial Information

Item 1.

Financial Statements

GOODMAN GLOBAL, INC.

CONSOLIDATED CONDENSED BALANCE SHEETS

	September 30,2009(unaudited)				December 31,2008
	March 31,2010(unaudited)			December 31,2009
	(in thousands)
Assets
Current assets:
Cash and cash equivalents	$	~~124~~53,~~918~~535		$	$39,679	~~144,118~~
Restricted cash		2,700			2,700	~~2,700~~
Accounts receivable, net of allowance for doubtful accounts ($6.1 million at September 30, 2009 and $3.9 million at December 31, 2008)		229,937				206,821
Accounts receivable, net of allowance for doubtful accounts ($3.4 million at March 31, 2010 and $4.4 million at December 31, 2009)		199,914			207,870
Inventories		~~267~~291,~~384~~366			294,651	~~223,330~~
Deferred tax assets		3510,~~610~~918			13,326	~~63,714~~
Other current assets		3041,~~038~~355			33,956	~~19,300~~
Total current assets		~~690~~599,~~587~~788			592,182	~~659,983~~
Property, plant, and equipment, net		~~172~~166,~~390~~671			169,906	~~177,693~~
Goodwill		1,399,536			1,399,536	~~1,399,536~~
Identifiable intangibles		~~787~~777,~~233~~213			782,223	~~802,265~~
Deferred financing costs		2725,~~357~~757			27,968	~~36,268~~
Other assets		36,~~533~~613			7,708	—
Total assets	$	32,~~080~~975,~~636~~578		$	$2,979,523	~~3,075,745~~
Liabilities and shareholders’ equity
Current liabilities:
Trade accounts payable	$	~~102~~104,~~657~~930		$	$95,038	~~59,664~~
Accrued warranty expenses		3136,~~504~~296			37,233	~~37,683~~
Other accrued expenses		~~106~~90,~~282~~596			124,283	~~126,393~~
Total current liabilities		~~240~~231,~~443~~822			256,554	~~223,740~~
Long-term debt		1,~~176~~162,~~710~~388			1,160,790	~~1,347,526~~
Deferred tax liabilities		~~171~~155,~~580~~271			155,216	~~165,349~~
Other long-term liabilities		9195,~~095~~332			91,445	~~76,833~~
Common stock, par value of $.01, 1,000 shares authorized, 10 shares issued and outstanding as of September 30, 2009 and as of December 31, 2008		—				—
Common stock, par value of $.01, 1,000 shares authorized, 10 shares issued and outstanding as of March 31, 2010 and as of December 31, 2009		—			—
Accumulated other comprehensive loss		(5,214	)			(52,069	)
Accumulated other comprehensive income		11,183			8,230
Additional paid-in capital		1,~~292~~295,~~936~~512			1,294,214	~~1,288,070~~
Retained earnings		~~113~~24,~~086~~070			13,074	~~26,296~~
Total shareholders’ equity		1,~~400~~330,~~808~~765			1,315,518	~~1,262,297~~
Total liabilities and shareholders’ equity	$	32,~~080~~975,~~636~~578		$	$2,979,523	~~3,075,745~~

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

GOODMAN GLOBAL, INC.

CONSOLIDATED CONDENSED STATEMENTS OF INCOME

	Successor			Successor			Successor			Predecessor			Successor
	Three MonthsEndedMarch 31, 2010			Three MonthsEndedMarch 31, 2009
	Three MonthsEndedSeptember 30,2009			Three MonthsEndedSeptember 30,2008			Nine MonthsEndedSeptember 30,2009			January 1 toFebruary 13,2008			February 14 toSeptember 30,2008
	(unaudited, in thousands)
	(unaudited, in thousands)
Sales, net	$	388,781		$	318,235
Sales, net	$	530,642		$	533,718		$	1,432,640		$	147,137		$	1,339,803
Costs and expenses:
Costs and expenses:
Cost of goods sold		271,860			245,750
Cost of goods sold		357,444			380,315			998,691			115,714			1,022,042
Selling, general, and administrative expenses		56,148			50,004
Selling, general, and administrative expenses		61,725			52,291			173,314			22,677			138,500
Depreciation expense		6,960			7,358
Acquisition-related expenses		—			—			—			42,939			—
Amortization expense		5,010			5,010
Depreciation expense		7,028			7,897			21,307			2,791			20,047
Operating profit		48,803			10,113
Amortization expense		5,010			5,011			15,031			1,044			12,725
Interest expense, net		31,224			38,126
Operating profit (loss)		99,435			88,204			224,297			(38,028	)		146,489
Other (income) expense, net		(164	)		439
Interest expense, net		32,646			39,269			102,924			56,176			97,839
Income (loss) before taxes		17,743			(28,452	)
Other (income) expense, net		(1,786	)		308			(18,935	)		(347	)		(115	)
Income tax expense (benefit)		6,747			(11,091	)
Income (loss) before taxes		68,575			48,627			140,308			(93,857	)		48,765
Net income (loss)	$	10,996		$	(17,361	)
Income tax expense (benefit)		25,549			18,337			53,518			(27,815	)		18,386
Net income (loss)	$	43,026		$	30,290		$	86,790		$	(66,042	)	$	30,379

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

GOODMAN GLOBAL, INC.

CONSOLIDATED CONDENSED STATEMENTS OF SHAREHOLDERS’ EQUITY

	CommonStock		AdditionalPaid-InCapital		RetainedEarnings~~(Deficit)~~		AccumulatedOtherComprehensiveIncome ~~(Loss)~~			Total	~~Total~~
	(unaudited, in thousands)
Balance at December 31, 2008	$	—	$	1,288,070	$	26,296	$	(52,069	)		$	1,262,297
Balance at December 31, 2009	$	—	$	1,294,214	$	13,074	$	8,230		$	1,315,518
Net income		—		—		8610,~~790~~996		—			10,996	~~86,790~~
Foreign currency translation		—		—		—		~~2,605~~842			842	~~2,605~~
Change in fair value of derivatives, net of tax		—		—		—		442,~~250~~111			2,111	~~44,250~~
Comprehensive income		—		—		—		—			13,949	~~133,645~~
Stock compensation amortization		—		41,~~866~~298		—		—			1,298	~~4,866~~
Balance at September 30, 2009	$	—	$	1,292,936	$	113,086	$	(5,214	)		$	1,400,808
Balance at March 31, 2010	$	—	$	1,295,512	$	24,070	$	11,183		$	1,330,765

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

GOODMAN GLOBAL, INC.

CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS

	Successor			Predecessor			Successor
	Three MonthsEndedMarch 31, 2010			Three MonthsEndedMarch 31, 2009
	Nine MonthsEndedSeptember 30,2009			January 1 toFebruary 13,2008			February 14 toSeptember 30,2008
	(unaudited, in thousands)
	(unaudited, in thousands)
Operating activities
Operating activities
Net income (loss)	$	10,996		$	(17,361	)
Net income (loss)	$	86,790		$	(66,042	)	$	30,379
Adjustments to reconcile net income (loss) to net cash used in operating activities:
Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities:
Depreciation		6,960			7,358
Depreciation		21,307			2,791			20,047
Amortization		5,010			5,010
Amortization		15,031			1,044			12,725
Provision for doubtful accounts		2,394			1,429
Provision for doubtful accounts		6,020			507			4,255
Deferred tax provision		3,733			2,966
Deferred tax provision		16,266			9,212			(14,761	)
Gain on disposal of assets		(94	)		(131	)
Gain on disposal of assets		(308	)		(42	)		(327	)
Compensation expense related to stock options		1,298			1,248
Gain on repurchase of long-term debt		(16,636	)		—			—
Amortization of deferred financing costs		2,211			2,343
Amortization of inventory step-up in basis		—			—			47,991
Amortization of original issue discount		1,598			1,776
Compensation expense related to stock options		3,805			6,240			3,280
Changes in operating assets and liabilities:
Amortization of deferred financing costs		6,538			14,548			7,096
Accounts receivable		5,562			25,751
Amortization of original issue discount		5,222			—			5,711
Inventories		3,285			(48,343	)
Changes in operating assets and liabilities, net of effects of acquisition:
Other assets		(6,270	)		(14,366	)
Accounts receivable		(29,137	)		12,579			(48,894	)
Accounts payable and accrued expenses		(18,615	)		7,449
Inventories		(44,054	)		(36,053	)		34,193
Net cash provided by (used in) operating activities		18,068			(24,871	)
Other assets		(2,432	)		(67,820	)		78,173
Investing activities
Accounts payable and accrued expenses		84,616			80,347			5,551
Purchases of property, plant, and equipment		(4,212	)		(6,123	)
Net cash provided by (used in) operating activities		153,028			(42,689	)		185,419
Proceeds from the sale of property, plant, and equipment		—			3
Investing activities
Net cash used in investing activities		(4,212	)		(6,120	)
Purchases of property, plant, and equipment		(16,270	)		(3,409	)		(9,470	)
Financing activities		—			—
Proceeds from the sale of property, plant, and equipment		9			1			1,263
Net increase (decrease) in cash		13,856			(30,991	)
Change in restricted cash		—			(100	)		—
Cash at beginning of period		39,679			144,118
Acquisition, net of assumed debt		—			—			(1,940,685	)
Cash at end of period	$	53,535		$	113,127
Net cash used in investing activities		(16,261	)		(3,508	)		(1,948,892	)
Supplementary disclosures of cash flow information:
Financing activities
Cash paid for interest and fees	$	41,399		$	24,586
Proceeds from long-term debt, net of original issue discount		—			—			1,373,000
Cash paid for income taxes, net of refunds	$	9,546		$	1,935
Repurchase of long-term debt		(57,028	)		—			(683,425	)
Net borrowing (payments) under revolving line facility		(100,000	)		11,500			(5,000	)
Equity contribution		—			—			1,278,247
Equity issuance costs		—			(99	)		(8,120	)
Issuance of stock		—			—			3,013
Deferred financing costs		—			—			(45,525	)
Excess tax benefit from exercise of options		1,061			25,270			—
Net cash provided by (used in) financing activities		(155,967	)		36,671			1,912,190
Net increase (decrease) in cash		(19,200	)		(9,526	)		148,717
Cash at beginning of period		144,118			18,955			9,429
Cash at end of period	$	124,918		$	9,429		$	158,146
Supplementary disclosures of cash flow information:
Cash paid for interest and fees	$	81,698		$	43,547		$	75,520
Cash paid for income taxes	$	23,783		$	402		$	6,733

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

GOODMAN GLOBAL, INC.

NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS

Three ~~and Nine~~ Months Ended ~~September~~March 3031, ~~2009,~~2010 ~~Three Months Ended September 30, 2008~~ and ~~Periods~~2009 ~~January 1 to~~

February 13, 2008 and February 14 to September 30, 2008

(Unaudited)

1. Basis of Presentation

Basis of Consolidation

The accompanying unaudited consolidated condensed financial statements of Goodman Global, Inc. (the Company), have been prepared in accordance with Rule 10-01 of Regulation S-X for interim financial statements required to be filed with the Securities and Exchange Commission (SEC) and do not include all information and footnotes required by generally accepted accounting principles in the United States for complete financial statements. However, the information furnished herein reflects all normal recurring adjustments, which are, in the opinion of management, necessary for a fair statement of the results for the interim periods. The preparation of consolidated financial statements in accordance with accounting principles generally accepted in the United States requires management to make estimates and assumptions that affect the amounts reported. Actual results could differ from those estimated. Certain information and footnote disclosures normally included in the financial statements prepared in accordance with generally accepted accounting principles have been condensed or omitted pursuant to the rules and regulations of the SEC. These consolidated condensed financial statements should be read in conjunction with the Company’s consolidated financial statements in its Annual Report on Form 10-K for the year ended December 31, ~~2008~~ 2009 as filed with the SEC on March 1312, ~~2009~~2010.

The results of operations for the three months ~~and nine months~~ ended ~~September~~March 3031, ~~2009,~~2010 ~~the three months ended September 30, 2008~~ and 2009 ~~periods January 1 to February 13, 2008 and February 14 to September 30, 2008~~ are not necessarily indicative of the results that may be expected for a full year. Although there is demand for the Company’s products throughout the year, in each of the past three years approximately 5758% to 60% of total sales occurred in the second and third quarters of the fiscal year. The Company’s peak production also typically occurs in the second and third quarters of each year.

The Company follows Financial Accounting Standards Board (FASB) accounting standards in the evaluation of its reporting requirements related to business segments. ~~The~~As the Company’s consolidated financial information is reviewed by the chief decision makers, and the business is managed under one operating and marketing strategy, the Company operates under one reportable segment. Long-lived assets outside the United States have not been significant.

~~Recent~~The ~~Developments~~Company is an indirect subsidiary of Goodman Global Group, Inc. (Parent), a Delaware corporation formed in October 2007 by affiliates of Hellman & Friedman LLC.

On February 13, 2008, Chill Acquisition, Inc., a Delaware Corporation formed on October 15, 2007, merged with and into Goodman Global, Inc. as the surviving corporation, now a subsidiary of Chill Holdings, Inc. (Parent), a Delaware corporation formed on October 12, 2007 by affiliates of Hellman & Friedman LLC. This is referred to as the 2008 Acquisition.

The financial statements for the three and nine months ended September 30, 2009, the three months ended September 30, 2008, and periods January 1 to February 13, 2008 and February 14 to September 30, 2008 have been presented to reflect the Company prior to the merger (Predecessor) and subsequent to the merger (Successor).

Recent Accounting Pronouncements

InThe ~~December 2008,~~Financial ~~the~~Accounting Standards Board (FASB) has issued ~~authoritative~~new guidance onrequiring ~~employer’s~~more ~~disclosures~~bifurcation ~~about~~of ~~postretirement~~embedded ~~benefit~~credit ~~plan~~derivatives. ~~assets,~~The ~~which~~new isguidance ~~effective~~requires ~~for~~investors ~~fiscal~~in ~~years~~synthetic ~~ending~~collateralized ~~after~~debt ~~December 15,~~obligations ~~2009. The~~to ~~new~~bifurcate ~~requirement~~the ~~expands~~embedded ~~disclosures~~credit ~~for~~derivative ~~assets~~features ~~held~~related byto ~~employer~~the ~~pension~~written credit default swap and ~~other~~account ~~postretirement~~for ~~benefit~~the ~~plans~~credit derivative at fair value or alternatively elect the fair value option for the hybrid instrument. The changes are effective for interim or annual periods after June 10, 2010. The Company does not anticipate that ~~the~~ adoption of this ~~guidance~~pronouncement will have a material impact on its ~~consolidated~~ financial statements.

InThe ~~June 2009, the~~ FASB has issued ~~authoritative~~ ~~guidance~~new onrevenue ~~accounting~~recognition guidance for ~~transfers~~multiple-deliverable ofarrangements ~~financial~~which ~~assets,~~amends previously ~~which~~issued isguidance ~~effective~~to ~~for~~permit ~~reporting~~multiple-deliverable ~~periods~~arrangements ~~beginning~~to ~~after~~be ~~November 15,~~separated ~~2009~~in more circumstances. The ~~new~~amendments ~~requirement~~establish ~~limits~~a hierarchy for determining the ~~circumstances~~selling inprice ~~which~~of a ~~financial~~deliverable ~~asset~~and ~~may~~replace ~~be de-recognized~~the ~~when~~term fair value in the ~~transferor~~revenue allocation ~~has~~with ~~not~~selling ~~transferred~~price to clarify that the ~~entire~~allocation ~~financial~~of ~~asset~~revenue oris ~~has~~based ~~continuing~~on ~~involvement~~entity-specific ~~with~~assumptions rather than assumptions of the ~~transferred~~marketplace ~~asset~~participant. The ~~concept~~amendments also eliminate the residual method of aallocation ~~qualifying~~and ~~special-purpose~~require ~~entity,~~that arrangement ~~which~~considerations ~~had~~be ~~previously~~allocated ~~facilitated~~at ~~sale~~the ~~accounting~~inception ~~for certain~~of ~~asset~~the ~~transfers,~~arrangement isto ~~removed~~all bydeliverables using the ~~new~~relative ~~requirement~~selling price method. The changes are effective for annual periods after June 10, 2010. The Company does not anticipate that ~~the~~ adoption of this ~~guidance~~pronouncement will have a material impact on its ~~consolidated~~ financial statements.

2. Significant Accounting Policies and Balance Sheet Accounts

The Company’s critical accounting policies are included in its Annual Report on Form 10-K for the year ended December 31, 2009 as filed on March 12, 2010. The Company believes that there have been no significant changes during the three months ended March 31, 2010 to the critical accounting policies disclosed in its Annual Report on Form 10-K for the year ended December 31, 2009.

GOODMAN GLOBAL, INC.

NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS—(Continued)

Three ~~and Nine~~ Months Ended ~~September~~March 3031, ~~2009,~~2010 ~~Three Months Ended September 30, 2008~~ and ~~Periods~~2009 ~~January 1 to~~

February 13, 2008 and February 14 to September 30, 2008

(Unaudited)

In August 2009, the FASB issued new accounting guidance to provide clarification on measuring liabilities at fair value when a quoted price in an active market is not available. The Company does not anticipate that the adoption of this guidance will have a material impact on its consolidated financial statements.

2. Significant Accounting Policies and Balance Sheet Accounts

The Company’s critical accounting policies are included in its Annual Report on Form 10-K for the year ended December 31, 2008 as filed on March 13, 2009. The Company believes that there have been no significant changes during the nine months ended September 30, 2009 to the critical accounting policies disclosed in its Annual Report on Form 10-K for the year ended December 31, 2008.

Restricted Cash and Cash Equivalents

At ~~September~~March 3031, ~~2009~~2010 and December 31, ~~2008~~2009, the restricted cash pertains to the Company’s extended warranty program and is invested in United States treasury notes and bills.

Allowance for Doubtful Accounts

A roll forward of receivable reserves consists of the following (in thousands):

	Successor			Predecessor			Successor
	Three months endedMarch 31, 2010			Three months endedMarch 31, 2009
	Nine monthsendedSeptember 30,2009			January 1 toFebruary 13,2008			February 14 toSeptember 30,2008
At the beginning of the period	$	4,386		$	3,900
At the beginning of the period	$	3,900		$	7,032		$	6,014
Current period accruals		2,394			1,429
Current period accruals		6,020			507			4,255
Current period uses		(3,393	)		(1,193	)
Current period uses		(3,867	)		(1,525	)		(5,916	)
At the end of the period	$	3,387		$	4,136
At the end of the period	$	6,053		$	6,014		$	4,353

Inventories

Inventory costs include material, labor, ~~depreciation,~~ transportation costs, and plant overhead. The Company’s inventory is stated at the lower of cost or market using the first-in, first-out (FIFO) method. Inventories consist of the following (in thousands):

	September 30, 2009		December 31, 2008
	March 31, 2010		December 31, 2009
Raw materials and parts	$	2220,~~588~~309	$	2422,~~538~~005
Finished goods		~~244~~271,~~796~~057		~~198~~272,~~792~~646
Total inventories	$	~~267~~291,~~384~~366	$	~~223~~294,~~330~~651

A roll forward of inventory reserves consists of the following (in thousands):

	Successor			Predecessor			Successor
	Three months endedMarch 31, 2010			Three months endedMarch 31, 2009
	Nine monthsendedSeptember 30,2009			January 1 toFebruary 13,2008			February 14 toSeptember 30,2008
At the beginning of the period	$	5,414		$	4,319
At the beginning of the period	$	4,319		$	4,735		$	4,802
Current period accruals		1,263			505
Current period accruals		2,370			164			1,417
Current period uses		(1,767	)		(210	)
Current period uses		(1,153	)		(97	)		(418	)
At the end of the period	$	4,910		$	4,614
At the end of the period	$	5,536		$	4,802		$	5,801

GOODMAN GLOBAL, INC.

NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS—(Continued)

Three ~~and Nine~~ Months Ended ~~September~~March 3031, ~~2009,~~2010 ~~Three Months Ended September 30, 2008~~ and ~~Periods~~2009 ~~January 1 to~~

February 13, 2008 and February 14 to September 30, 2008

(Unaudited)

Property, Plant, and Equipment

Property, plant, and equipment are stated at cost less accumulated depreciation. Expenditures for renewals and improvements are capitalized and expenditures for repairs and maintenance are charged to expense as incurred. Buildings and improvements and equipment are depreciated using the straight-line method over the estimated useful lives of the assets.

Property, plant and equipment consist of the following (in thousands):

	Useful livesin years	~~September~~March 3031, ~~2009~~2010			December 31, ~~2008~~2009
Land	—	$	14,417		$	14,417
Buildings and improvements	10-39		49,~~562~~643			4849,~~863~~588
Equipment	3-10		~~144~~152,~~642~~518			~~128~~148,~~087~~037
Construction-in-progress	—		109,~~311~~361			11,~~575~~467
			218,932			202,942
			225,939			223,509
Less: Accumulated depreciation			(4659,~~542~~268	)		(2553,~~249~~603	)
Total property, plant and equipment, net		$	~~172~~166,~~390~~671		$	~~177~~169,~~693~~906

Deferred Financing Costs

Debt issuance costs are capitalized and amortized to interest expense using the effective interest method over the period the related debt is anticipated to be outstanding.

Goodwill

Goodwill is the excess of the cost of an acquired company over the amounts assigned to assets acquired and liabilities assumed. Goodwill ~~and~~ and other indefinite-lived intangibles are not amortized, but are tested for impairment annually or more frequently if an event occurs or circumstances change that would indicate the carrying amount could be impaired. Impairment testing for goodwill is is done at the reporting unit level, which the Company has concluded is on a consolidated basis as the Company has only one reporting unit. An impairment charge generally would be recognized when the carrying amount of the reporting unit exceeds the estimated fair ~~market~~ value of the reporting unit. The Company estimates fair value using standard business valuation techniques such as discounted cash flows, industry participant information and reference to comparable business transactions. The discounted cash flow fair value estimates are based on ~~our~~the Company’s projected future cash flows and the estimated weighted-average cost of capital of market participants. Management assumptions about expected future cash flows can be affected by changes in industry or market conditions or the rate and extent to which anticipated synergies or cost savings are realized. The estimated weighted-average cost of capital is based on the risk-free interest rate and other factors such as equity risk premiums and the ratio of total debt and equity capital. ~~Based~~The onCompany ~~the~~performed ~~results~~its annual test as of ~~our~~October 1, ~~annual impairment~~2009 ~~tests~~and ~~performed~~determined inthat ~~the~~no ~~fourth~~impairment ~~quarter~~exists. As of ~~2008~~March 31, ~~the~~2010, ~~Company~~there ~~determined~~were no indicators noted that nowould require ~~impairment~~the ofCompany ~~our~~to ~~goodwill~~re-evaluate ~~existed~~its annual impairment test.

In assessing the fair value of our goodwill, the Company must make assumptions regarding estimated future cash flows and other factors to determine the fair value of the respective assets. If these estimates or the related assumptions change, the Company may be required to record impairment charges for these assets in the future. The analysis performed in the fiscal 2008 fourth quarter did not indicate an impairment of goodwill and since that time no events or circumstances have occurred that suggest an impairment exists. As of September 30, 2009, there were no indicators noted that would require the Company to re-evaluate its annual impairment test. The Company intends to perform its annual impairment testing in the fourth quarter of 2009.

Identifiable Intangible Assets

The values assigned to amortizable intangible assets are amortized to expense over their estimated useful lives and are reviewed for potential impairment. The estimated useful lives are based on an evaluation of the circumstances surrounding each asset, including an evaluation of events that may have occurred that would cause the useful life to be decreased. In the event the useful life would be considered to be shortened, or if the asset’s future value were deemed to be impaired, an appropriate amount would be charged to amortization expense. Future operating results and residual values could therefore reasonably differ from our current estimates and could require a provision for impairment in a future period. Indefinite lived intangible assets are reviewed in accordance with FASB accounting standards by comparison of the fair market value with its carrying amount. The Company ~~intends~~performed toits ~~perform~~annual intest ~~the~~as ~~fourth quarter~~ of October 1, 2009 ~~the~~and ~~required~~determined ~~annual~~that ~~tests~~no ~~for~~ impairment exists. As of ~~goodwill~~March 31, ~~and~~2010, ~~intangible~~there ~~assets~~were no indicators noted that ~~have~~would ~~indefinite~~require ~~useful~~the ~~lives~~Company to re-evaluate its annual impairment test.

GOODMAN GLOBAL, INC.

NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS—(Continued)

Three ~~and Nine~~ Months Ended ~~September~~March 3031, ~~2009,~~2010 ~~Three Months Ended September 30, 2008~~ and ~~Periods~~2009 ~~January 1 to~~

February 13, 2008 and February 14 to September 30, 2008

(Unaudited)

The values assigned to the Company’s identifiable intangible assets were determined using the income approach, whereby the fair value of an asset is based on the present value of its estimated future economic benefits. This approach was considered appropriate, as the inherent value of these intangible assets is their ability to generate current and future cash flows. The key assumption in using this approach is the identification of the revenue streams attributable to these assets based on projected future revenues. Amounts allocated to the identifiable intangibles are amortized on a straight-line basis over their estimated useful lives, with no residual value, as follows:


		Useful lives in years
Customer relationships		40
Trade names – Amana		15
Trade names – other		Indefinite
Technology		10

Identifiable intangible assets as of ~~September~~March 3031, ~~2009~~2010 consist of the following (in thousands):

	Gross		Accumulatedamortization			Net
Intangible assets subject to amortization:
Customer relationships	$	535,000	$	(2128,~~867~~554	)	$	~~513~~506,~~133~~446
Trade names – Amana		40,000		(4,360	)		35,640
Trade names—Amana		40,000		(5,693	)		34,307
Technology		40,000		(68,540	)		3331,460
Total intangible assets subject to amortization		615,000		(3242,~~767~~787	)		~~582~~572,~~233~~213
Total indefinite-lived trade names		205,000		—			205,000
Total identifiable intangible assets	$	820,000	$	(3242,~~767~~787	)	$	~~787~~777,~~233~~213

The amortization related to the amortizable intangibles assets in the aggregate will be approximately $20.0 million per year over the next five years.

Accrued Warranty

A roll forward of the liabilities for warranties consists of the following (in thousands):

	Successor			Predecessor			Successor
	Three months endedMarch 31, 2010			Three months endedMarch 31, 2009
	Nine monthsendedSeptember 30,2009			January 1 toFebruary 13,2008			February 14 toSeptember 30,2008
At the beginning of the period	$	37,233		$	37,683
At the beginning of the period	$	37,683		$	39,669		$	38,567
Current period accruals		5,418			7,876
Current period accruals		40,278			3,542			40,922
Current period uses		(6,355	)		(9,208	)
Current period uses		(46,457	)		(4,644	)		(42,929	)
At the end of the period	$	36,296		$	36,351
At the end of the period	$	31,504		$	38,567		$	36,560

GOODMAN GLOBAL, INC.

NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS—(Continued)

Three ~~and Nine~~ Months Ended ~~September~~March 3031, ~~2009,~~2010 ~~Three Months Ended September 30, 2008~~ and ~~Periods~~2009 ~~January 1 to~~

February 13, 2008 and February 14 to September 30, 2008

(Unaudited)

Other Accrued Expenses

Other accrued expenses consist of the following significant items (in thousands):

	September 30, 2009		December 31, 2008
	March 31, 2010		December 31, 2009
Accrued rebates	$	2820,~~323~~851	$	2233,~~390~~423
Accrued payroll		279,~~253~~623		1627,~~311~~595
Accrued self insurance reserves		12,~~578~~305		1112,~~170~~558
Accrued interest		7,292		181
Customer deposits		9,951		1,302
Derivative liability		1,265		52,836
Accrued interest		7,288		21,597
Other		29,571		23,505
Derivative liability		1,693		1,138
Total accrued expenses	$	106,282	$	126,393
Accrued taxes		7,427		8,292
Other		21,458		18,378
Total accrued expenses	$	90,596	$	124,283

3. Long-Term Debt

Long-term debt consists of the following (in thousands):

	September 30, 2009			December 31, 2008
	March 31, 2010			December 31, 2009
Senior subordinated notes	$	423,962		$	~~500~~423,~~000~~962
Term loan credit agreement		~~772~~754,000			~~772~~754,000
Revolving credit agreement		—			~~100,000~~—
Original issue discount		(1915,~~252~~574	)		(2417,~~474~~172	)
Total long-term debt, net of original issue discount		1,~~176~~162,~~710~~388			1,~~347~~160,~~526~~790
Current portion of long-term debt		—			—
Long-term debt	$	1,~~176~~162,~~710~~388		$	1,~~347~~160,~~526~~790

Senior subordinated notes

In February 2008, the Company issued and sold $500.0 million of 13.50%/14.00% senior subordinated notes due 2016. The senior subordinated notes bear interest at a rate of 13.50% per annum, provided that the Company may, at its option, elect to pay interest in any interest period at a rate of 14.00%, per annum, in which case up to 3.0% per annum may be paid by issuing additional notes. The senior subordinated notes are wholly and unconditionally guaranteed by each subsidiary guarantor.

In April 2009, the Company formed Goodman Global Finance (Delaware) LLC (GGF), a Delaware limited liability company and an unrestricted subsidiary of the Company, that entered into two separate transactions to purchase for $58.9 million (inclusive of $1.9 million in accrued interest) approximately $76.0 million aggregate face value of the Company’s 13.5%/14% senior subordinated notes. The Company recognized a gain of $16.6 million in the second quarter of 2009 as a result of this early extinguishment of long-term debt, after taking into consideration the recognition of $2.4 million of previously unamortized deferred financing costs associated with the $76.0 million of senior subordinated notes. As of September 30, 2009, the $76.0 million in senior subordinated notes were held by GGF.

Term loan credit agreement/revolving credit agreement

In February 2008, the Company entered into an $800.0 million term loan credit agreement due 2014 and a $300.0 million revolving credit agreement due 2013. The term loan credit agreement has an interest rate of Prime or the per annum London Interbank Offered Rate (LIBOR), with a minimum of 3.25% plus applicable margin, based on certain leverage ratios, which was 3.0% and totaled 6.25% as of ~~September~~ March 3031, ~~2009~~2010. The revolving credit agreement has an interest rate of Prime or LIBOR, plus applicable margin, which was 1.0% and totaled 4.25% as of ~~September~~March 3031, ~~2009~~2010.

AsThe ofCompany ~~September~~has previously made payments on its term loan credit agreement to satisfy its obligations through December 3031, ~~2009,~~2013 and in April 2010 the Company ~~owed~~elected to make an additional $~~772~~7.01 million onpayment ~~its~~to ~~term~~further ~~loan~~reduce ~~credit~~its ~~agreement~~outstanding ~~and~~obligation. ~~had~~The no outstanding ~~obligation~~balance onis ~~its revolving~~due ~~credit~~at ~~agreement~~maturity in February 2014.

InThe ~~July 2008, the~~ Company ~~made~~had aavailability ~~$26.0~~under ~~million~~the ~~payment~~revolving ~~on its term loan~~ credit agreement ~~to satisfy its obligation~~ of $2211.0 4 million ~~per~~at ~~quarter for the period beginning July~~March 131, ~~2008~~2010 ~~and~~after ~~ending~~taking ~~September 30,~~into consideration ~~2011.~~outstanding Ascommercial aand ~~result,~~standby ~~the~~letters ~~Company recognized an expense~~ of ~~$0.8~~credit ~~million~~issued ofunder ~~previously~~the ~~unamortized~~credit ~~deferred~~facility, ~~financing~~which ~~fees~~totaled ~~and~~ $033.95 million ofas ~~previously unamortized original issue discount that related directly to the amount~~ of ~~the early extinguishment of debt. The next quarterly payment under the term loan credit agreement is due on December~~March 31, ~~2011~~2010.

Original issue discount

The term loan credit agreement included an original issue discount of $32.0 million. It is being amortized to interest expense using the effective interest method over the period the debt is anticipated to be outstanding through maturity. As of March 31, 2010, the unamortized balance of the original issue discount was $15.6 million.

GOODMAN GLOBAL, INC.

NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS—(Continued)

Three ~~and Nine~~ Months Ended ~~September~~March 3031, ~~2009,~~2010 ~~Three Months Ended September 30, 2008~~ and ~~Periods~~2009 ~~January 1 to~~

February 13, 2008 and February 14 to September 30, 2008

(Unaudited)

~~The~~Deferred ~~Company~~financing ~~had~~costs availability under the revolving credit agreement of $197.5 million at September 30, 2009 after taking into consideration outstanding commercial and standby letters of credit issued under the credit facility, which totaled $33.5 million as of September 30, 2009.

~~Original~~The ~~issue~~Company ~~discount~~incurred $45.7 million in loan origination fees and direct loan origination costs related to issuance of the senior subordinated notes and the term loan and revolving credit agreement. In December 2009, the Company paid a fee of $3.0 million to the holders of the term loan and revolving credit agreement to obtain amendments to permit a one-time dividend payable to its stockholder. As of March 31, 2010, the Company had $25.8 million in unamortized deferred financing costs which is being amortized to interest expense using the effective interest method over the period that the debt is anticipated to be outstanding.

~~The~~Other term loan credit agreement included an original issue discount of $32.0 million. It is being amortized to interest expense using the effective interest method over the period the debt is anticipated to be outstanding through maturity. As of September 30, 2009, the unamortized balance of the original issue discount was $19.3 million.

~~Deferred~~Future ~~financing~~maturities ~~fees~~of long-term debt by year at March 31, 2010 are as follows (in thousands):

The Company incurred $45.7 million in loan origination fees and direct loan origination costs, of which $27.4 million was outstanding at September 30, 2009 and is being amortized to interest expense using the effective interest method over the period that the debt is anticipated to be outstanding.


2010	$	—
2011		—
2012		—
2013		—
2014		754,000
Thereafter		423,962

~~Future~~Under ~~maturities~~the ~~of long-~~term ~~debt~~loan credit byagreement, ~~year~~the atCompany ~~September~~is required to satisfy and maintain specified financial ratios and other financial condition tests, including a minimum interest coverage ratio and a maximum total leverage ratio. In addition, under its revolving credit agreement, the Company is required to satisfy and maintain, in certain circumstances, a minimum fixed charge coverage ratio. 30As of March 31, ~~2009~~2010, ~~are~~the asCompany ~~follows~~was (in ~~thousands):~~compliance with all of the covenants under its senior term loan credit agreement, revolving credit agreement and senior subordinated notes.

2010	$	—
2011		2,000
2012		8,000
2013		8,000
2014		754,000
Thereafter		423,962

All of the existing U.S. subsidiaries of the Company (other than AsureCare Corp., a Florida corporation and Goodman Global Finance (Delaware) LLC, a Delaware limited liability company) and all future restricted U.S. subsidiaries of the Company guarantee its debt obligations. In addition, Chill Intermediate Holdings, Inc. guarantees the Company’s debt obligations under the term loan and revolving credit agreements. The Company is structured as a holding company and substantially all of its assets and operations are held by its subsidiaries. There are currently no significant restrictions on the ability of the Company to obtain funds from its subsidiaries by dividend or loan. The Company’s and the non-guarantor subsidiaries’ independent assets, revenues, income before taxes, and operating cash flows in total are more than 3% of the consolidated total. As such, separate financial statements of the guarantors are included herein in Note 10 condensed consolidating financial information.

Under the term loan credit agreement, the Company is required to satisfy and maintain specified financial ratios and other financial condition tests, including a minimum interest coverage ratio and a maximum total leverage ratio. In addition, under its revolving credit agreement, the Company is required to satisfy and maintain, in certain circumstances, a minimum fixed charge coverage ratio. At September 30, 2009, the Company was in compliance with all of the covenants under its senior term loan credit agreement and revolving credit agreement.

All of the existing U.S. subsidiaries of the Company (other than AsureCare Corp., a Florida corporation, and GGF) and all future restricted U.S. subsidiaries of the Company guarantee its debt obligations. The Company is structured as a holding company and substantially all of its assets and operations are held by its subsidiaries. There are currently no significant restrictions on the ability of the Company to obtain funds from its subsidiaries by dividend or loan. The Company’s and the non-guarantor subsidiaries’ independent assets, revenues, income before taxes, and operating cash flows in total are more than 3% of the consolidated total. As such, separate financial statements of the guarantors are included herein in Note 10 condensed consolidating financial information.

GOODMAN GLOBAL, INC.

NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS—(Continued)

Three ~~and Nine~~ Months Ended ~~September~~March 3031, ~~2009,~~2010 ~~Three Months Ended September 30, 2008~~ and ~~Periods~~2009 ~~January 1 to~~

February 13, 2008 and February 14 to September 30, 2008

(Unaudited)

4. Fair Value Measurements

Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction ~~between~~ between market participants at the measurement date. FASB accounting standards also provide a framework for measuring fair value, establishes a three-level hierarchy for fair value measurements based upon the transparency of inputs to the valuation of an asset or liability as of the measurement date and requires consideration of the Company’s creditworthiness when valuing certain liabilities. The hierarchy gives the highest priority to unadjusted quoted prices in active markets for ~~identical~~ identical assets and liabilities (Level 1) and the lowest priority to unobservable inputs (Level 3). The ~~three~~Company had no transfers of amounts between the levels of the fair value hierarchy ~~are~~during ~~described~~the ~~below:~~three months ended March 31, 2010.

The three levels of the fair value hierarchy are described below:


Level 1		- Unadjusted quoted prices in active markets that are accessible to the reporting entity at the measurement date for identical assets and liabilities.

Level 2		- Inputs other than quoted prices in active markets for identical assets and liabilities which are observable either directly or indirectly for substantially the full term of the asset or liability. Level 2 inputs include the following:

		- quoted prices for similar assets and liabilities in active markets

		- quoted prices for identical or similar assets or liabilities in markets that are not active

		- observable inputs other than quoted prices that are used in the valuation of the assets or liabilities (e.g., interest rate and yield curve quotes at commonly quoted intervals)

		- inputs that are derived principally from or corroborated by observable market data by correlation or other means

Level 3		- Unobservable inputs for the asset or liability that is supported by little or no market activity. Level 3 inputs include management’s own assumption about the assumptions that market participants would use in pricing the asset or liability (including assumptions of risk)

The level in the fair value hierarchy within which the fair value measurement is classified is determined based on the lowest level input that is significant to the fair value measure in its entirety.

	Fair value measurements on a recurring basis
	(In thousands)
	Quoted prices inactive markets foridentical assets(Level 1)		Significant otherobservable inputs(Level 2)			Significantunobservable inputs(Level 3)			Total
	Quoted prices inactive marketsfor identicalassets (Level 1)		Significant otherobservable inputs(Level 2)				Significantunobservable inputs(Level 3)			Total
Restricted cash	$	2,700	$	—		$	—$	—	$	~~2,700~~$	2,700
Derivatives, net		—		1520,~~769~~679	(1)		—	—		~~15,769~~	20,679

~~Other~~(1) ~~Fair~~Based ~~Value~~upon ~~Measurements~~counterparty statements at March 31, 2010 where the indicative valuation was determined either (a) by means of a mathematical model that calculated the present value of the anticipated cash flows from the transaction using mid-market prices and other economic data and assumptions or (b) by means of pricing indications from one or more other dealers as selected by the counterparty.

In order to determine the fair value of its debt instruments as of September 30, 2009, the Company considered valuation techniques that included the market, income and liquidation approaches in the analysis of its interest bearing debt. The Company elected to determine the fair value of each tranche of interest bearing debt using the income approach. The fair values presented are estimates and are not necessarily indicative of amounts for which the Company could settle such instruments currently or indicative of its intent or ability to dispose of or liquidate them. The Company estimates the fair value of its interest bearing debt as follows (in thousands):

Interest bearing security	Par Valueas of September 30, 2009		Range of Fair Value at September 30, 2009
			Low		High
Senior subordinated notes	$	423,962	$	431,180	$	448,471
Term loan		772,000		768,186		781,921

GOODMAN GLOBAL, INC.

NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS—(Continued)

Three ~~and Nine~~ Months Ended ~~September~~March 3031, ~~2009,~~2010 ~~Three Months Ended September 30, 2008~~ and ~~Periods~~2009 ~~January 1 to~~

February 13, 2008 and February 14 to September 30, 2008

(Unaudited)

Other Fair Value Measurements

Long-term debt

In order to determine the fair value of its debt instruments as of March 31, 2010, the Company considered valuation techniques that included the market, income and liquidation approaches in the analysis of its interest bearing debt. The Company elected to determine the fair value of each tranche of interest bearing debt using the income approach. The fair values presented are estimates and are not necessarily indicative of amounts for which the Company could settle such instruments currently or indicative of its intent or ability to dispose of or liquidate them. The Company estimates the fair value of its interest bearing debt as follows (in thousands):


	Par value as of March 31, 2010		Range of fair value at March 31, 2010
Interest bearing security	Par value as of March 31, 2010		Low		High

Senior subordinated notes	$	423,962	$	464,533	$	482,790
Term loan		754,000		753,828		778,567

5. Stock Compensation Plans

On February 13, 2008, the Board of Directors of the Parent adopted the 2008 Chill Holdings, Inc. Stock Incentive Plan (2008 Plan). The 2008 Plan is a comprehensive incentive compensation plan that permits grants of equity-based compensation awards ~~to employees and consultants of the Parent and its subsidiaries. Awards under the 2008 Plan may be~~ in the form of stock options (either incentive stock options or non-qualified stock options) or other stock-based awards, including restricted stock purchase awards, restricted stock units and stock appreciation rights. The maximum number of shares reserved for the grant or settlement of awards under the 2008 Plan is 6,734,923 shares of Parent, subject to adjustment in the event of an extraordinary dividend or other distribution, recapitalization, stock split, reorganization, merger, consolidation, spin-off, combination, repurchase or share exchange or other similar corporate transaction. Any shares subject to awards which are cancelled, forfeited, reacquired or repurchased before vesting under the 2008 Plan will again be available for grants under the 2008 Plan. In the event of a change in control, Parent’s Compensation Committee will have the discretion to accelerate all outstanding awards, cancel awards for fair value, provide for the issuance of substitute awards and/or provide award holders an opportunity to exercise their awards prior to the occurrence of the change in control transaction.

~~Through~~FASB ~~September 30,~~accounting ~~2009,~~standards ~~the~~require ~~Company~~that ~~has~~all ~~issued~~stock-based ~~under~~compensation be recognized as an expense in the ~~2008~~financial ~~Plan~~statements ~~(1) 6,295,262 stock~~and ~~options~~that ~~with~~such ancost ~~exercise~~be ~~price~~measured at the fair value of ~~approximately~~the ~~$10~~award.00 ~~per~~The ~~share~~fair ~~and~~value aof ~~weighted~~each ~~average~~option ~~fair~~award ~~market~~is ~~value~~estimated aton the date of grant ofusing the $3Black-Scholes-Merton model.44 ~~per~~The ~~share~~exercise ~~and~~price ~~(2) 301,250 shares~~for options granted are based on contemporaneous appraisals of ~~Chill~~the ~~Holdings,~~Company’s ~~Inc~~common stock. The Company estimates the fair value of common stock ~~that~~using ~~were~~standard ~~sold~~business tovaluation ~~employees~~techniques ofsuch as ~~the~~discounted ~~Company~~cash atflows, ~~$10.00~~industry ~~per~~participant ~~share.~~information Aand ~~portion~~reference ofto ~~the~~comparable ~~stock~~business ~~options~~transactions. ~~issued~~The ~~under~~discounted ~~the~~cash ~~2008~~flow ~~Plan~~fair ~~vest~~value estimates are based on ~~time~~our inprojected ~~installments~~future ~~though~~cash ~~2013,~~flows and athe ~~portion~~estimated ~~vest~~weighted-average ~~based~~cost onof ~~achievement~~capital of ~~pre-established~~market ~~EBITDA~~participants. ~~performance~~Management ~~targets~~assumptions about expected future cash flows can be affected by changes in ~~installments~~industry ~~through~~or ~~2012.~~market Itconditions isor the ~~Company’s~~rate ~~belief~~and ~~that~~extent ~~the~~to ~~performance~~which ~~shares~~anticipated ~~will~~synergies ~~vest~~or ~~over~~cost ~~the~~savings ~~installment~~are ~~period~~realized. ~~Approximately~~The ~~1.0 million~~estimated weighted-average ~~stock~~cost ~~options~~of ~~issued~~capital ~~under~~is based on the ~~2008~~ ~~Plan~~risk-free ~~vested~~interest ~~during~~rate and other factors such as equity risk premiums and the ~~nine~~ratios ~~months~~of ~~ended~~total ~~September 30,~~debt ~~2009~~and equity capital.

The Company ~~also~~uses ~~had~~the 54modified prospective method of application,~~188~~ ~~outstanding~~which ~~stock~~requires ~~options under~~it ato ~~Predecessor~~recognize ~~equity~~compensation ~~plan~~cost on a prospective basis. The ~~Under~~Company ~~the~~recognizes ~~terms~~compensation ofcost on a straight-line basis over the ~~February 13,~~requisite ~~2008~~service ~~merger~~period ~~agreement,~~for ~~these~~each ~~options~~separately ~~became~~vesting ~~fully~~portion ~~vested~~of ~~and~~the ~~Parent~~award. ~~converted~~Excess ~~these~~tax ~~options~~benefits related to ~~138,849~~stock ~~fully~~option ~~vested~~exercises ~~stock~~are ~~options~~reflected ofas ~~Chill~~financing ~~Holdings,~~cash ~~Inc~~flows.

~~The~~During ~~Company~~the ~~accounts~~first ~~for~~quarter ~~its~~of ~~stock~~2010, ~~options~~the atCompany ~~fair~~granted ~~value.~~212,000 ~~The~~options ~~Company~~with ~~recognized~~an ~~compensation~~exercise ~~expense~~price of $110.340 ~~million~~per ~~($0.8~~share ~~million~~to ~~net of~~certain ~~tax)~~non-executive ~~and~~employees, ~~$3.8~~which ~~million~~price ~~($2.3~~was ~~million~~determined ~~net~~by ofParent’s ~~tax),~~board ~~respectively,~~of ~~during~~directors ~~the~~as ~~three~~fair ~~and~~value ~~nine~~of ~~months~~its ~~ended~~common ~~September 30,~~stock ~~2009~~as ~~and~~of ~~$1.3~~the ~~million~~grant ~~($0~~date.8 ~~million~~Subsequent ~~after~~to ~~tax)~~the ~~and~~grant ~~$3.3~~date, ~~million~~the ~~($2.0~~Company ~~million~~re-evaluated ~~after~~the ~~tax),~~assumptions ~~respectively,~~used ~~during~~in determining the ~~three~~fair ~~months~~value ~~ended~~of ~~September 30,~~such ~~2008~~options and ~~the~~determined ~~period~~that ~~February 14,~~on ~~2008~~the todate ~~September 30,~~of ~~2008.~~such ~~The~~option ~~Company~~grant ~~recognized~~the ~~$6.4~~fair ~~million~~value ~~($4.0 million net~~ of ~~tax) in acquisition-related expenses during~~ the ~~period~~common ~~January 1,~~stock ~~2008~~was ~~to February 13, 2008, when 1~~$16.~~7 million~~10 ~~shares~~per ~~vested~~share and, as a result, ofwill ~~the~~record ~~2008~~total ~~Acquisition.~~compensation ~~The Company includes this~~ expense inof ~~selling,~~$1.9 ~~general~~million ~~and~~over ~~administrative~~the infour ~~the~~year ~~accompanying~~vesting ~~statement~~period of ~~income.~~such options.

The ~~fair~~Company ~~value~~recognized ofcompensation ~~each~~expense ~~option award is estimated on the date~~ of ~~grant using the Black-Scholes-Merton model using assumptions as discussed herein~~$1.3 ~~The~~million ~~expected volatility of 30%-32% at the grant date was based mainly on the volatility of the Company’s competitors~~($0.8 ~~The~~million ~~expected~~net ~~term~~ of ~~the~~tax) ~~options~~and ~~granted of 7 years is based on the period the options are expected to be outstanding~~$1. ~~The~~2 ~~risk-free~~million ~~interest rate of between 2~~($0.8% ~~and~~million ~~3.9%~~net ~~is based on the U.S. Treasury rate~~ of tax), arespectively, ~~note~~during ~~with~~ the ~~expected~~three ~~maturity~~months ofended ~~the~~March 31, ~~expected~~2010 ~~term~~and ofMarch 31, ~~the options~~2009. The Company ~~has~~includes ~~not~~this ~~considered~~expense ~~a dividend payment~~ in ~~its~~selling, ~~calculation~~general and ~~believes~~administrative ~~that forfeitures~~in ~~will~~the ~~not~~accompanying bestatement ~~significant~~of income.

As of September 30, 2009, the total compensation cost related to nonvested awards not yet recognized in the Company’s statements of income is $13.2 million. This amount will be recognized on a weighted average period of 2.7 years.

6. Comprehensive Income (Loss)

~~Other~~Accumulated other comprehensive income (loss) consists of the following (in thousands):

	Successor						Predecessor				Successor
	Definedbenefit plans				Change in fairvalue ofderivatives			Foreigncurrencytranslation				Total
	Three monthsendedSeptember 30,2009			Nine monthsendedSeptember 30,2009			January 1 toFebruary 13,2008				February 14 toSeptember 30,2008
December 31, 2009	$	(3,874	)		$	14,103		$	(1,999	)		$	8,230
Net income (loss)	$	43,026		$	86,790		$	(66,042	)		$	30,379
Net change through March 31, 2010		—				2,111			842				2,953
Fair value of derivatives, net of tax		16,669			44,250			9,099				(15,594	)
March 31, 2010	$	(3,874	)		$	16,214		$	(1,157	)		$	11,183
Foreign currency translation adjustment		1,462			2,605			(41	)			(1,948	)
Other comprehensive income (loss)	$	61,157		$	133,645		$	(56,984	)		$	12,837

7. Derivatives

The Company uses derivative instruments to manage risks related to interest rates, contracted transportation and the purchases of certain commodities. The Company evaluates each derivative instrument to determine whether it qualifies for hedge accounting treatment.

Interest Rate Risks

Certain of the Company’s long-term obligations are subject to interest rate risks. To reduce the risk associated with fluctuations in the interest rate of our floating rate debt: (1) in May 2008, the Company entered into a two-year interest rate cap with a notional amount of $150.0 million that matures in May 2010; (2) in March 2009, the Company entered into an interest rate swap with a notional amount of $200.0 million that matured in March 2010; and (3) in March 2009, the Company entered into an interest rate swap with a notional amount of $300.0 million that matures in March 2011. The Company elected not to designate the interest rate derivatives as cash flow hedges. Therefore, gains and losses from changes in the fair values of derivatives that are not designated as hedges are recognized in interest expense, net.

Fuel Surcharge Risks

As a part of its risk management strategy, the Company purchased a commodity contract for diesel in order to manage its exposure related to contracted transportation. Prices for diesel are normally correlated to transportation costs where third party

GOODMAN GLOBAL, INC.

NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS—(Continued)

Three ~~and Nine~~ Months Ended ~~September~~March 3031, ~~2009,~~2010 ~~Three Months Ended September 30, 2008~~ and ~~Periods~~2009 ~~January 1 to~~

February 13, 2008 and February 14 to September 30, 2008

(Unaudited)

~~Accumulated~~ haulers ~~other~~assess ~~comprehensive~~a ~~income~~fuel ~~(loss)~~surcharge ~~consists~~when diesel prices increase thus making derivatives of diesel effective at providing short-term protection against adverse price fluctuations. The Company elected not to designate the ~~following~~diesel (derivatives as cash flow hedges. Therefore, gains and losses from changes in ~~thousands~~the fair values of derivatives that are not designated as hedges are recognized in other (income): expense.

	Definedbenefit plans			Change in fairvalue ofderivatives			Foreigncurrencytranslation			Total
December 31, 2008	$	(4,851	)	$	(41,736	)	$	(5,482	)	$	(52,069	)
Net change through September 30, 2009		—			44,250			2,605			46,855
September 30, 2009	$	(4,851	)	$	2,514		$	(2,877	)	$	(5,214	)

7. Derivatives

The Company uses derivative instruments to manage risks related to interest rates and the purchases of commodities. The Company evaluates each derivative instrument to determine whether it qualifies for hedge accounting treatment.

Interest Rate Risks

Certain of the Company’s long-term obligations are subject to interest rate risks. To reduce the risk associated with fluctuations in the interest rate of its floating rate debt, the Company entered into fixed rate contracts in March 2009 with a notional amount of $500.0 million for up to 24 months. The Company elected not to designate the interest rate derivatives as cash flow hedges. Therefore, gains and losses from changes in the fair values of derivatives that are not designated as hedges are recognized in interest (income) expense.

Commodity Derivatives

The Company uses financial instruments to manage market risk from changes in commodity prices and selectively hedges anticipated transactions that are subject to commodity price exposure, primarily using commodity contracts relating to raw materials used in its production process. The Company has open positions for copper and aluminum in notional amounts of 9 18.82 million pounds and 6956.1 8 million pounds, respectively, to fix the purchase price, and thereby substantially reduce the variability of its purchase price for these commodities. The swaps, which expire at various dates through 2011, have been designated as cash flow hedges.

For these qualifying cash flow hedges, changes in the fair market value of these hedge instruments are reported in accumulated other comprehensive income (OCI) and reclassified into earnings in the same period during which the hedged transaction affects earnings. Assuming commodity prices remain constant, $017.58 million of derivative ~~losses~~gains are expected to be reclassified into earnings within the next twelve months. The Company has assessed the effectiveness of the transactions that receive hedge accounting treatment and any ineffectiveness would be recorded in other (income) expense.

FASB accounting standards establish, among other things, the disclosure requirements for derivative instruments and for hedging activities. Certain qualitative disclosures are required about objectives and strategies for using derivatives, quantitative disclosures about fair value amounts of gains and losses on derivative instruments, and disclosures about credit risk related contingent features in derivative agreements.

The following table discloses the fair value of the derivative instruments in the Company’s condensed consolidated balance sheets (in thousands):

	Asset derivatives			~~Liability derivatives~~
	Fair value as of September 30, 2009			Fair value as of September 30, 2009
		Fair value as of
	Balance sheet location	~~Fair~~March ~~value~~31, 2010		~~Balance~~December ~~sheet~~31, ~~location~~2009		~~Fair value~~
Commodity contracts	Other current assets	$	12,236	Other accrued expenses		$	—	(1)
Commodity contracts – raw materials	Other current assets	$	15,758	$	15,777
Commodity contracts	Other long term assets		3,533
Commodity contracts – raw materials	Other long term assets		6,614		7,601
Interest rate swaps			—	Other accrued expenses			1,265
		$	22,372	$	23,378
		$	15,769			$	1,265
	Liability derivatives
		Fair value as of
	Balance sheet location	March 31, 2010		December 31, 2009
Interest rate swaps	Other accrued expenses	$	1,646	$	1,138
Commodity contracts - diesel	Other accrued expenses		47		—
		$	1,693	$	1,138

(1) As of September 30, 2009, the Company had a balance of $6.9 million ($4.2 million net of tax) related to its March 2009 terminated commodity swaps. The Company determined that the settled derivatives remained effective and that the derivative loss related to the settled positions would remain in other comprehensive income and subsequently reclassified into cost of sales in October 2009 through December 2009 when the end products are sold to the Company’s customers.


Derivatives in cash flow hedging relationships	Amount of (gain) loss recognized in OCI on derivative (effective portion) as of
	March 31, 2010			December 31, 2009
Commodity contracts	$	(16,214	)	$	(14,103	)


Location of (gain) loss reclassified from Accumulated OCI into income (effective portion)	Amount of (gain) loss reclassified from accumulated OCI into income (effective portion) for the three months ended					Location of loss recognized in income on derivative (ineffective portion and amount excluded from effectiveness testing)	Amount of (gain) loss recognized in income on derivative (ineffective portion and amount excluded from ineffectiveness testing) for the three months ended
	March 31, 2010			March 31, 2009			March 31, 2010			March 31, 2009
Cost of goods sold	$	(3,739	)	$	14,450	Other (income) expense	$	(115	)	$	932

GOODMAN GLOBAL, INC.

NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS—(Continued)

Three ~~and Nine~~ Months Ended ~~September~~March 3031, ~~2009,~~2010 ~~Three Months Ended September 30, 2008~~ and ~~Periods~~2009 ~~January 1 to~~

February 13, 2008 and February 14 to September 30, 2008

(Unaudited)

Derivatives in cash flow hedging relationships		Amount of (gain) lossrecognized in OCI onderivative(effective portion) asof September 30, 2009
Commodity contracts		$	(2,515	)

Location of (gain) loss reclassified from Accumulated OCI intoincome (effective portion)		Amount of (gain) lossreclassified fromaccumulated OCI intoincome (effective portion)for the three monthsended September 30,2009			Amount of (gain)loss reclassifiedfrom accumulatedOCI into income(effective portion)for the nine monthsended September 30,2009			Location of lossrecognized in income onderivative (ineffectiveportionand amount excluded fromeffectiveness testing)		Amount of (gain) lossrecognized in income onderivative (ineffectiveportion and amountexcluded fromineffectiveness testing)for the three monthsended September 30,2009				Amount of (gain) lossrecognized in income onderivative (ineffectiveportion and amountexcluded fromineffectiveness testing)for the nine monthsended September 30,2009
Cost of goods sold		$	11,863		$	40,957		Other (income) expense		$	(20	)		$	567

The following table discloses the effect of derivative instruments on the statements of income that are not designated as hedging instruments (in thousands):

Derivatives not designated as hedging instruments	Location of lossrecognized in incomeon derivative	Amount of (income) lossrecognized in income onderivative for the threemonths endedSeptember 30, 2009		Amount of (income) lossrecognized in income onderivative for the nine monthsended September 30, 2009
Derivatives not designated as hedginginstruments	Location of loss recognized in income onderivative	Amount of loss recognized inincome on derivative for the threemonths ended
Interest rate swaps	Interest expense	$	1,682	$	2,625
		March 31, 2010		March 31, 2009
Commodity contracts - diesel	Other expense	$	47	$	—
Interest rate swaps	Interest expense, net		1,173		1,504
		$	1,220	$	1,504

Contingent Features

The Company’s derivative instruments contain provisions that require the counterparties’ debt to maintain an investment grade rating. If the rating of the debt were to fall below investment grade, it would be in violation of these provisions which would render the hedging relationship ineffective. The aggregate fair value of all derivative instruments with credit-risk related contingent features that are in an asset position on ~~September~~March 3031, ~~2009~~2010 was $1522.84 million. As of ~~September~~March 3031, ~~2009~~2010, the counterparties were at or above an acceptable investment grade rating.

8. Employee Benefit Plans

The Company sponsors a defined benefit plan, which covers union employees hired on or before December 14, 2002 who have both attained age 21 and completed one year of service. Benefits are provided at stated amounts based on years of service, as defined by the plan. Benefits vest after completion of five years of service. The Company’s funding policy is to make contributions in amounts adequate to fund the benefits to be provided. Plan assets consist of primarily equity and fixed-income securities.

The Company made a ~~$0.3 million~~ contribution to the plan during the ~~third~~first quarter of ~~2009~~2010 of $0.2 million. The Company will make contributions to the plan during the remainder of ~~2009~~2010 of approximately $0.37 million.

The components of net periodic benefit cost recognized during interim periods are as follows (in thousands):

	Successor									Predecessor			Successor
	Three months endedMarch 31, 2010			Three months endedMarch 31, 2009
	Three monthsendedSeptember 30,2009			Three monthsendedSeptember 30,2008			Nine monthsendedSeptember 30,2009			January 1 toFebruary 13,2008			February 14 toSeptember 30,2008
Service cost	$	173		$	160
Service cost	$	160		$	171		$	480		$	81		$	432
Interest cost		533			481
Interest cost		481			463			1,443			219			1,170
Expected return on plan assets		(549	)		(441	)
Expected return on plan assets		(441	)		(568	)		(1,323	)		(268	)		(1,436	)
Amortization of prior service cost		—			—
Amortization of prior service cost		—			—			—			1			8
Amortization of net loss		81			100
Amortization of net loss		100			3			300			—			—
Net periodic benefit cost	$	238		$	300
Net periodic benefit cost	$	300		$	69		$	900		$	33		$	174

9. Contingent Liabilities

As part of the equity contribution associated with the sale of the Amana Appliance business in July 2001, the Company agreed to indemnify Maytag for certain potential product liability claims. In light of these potential liabilities, the Company has purchased insurance that the Company expects will shield it from incurring material costs associated with such potential claims.

Pursuant to a March 15, 2001 Consent Order (the Consent Order) with the Florida Department of Environmental Protection (FDEP), the Company’s subsidiary, Goodman Distribution Southeast, Inc. (GDI Southeast) (formerly Pioneer Metals Inc.) is continuing to investigate and pursue, under FDEP oversight, the delineation of groundwater contamination at and around the GDI Southeast facility in Fort Pierce, Florida. Remediation has not begun. The contamination was discovered through environmental assessments conducted in connection with a Company subsidiary’s acquisition of the Fort Pierce facility in 2000 and was reported to FDEP, giving rise to the Consent Order.

The ultimate cost for the investigation, remediation and monitoring of the site cannot be predicted with certainty due to the variables relating to the contamination and the appropriate remediation methodology, the evolving nature of remediation technologies and governmental regulations and the inability to determine the extent to which contribution will be available from other parties. All of these factors are taken into account to the extent possible in estimating potential liability. A reserve appropriate for the probable remediation costs, which are reasonably susceptible to estimation, has been established.

GOODMAN GLOBAL, INC.

NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS—(Continued)

Three ~~and Nine~~ Months Ended ~~September~~March 3031, ~~2009,~~2010 ~~Three Months Ended September 30, 2008~~ and ~~Periods~~2009 ~~January 1 to~~

February 13, 2008 and February 14 to September 30, 2008

(Unaudited)

9Based on analyses of currently available information, it is probable that the proposed infrastructure and setup costs associated with the site will be approximately $0.5 ~~Contingent~~million. ~~Liabilities~~The Company reserved approximately $0.5 million as of December 31, 2009, although it is possible that costs could exceed this amount by up to approximately $3.3 million. Costs of future expenditures are not discounted to their present value. Management believes any liability arising from potential environmental obligations is not likely to have a material adverse effect on the Company’s liquidity or financial position as such obligations could be satisfied over a period of years. Nevertheless, future developments could require material changes in the recorded reserve amount.

AsThe ~~part~~Company ofbelieves ~~the~~this ~~equity~~contamination ~~contribution~~predated ~~associated~~GDI Southeast’s involvement with the ~~sale~~Fort ofPierce ~~the~~facility ~~Amana~~and ~~Appliance~~GDI ~~business~~Southeast’s operation inat ~~July~~this ~~2001,~~location ~~the~~has ~~Company~~not ~~agreed~~caused toor ~~indemnify Maytag~~contributed ~~for~~to ~~certain~~the ~~potential~~contamination. ~~product~~Accordingly, ~~liability~~the ~~claims.~~Company Inis ~~light~~pursuing oflitigation ~~these~~against ~~potential~~a ~~liabilities,~~former ~~the~~owner ~~Company~~and ~~has~~a ~~purchased~~former ~~insurance~~lessee ~~that~~of the ~~Company~~Fort ~~expects~~Pierce ~~will~~facility ~~shield~~in itan ~~from~~attempt ~~incurring~~to ~~material~~recover its costs. ~~associated~~At ~~with~~this ~~such~~time, the ~~potential~~Company ~~claims~~cannot estimate probable recoveries from this litigation.

~~Pursuant~~On ~~to a~~ March 1531, ~~2001~~2010, ~~Consent~~GDI ~~Order~~Southeast merged with and into the ~~Florida~~Company’s ~~Department of Environmental Protection (FDEP), our~~ subsidiary, Goodman Distribution ~~Southeast~~, Inc., ~~(GDI~~with ~~Southeast)~~Goodman ~~(formerly~~Distribution, ~~Pioneer Metals~~ Inc.) isbeing ~~continuing~~the tosurviving ~~investigate~~entity and ~~pursue,~~assuming ~~under FDEP oversight,~~ the ~~delineation~~liabilities ~~of groundwater contamination at~~ and ~~around~~obligations ~~the~~of GDI Southeast ~~facility in Fort Pierce~~, ~~Florida.~~including ~~Remediation~~its ~~has~~obligations ~~not~~under ~~begun. The contamination was discovered through environmental assessments conducted in connection with a Company subsidiary’s acquisition of~~ the ~~Fort Pierce facility in 2000 and was reported to FDEP, giving rise to the~~ Consent Order.

~~The~~In ~~ultimate~~April ~~cost~~2010, ~~for~~ the ~~investigation,~~Company ~~remediation~~received ~~and~~two ~~monitoring~~Notices of Proposed Adjustment from the ~~site~~Department ~~cannot~~of beTreasury – Internal Revenue Service ~~predicted~~covering ~~with~~its ~~certainty~~consolidated ~~due~~return tofor the ~~variables~~period ~~relating~~January 1 tothrough ~~the~~February 13, ~~contamination~~2008. ~~and~~The ~~the~~proposed ~~appropriate~~adjustments ~~remediation~~disallow ~~methodology,~~as ~~the~~non-recoverable ~~evolving~~costs ~~nature~~deductions offor ~~remediation~~certain ~~technologies~~expenses ~~and~~related ~~governmental~~to ~~regulations~~the 2008 Acquisition and ~~the~~would ~~inability~~increase toincome ~~determine~~taxes by ~~the~~approximately ~~extent~~$11.5 tomillion plus interest, which ~~contribution~~ ~~will~~would be ~~available~~recorded ~~from~~as ~~other~~a ~~parties~~charge to income tax expense. ~~All~~We ofbelieve ~~these~~that ~~factors~~the deductions were appropriate and are ~~taken~~in ~~into~~discussion ~~account~~with tothe IRS regarding this matter. At this time, the ~~extent~~IRS ~~possible~~has innot concluded ~~estimating~~its ~~potential~~review ~~liability.~~of AGoodman ~~reserve~~Global, ~~appropriate~~Inc.’s consolidated returns for the ~~probable~~years ~~remediation~~ended ~~costs~~December 31, ~~which~~2006 ~~are~~and ~~reasonably~~2007 ~~susceptible~~and ~~to estimation,~~the ~~has~~period ~~been~~January 1 ~~established~~to February 13, 2008.

Based on analyses of currently available information, it is probable that costs associated with the site will be $0.5 million. We reserved approximately $0.5 million as of September 30, 2009, although it is possible that costs could exceed this amount by up to approximately $2.7 million. Costs of future expenditures are not discounted to their present value. Management believes any liability arising from potential environmental obligations is not likely to have a material adverse effect on our liquidity or financial position as such obligations could be satisfied over a period of years. Nevertheless, future developments could require material changes in the recorded reserve amount.

The Company believes this contamination predated GDI Southeast’s involvement with the Fort Pierce facility and GDI Southeast’s operation at this location has not caused or contributed to the contamination. Accordingly, the Company is pursuing litigation against former owners of the Fort Pierce facility in an attempt to recover its costs. At this time, we cannot estimate probable recoveries from this litigation.

The Company is party to a number of other pending legal and administrative proceedings and is subject to various regulatory and compliance obligations. The Company believes that these proceedings and obligations will not have a materially adverse effect on its consolidated financial condition, cash flows or results of operations. To the extent required, the Company has established reserves that it believes to be adequate based on current evaluations and its experience in these types of matters. Nevertheless, an unexpected outcome in any such proceeding could have a material adverse impact on the Company’s consolidated results of operations in the period in which it occurs. Moreover, future adverse developments could require material changes in the recorded reserve amounts.

GOODMAN GLOBAL, INC.

NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS—(Continued)

Three ~~and Nine~~ Months Ended ~~September~~March 3031, ~~2009,~~2010 ~~Three Months Ended September 30, 2008~~ and ~~Periods~~2009 ~~January 1 to~~

February 13, 2008 and February 14 to September 30, 2008

(Unaudited)

10. Condensed consolidating financial information

As discussed in Note 3, all of the existing U.S. subsidiaries of the Company (other than AsureCare Corp. and ~~GGF~~Goodman Global Finance (Delaware) LLC) and all future restricted U.S. subsidiaries of the Company guarantee the Company’s debt obligations. The Company is structured as a holding company and substantially all of its assets and operations are held by its subsidiaries. The following information presents the condensed consolidating balance sheets as of ~~September~~March 3031, ~~2009~~2010 and December 31, ~~2008~~2009, the condensed consolidating statements of operations for the three ~~and nine~~ months ended ~~September~~March 3031, ~~2009~~2010 and March 31, ~~2008~~2009 and the condensed consolidating cash flows for the ~~nine~~three months ended ~~September~~March 3031, ~~2009~~2010 and ~~2008~~March 31, 2009 of (a) the “Guarantors”, Goodman Global, Inc., and all of the existing U.S. subsidiaries of the Company (other than AsureCare Corp. and ~~GGF~~Goodman Global Finance (Delaware) LLC), (b) the “Non-Guarantors”, AsureCare Corp., Goodman Global Finance (Delaware) LLC and Goodman Canada, L.L.C. ~~and GGF~~, and includes eliminating entries and the Company on a consolidated basis. Intercompany transactions are reflected in financing activities in the condensed consolidating statements of cash flows. For comparability purposes, the Predecessor period of January 1 to February 13, 2008 and the Successor period from February 14 to September 30, 2008 were combined for this presentation. (All amounts are in thousands).

Condensed Consolidating Balance Sheet

	September 30, 2009
	March 31, 2010
	Guarantors			Non-guarantors	~~Non-guarantors~~		ConsolidatingEntries			Consolidated
Current assets	$	~~655~~572,~~458~~241		$	$27,547	~~36,412~~	$	~~(1,283~~—	)	$	~~690~~599,~~587~~788
Property, plant and equipment		~~172~~166,~~268~~502			169	~~122~~		—			~~172~~166,~~390~~671
Goodwill		1,399,536			—	—		—			1,399,536
Identifiable intangibles		~~787~~777,~~233~~213			—	—		—			~~787~~777,~~233~~213
Other assets		3332,~~263~~812			—	~~57,029~~		(~~59,402~~442	)		3032,~~890~~370
Investment in affiliates		2729,~~078~~162			—	—		(2729,~~078~~162	)		—
Total assets	$	32,~~074~~977,~~836~~466		$	$27,716	~~93,563~~	$	(8729,~~763~~604	)	$	32,~~080~~975,~~636~~578
Current liabilities	$	~~238~~230,~~844~~281		$	$1,541	~~2,882~~	$	~~(1,283~~—	)	$	~~240~~231,~~443~~822
Intercompany payable (receivable)		~~(62~~4,~~773~~278	)		(4,278	~~62,773~~)		—			—
Long-term debt, less current portion		1,~~252~~162,~~748~~388			—	—		~~(76,038~~—	)		1,~~176~~162,~~710~~388
Long-term liabilities		~~261~~249,~~403~~312			1,291	~~1,272~~		—			~~262~~250,~~675~~603
Shareholders’ equity		1,~~384~~331,~~614~~207			29,162	~~26,636~~		(1029,~~442~~604	)		1,~~400~~330,~~808~~765
Total liabilities and shareholders’ equity	$	32,~~074~~977,~~836~~466		$	$27,716	~~93,563~~	$	(8729,~~763~~604	)	$	32,~~080~~975,~~636~~578
	December 31, 2009
	Guarantors			Non-guarantors			ConsolidatingEntries			Consolidated
Current assets	$	559,989		$	32,193		$	—		$	592,182
Property, plant and equipment		169,776			130			—			169,906
Goodwill		1,399,536			—			—			1,399,536
Identifiable intangibles		782,223			—			—			782,223
Other assets		36,118			—			(442	)		35,676
Investment in affiliates		26,767			—			(26,767	)		—
Total assets	$	2,974,409		$	32,323		$	(27,209	)	$	2,979,523
Current liabilities	$	251,287		$	5,267		$	—		$	256,554
Intercompany payable (receivable)		887			(887	)		—			—
Long-term debt, less current portion		1,160,790			—			—			1,160,790
Long-term liabilities		245,485			1,176			—			246,661
Shareholders’ equity		1,315,960			26,767			(27,209	)		1,315,518
Total liabilities and shareholders’ equity	$	2,974,409		$	32,323		$	(27,209	)	$	2,979,523

GOODMAN GLOBAL, INC.

NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS—(Continued)

Three ~~and Nine~~ Months Ended ~~September~~March 3031, ~~2009,~~2010 ~~Three Months Ended September 30, 2008~~ and ~~Periods~~2009 ~~January 1 to~~

February 13, 2008 and February 14 to September 30, 2008

(Unaudited)

	December 31, 2008
	Guarantors			Non-guarantors		ConsolidatingEntries			Consolidated
Current assets	$	625,610		$	34,373	$	—		$	659,983
Property, plant and equipment		177,527			166		—			177,693
Goodwill		1,399,536			—		—			1,399,536
Identifiable intangibles		802,265			—		—			802,265
Other assets		36,268			—		—			36,268
Investment in affiliates		18,789			—		(18,789	)		—
Total assets	$	3,059,995		$	34,539	$	(18,789	)	$	3,075,745
Current liabilities	$	221,496		$	2,244	$	—		$	223,740
Intercompany payable (receivable)		(11,941	)		11,941		—			—
Long-term debt, less current portion		1,347,526			—		—			1,347,526
Long-term liabilities		240,617			1,565		—			242,182
Shareholders’ equity		1,262,297			18,789		(18,789	)		1,262,297
Total liabilities and shareholders’ equity	$	3,059,995		$	34,539	$	(18,789	)	$	3,075,745

Condensed Consolidating Statement of Operations

Successor

Three months ended March 31, 2010

Three months ended September 30, 2009

Guarantors

Non-guarantors

ConsolidatingEntries

Consolidated

Sales, net

~~508~~371,~~376~~943

2217,~~787~~438

(~~521~~600

)

~~530~~388,~~642~~781

Cost of goods sold

~~338~~257,~~455~~705

1914,~~510~~755

(~~521~~600

)

~~357~~271,~~444~~860

Selling, general and administrative expenses

5954,~~454~~442

21,~~271~~706

—

6156,~~725~~148

Depreciation and amortization

1211,~~017~~953

2117

—

1211,~~038~~970

Operating profit

9847,~~450~~843

~~985~~960

—

9948,~~435~~803

Interest (income) expense, net

3531,~~217~~252

(~~2,571~~28

)

—

3231,~~646~~224

Other (income) expense, net

(~~458~~383

)

~~(1,328~~219

)

—

(~~1,786~~164

)

Equity in earnings of affiliates

(~~3,132~~161

)

—

~~3,132~~161

—

Earnings before income taxes

6617,~~823~~135

~~4,884~~769

(~~3,132~~161

)

6817,~~575~~743

Income tax expense (benefit)

236,~~797~~139

~~1,752~~608

—

256,~~549~~747

Net income (loss)

4310,~~026~~996

~~3,132~~161

(~~3,132~~161

)

4310,~~026~~996

Three months ended September 30, 2008

Three months ended March 31, 2009

Guarantors

Non-guarantors

ConsolidatingEntries

Consolidated

Sales, net

~~516~~309,~~130~~791

178,~~907~~851

(~~319~~407

)

~~533~~318,~~718~~235

Cost of goods sold

~~366~~238,~~251~~392

147,~~383~~765

(~~319~~407

)

~~380~~245,~~315~~750

Selling, general and administrative expenses

5048,~~814~~689

1,~~477~~315

—

5250,~~291~~004

Depreciation and amortization

12,~~885~~349

2319

—

12,~~908~~368

Operating profit

8610,~~180~~361

~~2,024~~(248

)

—

8810,~~204~~113

Interest (income) expense, net

3938,~~199~~186

70(60

)

—

3938,~~269~~126

Other (income) expense, net

~~269~~572

39(133

)

—

~~308~~439

Equity in earnings of affiliates

~~(1,254~~55

)

—

~~1,254~~(55

)

—

Earnings before income taxes

47(28,~~966~~452

)

~~1,915~~(55

)

~~(1,254~~55

)

48(28,~~627~~452

)

Income tax expense (benefit)

17(11,~~676~~091

)

~~661~~—

—

18(11,~~337~~091

)

Net income (loss)

30(17,~~290~~361

)

~~1,254~~(55

)

~~(1,254~~55

)

30(17,~~290~~361

)

GOODMAN GLOBAL, INC.

NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS—(Continued)

Three ~~and Nine~~ Months Ended ~~September~~March 3031, ~~2009,~~2010 ~~Three Months Ended September 30, 2008~~ and ~~Periods~~2009 ~~January 1 to~~

February 13, 2008 and February 14 to September 30, 2008

(Unaudited)

	Successor
	Nine months ended September 30, 2009
	Guarantors			Non-guarantors			ConsolidatingEntries			Consolidated
Sales, net	$	1,381,604		$	52,432		$	(1,396	)	$	1,432,640
Cost of goods sold		954,388			45,699			(1,396	)		998,691
Selling, general and administrative expenses		168,540			4,774			—			173,314
Depreciation and amortization		36,277			61			—			36,338
Operating profit		222,399			1,898			—			224,297
Interest (income) expense, net		107,552			(4,628	)		—			102,924
Other (income) expense, net		(498	)		(1,801	)		(16,636	)		(18,935	)
Equity in earnings of affiliates		(5,107	)		—			5,107			—
Earnings before income taxes		120,452			8,327			11,529			140,308
Income tax expense (benefit)		50,298			3,220			—			53,518
Net income (loss)	$	70,154		$	5,107		$	11,529		$	86,790
	Nine months ended September 30, 2008
	Guarantors			Non-guarantors			ConsolidatingEntries			Consolidated
Sales, net	$	1,434,147		$	53,851		$	(1,058	)	$	1,486,940
Cost of goods sold		1,095,297			43,517			(1,058	)		1,137,756
Selling, general and administrative expenses		156,564			4,613			—			161,177
Acquisition-related expenses		42,939			—			—			42,939
Depreciation and amortization		36,545			62			—			36,607
Operating profit		102,802			5,659			—			108,461
Interest (income) expense, net		154,066			(51	)		—			154,015
Other (income) expense, net		(785	)		323			—			(462	)
Equity in earnings of affiliates		(3,514	)		—			3,514			—
Earnings before income taxes		(46,965	)		5,387			(3,514	)		(45,092	)
Income tax expense (benefit)		(11,302	)		1,873			—			(9,429	)
Net income (loss)	$	(35,663	)	$	3,514		$	(3,514	)	$	(35,663	)

GOODMAN GLOBAL, INC.

NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS—(Continued)

Three and Nine Months Ended September 30, 2009, Three Months Ended September 30, 2008 and Periods January 1 to

February 13, 2008 and February 14 to September 30, 2008

(Unaudited)

Condensed Consolidating Statement of Cash Flows

	Successor
	Three months ended March 31, 2010
	Nine months ended September 30, 2009
	Guarantors			Non-guarantors			ConsolidatingEntries			Consolidated
	Guarantors			Non-guarantors			ConsolidatingEntries				Consolidated
Net cash provided by (used in):
Net cash provided by (used in):
Operating Activities	$	18,837		$	(769	)	$	—		$	18,068
Operating Activities	$	148,643		$	61,413		$	(57,028	)		$	153,028
Investing Activities		(4,160	)		(52	)		—			(4,212	)
Investing Activities		(16,261	)		(57,028	)		57,028				(16,261	)
Financing Activities		—			—			—			—
Financing Activities		(147,814	)		(8,153	)		—				(155,967	)
Net increase (decrease) in cash		14,677			(821	)		—			13,856
Net increase (decrease) in cash		(15,432	)		(3,768	)		—				(19,200	)
Cash at beginning of period		37,572			2,107			—			39,679
Cash at beginning of period		129,170			14,948			—				144,118
Cash at end of period	$	52,249		$	1,286		$	—		$	53,535
Cash at end of period	$	113,738		$	11,180		$	—			$	124,918
	Three months ended March 31, 2009
	Nine months ended September 30, 2008
	Guarantors			Non-guarantors			ConsolidatingEntries			Consolidated
	Guarantors			Non-guarantors			ConsolidatingEntries				Consolidated
Net cash provided by (used in):
Net cash provided by (used in):
Operating Activities	$	(25,861	)	$	990		$	—		$	(24,871	)
Operating Activities	$	148,530		$	(5,800	)	$	—			$	142,730
Investing Activities		(6,120	)		—			—			(6,120	)
Investing Activities		(1,952,395	)		(5	)		—				(1,952,400	)
Financing Activities		(7,070	)		7,070			—			—
Financing Activities		1,942,107			6,754			—				1,948,861
Net increase (decrease) in cash		(39,051	)		8,060			—			(30,991	)
Net increase (decrease) in cash		138,242			949			—				139,191
Cash at beginning of period		129,170			14,948			—			144,118
Cash at beginning of period		17,103			1,852			—				18,955
Cash at end of period	$	90,119		$	23,008		$	—		$	113,127
Cash at end of period	$	155,345		$	2,801		$	—			$	158,146

11. Subsequent Events

The Company has evaluated subsequent events through the time of its filing ~~on November 10, 2009,~~ which represents the date the financial statements are issued.

2120

Item 2.

Management’s Discussion and Analysis of Financial Condition and Results of Operations

The following discussion and analysis provides information that management believes is relevant to an assessment and understanding of our results of operations and financial condition. This discussion should be read in conjunction with the condensed consolidated financial statements and notes that are included herein and the consolidated financial statements and notes and the related Management’s Discussion and Analysis of Financial Condition and Results of Operations and Risk Factors in our Annual Report on Form 10-K for the year ended December 31, ~~2008~~2009 filed with the Securities and Exchange Commission (SEC) on March 1312, ~~2009~~2010.

Overview

WeGoodman ~~manufacture~~Global, ~~and~~Inc. ~~market~~(Goodman) anis ~~extensive~~a ~~line~~leading domestic manufacturer of heating, ventilation and air conditioning, (or HVAC), products ~~primarily under the Goodman®, Amana® and Quietflex® brands~~ for ~~the~~ residential and light commercial ~~markets~~use ~~primarily~~(consisting inof ~~the~~gas ~~United~~furnaces, ~~States~~package ~~and~~terminal ~~Canada,~~units and ~~believe~~compressor ~~that~~bearing weunits ~~are~~5 ~~the~~tons ~~second~~in ~~largest~~capacity ~~domestic manufacturer of residential~~ and ~~light~~smaller). ~~commercial~~Since ~~heating~~we ~~and~~began ~~air~~to ~~conditioning~~manufacture ~~products~~HVAC ~~based~~equipment ~~on unit sales. Founded~~ in ~~1975~~1982, aswe abelieve ~~manufacturer~~that ofwe ~~flexible~~have ~~duct,~~grown weour ~~expanded~~share ~~into~~ of the ~~broader~~residential HVAC ~~manufacturing~~ market in(consisting ~~1982.~~of ~~Since~~gas ~~then,~~furnaces weand ~~have~~compressor ~~expanded~~bearing ~~our~~units ~~product~~5 ~~offerings~~tons ~~and~~in ~~maintained~~capacity ~~our~~and ~~core~~smaller) ~~competency~~to ofnow ~~manufacturing~~become ~~high-quality~~one ~~products~~of atthe ~~low costs.~~country’s ~~Our~~largest ~~growth~~residential ~~and~~HVAC ~~success~~manufacturers, ~~can~~based beon ~~attributed~~unit tosales. ~~our~~Our ~~strategy~~activities ofinclude engineering, ~~providing~~manufacturing, ~~a quality~~distributing, ~~competitively~~and ~~priced~~marketing ~~product~~an ~~that~~extensive isline ~~designed~~of toHVAC beequipment ~~reliable~~ and ~~easy-to-install~~related products.

OnOur ~~February 13,~~products ~~2008,~~are ~~Chill~~predominantly ~~Acquisition~~marketed under the Goodman®, Amana® ~~Inc~~and Quietflex® brand names., aWe ~~Delaware~~believe ~~Corporation~~the ~~formed~~Goodman onbrand ~~October 15,~~is ~~2007~~the single largest domestic residential HVAC brand, based ~~merged~~on ~~with~~unit sales, and ~~into~~caters ~~Goodman~~to ~~Global,~~the ~~Inc.~~large assegment of the ~~surviving~~market ~~corporation,~~that ~~now~~is aprice ~~subsidiary~~sensitive ~~of Chill~~and ~~Holdings,~~desires ~~Inc.~~reliable ~~(Parent)~~and low-cost climate comfort, awhile ~~Delaware~~our ~~corporation~~premium ~~formed~~Amana onbrand ~~October 12,~~includes ~~2007~~advanced byfeatures, ~~affiliates~~quieter ofoperation ~~Hellman &~~and ~~Friedman~~enhanced ~~LLC~~warranties. WeThe Quietflex ~~refer~~brand tois ~~this~~a ~~merger~~recognized asbrand ~~the~~of ~~2008~~flexible ~~Acquisition~~duct.

Founded in 1975 as a manufacturer of flexible duct, we expanded into the broader HVAC manufacturing market in 1982. Since then, we have expanded our product offerings and maintained our core competency of manufacturing high-quality products at low costs. Our growth and success can be attributed to our strategy of providing a quality, competitively priced product that we believe is designed to be reliable and easy-to-install.

We are an indirect subsidiary of Goodman Global Group, Inc, a Delaware corporation formed in October 2007 by affiliates of Hellman & Friedman LLC.

Markets and Sales Channels

~~Our~~We ~~products~~manufacture ~~are~~and ~~distributed~~market ~~through~~an ~~over~~extensive ~~900~~line ~~distribution~~of ~~points~~heating, ~~across~~ventilation ~~North~~and ~~America.~~air ~~Our~~conditioning ~~customer~~products ~~relationships~~for ~~include~~the ~~independent~~residential ~~distributors,~~and ~~installing~~light ~~contractors~~commercial HVAC ormarkets ~~“dealers,”~~primarily ~~national homebuilders~~in ~~and~~the ~~other~~United ~~national~~States ~~accounts~~and Canada. WeThese ~~sell~~residential toand ~~dealers~~light ~~primarily~~commercial ~~through~~products ~~our~~consist ~~network~~mainly of ~~independent~~gas ~~distributors~~furnaces, ~~and~~package ~~company-operated~~terminal ~~distribution~~units ~~centers.~~and Wecompressor ~~sell~~bearing tounits ~~some~~five oftons ~~our~~in ~~independent~~capacity ~~distribution~~and ~~channel under inventory consignment arrangements~~smaller. We ~~focus~~also ~~the~~manufacture complementary ~~majority~~lines of ~~our~~flex-duct, ~~marketing~~evaporator oncoils, ~~dealers~~air ~~who~~handlers ~~install residential~~ and ~~light~~compressor ~~commercial~~bearing ~~HVAC~~units ~~products.~~with Wecapacities ~~believe~~ranging ~~that~~from ~~the~~six ~~dealer~~through is12.5 ~~the~~tons ~~key~~and ~~participant~~source in a ~~homeowner’s~~variety ~~purchasing~~of ~~decision,~~accessory ascomponents ~~the~~that ~~dealer~~aid isin the ~~primary contact~~installation ~~for~~and ~~the~~service ~~end user. Given the strategic importance~~ of ~~the~~our ~~dealer,~~products. Essentially weall ~~remain committed to enhancing profitability for this segment~~ of ~~the distribution chain while allowing~~ our ~~distributors~~products toare ~~achieve~~manufactured ~~their~~and ~~own~~assembled ~~profit~~at ~~goals.~~facilities Wein ~~believe~~Texas, ~~the ongoing~~Tennessee, ~~focus~~Florida, onPennsylvania ~~the~~and ~~dealer~~Arizona ~~creates~~and ~~loyalty~~are ~~and~~distributed ~~mutually~~through ~~beneficial~~over ~~relationships~~945 ~~among~~distribution ~~distributors,~~points ~~dealers~~across ~~and~~North usAmerica.

~~Weather~~Our customer relationships include independent distributors, ~~Seasonality~~installing contractors or “dealers,” national homebuilders and other ~~Business~~national ~~Mix~~accounts. We sell to dealers primarily through our network of independent distributors and company-operated distribution centers. We sell to some of our independent distribution channel under inventory consignment arrangements. We focus the majority of our marketing on dealers who install residential and light commercial HVAC products. We believe that the dealer is the key participant in a homeowner’s purchasing decision as the dealer is the primary contact for the end user. Given the strategic importance of the dealer, we remain committed to enhancing profitability for this segment of the supply chain while allowing our distributors to achieve their own profit goals. We believe the ongoing focus on the dealer creates loyalty and mutually beneficial relationships among distributors, dealers and us.

Weather patterns have historically impacted the demand for HVAC products. For example, hot weather in the spring causes existing older units to fail earlier in the cooling season, driving customers to accelerate replacement of a unit, which might otherwise be deferred in the case of a late season failure. Similarly, unseasonably mild weather diminishes customer demand for both commercial and ~~residential~~Seasonality ~~HVAC replacement~~ and ~~repairs. Weather also impacts installation during periods of inclement weather as fewer units are installed due to dealers being~~ ~~delayed~~Business orMix ~~forced to suspend operations.~~

~~Although~~We ~~there~~believe isthat weather patterns have historically impacted the demand for ~~our~~HVAC products. ~~throughout~~For ~~the year~~example, inwe believe ~~each~~that ofhot ~~the~~weather ~~past three~~in ~~years~~the ~~approximately~~spring ~~57%~~season tocan ~~60%~~cause ofexisting ~~our~~older ~~total~~units ~~sales~~to ~~occurred~~fail earlier in the ~~second~~season, ~~and~~driving ~~third~~customers ~~quarters~~to accelerate replacement of a unit, which might otherwise be deferred in the ~~fiscal~~case ~~year~~of a late season failure. ~~Our~~Similarly, ~~peak~~we believe ~~production~~that ~~also~~unseasonably ~~typically~~mild ~~occurs~~weather indiminishes ~~the~~customer ~~second~~demand for both commercial and ~~third~~residential ~~quarters~~HVAC replacement and repairs. Weather also impacts installation during periods of ~~the~~inclement ~~fiscal~~weather ~~year~~as fewer units are installed due to dealers being delayed or forced to shut down their operations.

WeAlthough ~~believe~~there ~~approximately~~is ~~15-20%~~demand offor our ~~sales~~products ~~are~~throughout ~~associated~~the ~~with~~year, ~~residential~~in ~~new~~each of ~~construction,~~the ~~with~~past ~~the~~three ~~balance~~fiscal ~~attributable~~years tobetween ~~repair, retrofitting~~58% and ~~replacement~~60% ~~units.~~of ~~With~~our ~~the~~total ~~current~~sales ~~downturn~~occurred in ~~residential~~the ~~new~~second ~~construction~~and ~~activity,~~third wequarters ~~are~~of ~~seeing~~the afiscal ~~decline~~year. Our peak production also typically occurs in the ~~volume~~second ofand ~~products~~third wequarters ~~sell~~of ~~into~~the ~~this~~fiscal ~~market~~year.

We believe approximately 15% to 20% of our sales during 2009 were associated with residential new construction, with the balance attributable to repair, retrofitting and replacement units.

Costs

~~Most of our products are manufactured and assembled at facilities in Texas, Tennessee, Florida, Pennsylvania and Arizona.~~ The principal elements of cost of goods sold in our manufacturing operations are component parts, raw materials, factory overhead, labor, transportation costs and warranty. The principal component parts, which, depending on the product, can approach up to 41% of our cost of goods sold, are compressors and motors. We believe that we have good relationships with quality component suppliers. The principal raw materials used in our processes are copper, aluminum and steel. In 2008, we spent over $300.0 million on these raw materials and their cost variability can have a material impact on our results of

2221

to 41% of our cost of goods sold, are compressors and motors. We purchase most of our components, such as compressors, motors, capacitors, valves and control systems, from third-party suppliers. In order to maintain low input costs, we also manufacture select components when it is deemed cost effective. We also manufacture heat transfer surfaces and heat exchangers for our units. Our primary raw materials are copper, aluminum and steel, all of which we purchase from third parties. We spent approximately $264.7 million in 2009 on these raw materials. Cost variability of raw materials can have a material impact on our results of operations. To enhance stability in the cost of major raw material commodities, such as copper and aluminum used in the manufacturing process, we have entered and may continue to enter into commodity derivative arrangements. Shipping and handling costs associated with sales are recorded at the time of the sale. Warranty expense, which is also recorded at the time of sale, is estimated based on historical trends such as incident rates, replacement costs and other factors and equaled 3.6% of our net sales in 2009.

Our selling, general and administrative expenses consist of costs incurred to support our marketing, distribution, engineering, information systems, human resources, finance, purchasing, risk management, legal and tax functions.

Depreciation expense is primarily impacted by capital expenditure levels. Equipment is depreciated on a straight line basis over the assets’ remaining useful lives.

Interest expense, net consists of interest expense and interest income. In addition, interest expense includes the amortization of deferred ~~the~~ financing costs ~~associated~~and ~~with~~settlements ~~the 2008 Acquisition~~ and changes in fair value of our interest rate derivatives that have not been designated as cash flow hedges. ~~In the nine months ended September 30, 2008, interest expense included a $49.8 million charge related to the retirement of our predecessor company’s outstanding debt.~~

Other income, net consists of ~~gains~~ineffectiveness onrelated ~~the~~to ~~repurchase~~hedge accounting of ~~long-term~~our ~~obligations~~commodity swaps, ~~ineffectiveness~~changes ~~related~~in tofair ~~hedge~~value ~~accounting~~ of our commodity contract ~~swaps~~for diesel that has not been designated as a cash flow hedge, gains or losses from foreign currency translations and miscellaneous income or expenses.

Income Taxes

Our effective income tax rates include a federal statutory rate of 35% and can differ for periods presented as a result of certain items, such as state and local taxes, non-deductible expenses and the domestic production activities deduction.

At ~~September~~March 3031, ~~2009~~ 2010, we had a valuation allowance of $3.43 million against certain net operating loss carry forwards. As of ~~September~~March 3031, ~~2009~~2010, we had net deferred tax liabilities of $~~171~~144.64 million primarily related to the non-deductibility of the step-up in basis of the assets to fair value in accordance with purchase accounting that related to ~~the~~our ~~2008~~acquisition ~~Acquisition~~in 2008 and other prior events.

FASB accounting standards require the use of significant judgment in determining what constitutes an individual tax position as well as assessing the outcome of each tax position. We consider many factors when evaluating and estimating our tax positions and tax benefits, which may require periodic adjustments and may not accurately anticipate actual outcomes. Changes in judgment as to recognition or measurement of tax positions can materially affect the estimate of the effective tax rate and, consequently, affect our operating results. The accounting treatment for recorded tax assets associated with our tax positions ~~reflect~~ reflects our judgment that it is more likely than not that our positions will be respected and the recorded assets will be realized. However, if such positions are challenged, then, to the extent they are not sustained, the expected benefits of the recorded assets and tax positions will not be fully realized.

Goodwill and Intangible Assets

At ~~September~~March 3031, ~~2009~~2010, we had a balance of $1,399.5 million in goodwill and $~~787~~777.2 million in intangible assets, net of amortization. The analysis performed in the fiscal ~~2008~~2009 fourth quarter did not indicate an impairment of goodwill ~~and since that time no events or circumstances have occurred that we believe would suggest an impairment exists~~. As of ~~September~~March 3031, ~~2009~~2010, there were no indicators noted that we believe would require us to re-evaluate our annual impairment test. We will perform our annual impairment testing in the fourth quarter of ~~2009~~2010.

Critical Accounting Policies and Estimates

~~Preparation~~The preparation of ~~our~~ consolidated financial statements in conformity with accounting principles generally accepted in the United States requires usmanagement to make estimates and assumptions that affect the amounts reported ~~amounts~~in ofthe ~~assets,~~consolidated ~~liabilities,~~financial ~~revenues~~statements and ~~expenses,~~accompanying ~~and~~notes. ~~disclosures~~We ofmust ~~contingent~~make ~~assets~~these estimates and ~~liabilities.~~assumptions ~~Many~~because ofcertain ~~the~~information ~~estimates~~is dependent ~~require~~on usfuture toevents, ~~make~~cannot ~~significant~~be ~~judgments~~calculated ~~and~~with ~~assumptions. Actual~~a ~~results~~high ~~could~~degree ~~differ~~of precision from ~~our~~data ~~estimates~~available ~~and~~or ~~could~~simply ~~have~~cannot abe ~~significant~~readily ~~impact~~calculated based on ~~our~~generally ~~consolidated~~accepted ~~results~~methodologies. ofIn ~~operations~~some cases, ~~financial~~these ~~position~~estimates ~~and~~are ~~cash~~particularly ~~flows.~~difficult Weto determine, ~~consider~~and ~~the~~significant ~~estimates~~judgment ~~used~~must tobe ~~account~~exercised. ~~for~~In ~~warranty~~preparing ~~liabilities~~the financial statements, ~~income~~the ~~taxes~~most difficult, ~~self-insurance~~ ~~reserves~~subjective and ~~contingencies,~~complex ~~rebates~~estimates and the ~~impairment~~assumptions that deal with the greatest amount of uncertainty relate to goodwill, intangible and long-lived assets and ~~goodwill~~reserves asfor ~~our~~self-insurance, ~~most~~warranty ~~significant~~and ~~judgments~~income tax liabilities. Actual results could differ materially from the estimates and assumptions used in the preparation of our financial statements.

We base many of our assumptions on our historical experience, recent trends and forecasts. We develop our forecasts based upon current and historical operating performance, expected industry and market trends and expected overall economic conditions. Our assumptions about future experience, cash flows and profitability require significant judgment since actual results have fluctuated in the past and are expected to continue to do so.

Our critical accounting policies are included in our Annual Report on Form 10-K for the year ended December 31, ~~2008~~2009 as filed with the SEC on March 1312, ~~2009~~2010. We believe that there have been no significant changes during the quarter ended ~~September~~March 3031, ~~2009~~2010 to the critical accounting policies disclosed in our Annual Report on Form 10-K for the year ended December 31, ~~2008~~2009.

Results of Operations

The table below presents condensed statement of income information for the three months ended March 31, 2010 and 2009 as a percentage of net sales.


	Three months ended March 31,
	2010		2009
Sales, net	100.0	%	100.0	%
Cost of goods sold	69.9		77.2
Selling, general and administrative	14.4		15.7
Depreciation and amortization expenses	3.1		3.9

Operating profit	12.6		3.2
Interest expense, net	8.0		12.0
Other (income) expense, net	—		0.1

Earnings before taxes	4.6		(8.9	)
Provision for income taxes	1.8		(3.5	)

Net income	2.8		(5.4	)

Three Months Ended March 31, 2010 Compared to March 31, 2009

Sales, net. Net sales for the three months ended March 31, 2010 were $388.8 million, a $70.6 million increase from $318.2 million for the three months ended March 31, 2009. Sales volume for the three months ended March 31, 2010 was 16.4% higher than the same period in the previous year, primarily as a result of increased sales in the majority of our product lines (due, in part, to an improved domestic economy) and a 5.8% increase related to a more favorable product mix, including the continued shift to higher priced, higher SEER cooling products.

Cost of goods sold. Cost of goods sold for the three months ended March 31, 2010 was $271.9 million, a $26.1 million increase from $245.8 million for the three months ended March 31, 2009. Cost of goods sold as a percentage of net sales decreased from 77.2% for the three months ended March 31, 2009 to 69.9% for the three months ended March 31, 2010. This decrease in cost of goods sold as a percentage of net sales was due to cost-reducing product designs, a reduction in certain raw material costs and the shift in product mix to higher margin products.

Selling, general and administrative expense. Selling, general and administrative expense was $56.1 million for the three months ended March 31, 2010, a $6.1 million increase from $50.0 million for the three months ended March 31, 2009 which related primarily to increases of approximately $3.2 million in payroll-related expenses that primarily related to newly opened company-operated distribution centers during the past twelve months, $1.1 million in advertising and promotion and $1.5 million related to early payment cash discounts, credit card fees and bad debts that primarily related to the increase in revenues.

Depreciation and amortization expense. Depreciation and amortization expense for the three months ended March 31, 2010 was $12.0 million, a $0.4 million decrease from $12.4 million for the three months ended March 31, 2009. The decrease was the result of a certain group of assets that became fully depreciated in 2009.

Operating profit. Operating profit for the three months ended March 31, 2010 was $48.8 million, a $38.7 million increase from $10.1 million reported for the three months ended March 31, 2009. The increase was primarily due to a decrease in cost of goods sold as a percentage of net sales that was partially offset by an increase in selling, general and administrative expenses.

Interest expense, net. Interest expense, net for the three months ended March 31, 2010 was $31.2 million, a decrease of $6.9 million from $38.1 million reported for the three months ended March 31, 2009. This decrease was primarily the result of having less debt outstanding during the three months ended March 31, 2010 as compared to the three months ended March 31, 2009. Our outstanding debt was $1,162.4 million at March 31, 2010 as compared to $1,349.3 million at March 31, 2009. Additionally, our term loan average interest rate was 6.25% during the three months ended March 31, 2010 as compared to 7.5% for the three months ended March 31, 2009.

~~Results~~Other (income) expense, net. Other income for the three months ended March 31, 2010 was $0.2 million, a net change of ~~Operations~~$0.6 million from $0.4 million in other expense reported for the three months ended March 31, 2009 that primarily related to a reduction of $1.0 million in hedge ineffectiveness on our commodity swaps that was partially offset by $0.4 million in foreign currency losses.

~~The~~Provision ~~financial information~~ for ~~the~~income ~~nine~~taxes. ~~months~~Income ~~ended~~tax ~~September~~expense ~~30, 2008 in~~ for the ~~table~~three ~~below~~months isended ~~the combined presentation of the pre-merger period January 1 to February 13~~March 31, ~~2008~~2010, ~~the~~was ~~date~~$6.7 ~~of the 2008 Acquisition~~million, ~~and~~an ~~the~~increase ~~post-merger~~of ~~period~~$17.8 ~~February~~million 14compared to ~~September~~an ~~30,~~income ~~2008.~~tax ~~Management~~benefit ~~believes~~of ~~that combining the Predecessor results for the period January~~ $11.1, ~~2008~~million ~~through February 13, 2008 with the results of the post-acquisition period provides the basis~~ for ~~a meaningful comparison to~~ the ~~operating~~three ~~results~~months ~~for the nine month period~~ ended ~~September 30~~March 31, 2009. The ~~combined~~increase ~~operating~~was ~~results~~primarily ~~have~~related ~~not~~to been prepared as pro forma results under applicable regulations, may not reflect the actual results we would have achieved absent the 2008 Acquisition and may not be predictive of future results of operations$17.7 Inmillion ~~addition, despite the combined presentation not being~~ in ~~accordance~~pre-tax ~~with~~earnings ~~GAAP because of, among other things, the change~~ in the ~~historical~~three ~~carrying~~months ~~value~~ended ~~or basis of assets and liabilities that resulted from the 2008 Acquisition~~March 31, we2010 ~~believe~~as ~~that~~compared ~~for~~to ~~comparison purposes, such~~ a ~~presentation~~pre-tax isloss ~~most meaningful to an understanding~~ of ~~the results of the business~~$28.5 ~~Where~~million ~~the operating results~~ for the ~~pre-merger~~three ~~and~~months ~~post-merger~~ended ~~periods in 2008 have been impacted by 2008 Acquisition costs or changes in the historical carrying values~~March 31, ~~such items are identified and discussed~~2009. ~~Additionally,~~The ~~the~~effective ~~historic~~tax ~~periods~~rates dofor ~~not reflect~~ the ~~impact~~three ~~the~~months ~~2008~~ended ~~Acquisition~~March 31, ~~had~~2010 onand usMarch 31, 2009 ~~most~~were ~~notably~~comparable ~~significantly~~at ~~increased~~38.0% ~~leverage~~ and ~~liquidity requirements~~38.6%, ~~and may not be predictive of future results of operations~~respectively.

	Three months endedSeptember 30,				Nine months endedSeptember 30,
	2009		2008		2009		2008
Sales, net	100.0	%	100.0	%	100.0	%	100.0	%
Cost of goods sold	67.4		71.3		69.7		76.5
Selling, general and administrative	11.6		9.8		12.1		9.2
Acquisition-related expenses	—		—		—		4.5
Depreciation and amortization expenses	2.2		2.4		2.5		2.4
Operating profit	18.8		16.5		15.7		7.4
Interest expense, net	6.2		7.4		7.2		10.4
Other (income) expense, net	(0.3	)	0.0		(1.3	)	—
Earnings before taxes	12.9		9.1		9.8		(3.0	)
Provision for income taxes	4.8		3.4		3.7		(0.6	)
Net income	8.1		5.7		6.1		(2.4	)

Liquidity and Capital Resources and Off-Balance Sheet Arrangements

~~Three~~As ~~Months~~of ~~Ended September~~March 3031, ~~2009~~2010, ~~Compared~~we tohad ~~September 30~~unrestricted cash and cash equivalents of $53.5 million, ~~2008~~working capital of $311.7 million and availability under our revolving credit agreement of $211.4 million.

~~Sales,~~At ~~net. Net sales for the three months ended September~~March 3031, ~~2009 were $530.6 million~~2010, ~~a $3.1 million~~we ~~decrease~~had, ~~from~~exclusive ~~$533.7~~of ~~million~~original ~~for~~issue ~~the three months ended September 30~~discount, ~~2008~~$1,178.0 ~~Sales~~million ~~volume~~of ~~for~~net ~~the~~indebtedness ~~three~~outstanding ~~months~~that ~~ended~~included ~~September 30, 2009 was 3~~$424.0% ~~lower~~million ~~than the same period in the previous year, primarily as a result~~ of ~~the~~senior ~~declines~~subordinated innotes ~~the residential~~and ~~new~~$754.0 ~~construction~~million ~~market~~related ~~and~~to ~~the~~our ~~overall~~term ~~downturn~~loan incredit ~~the economy~~agreement. ~~The~~At ~~decline~~March 31, in2010, ~~sales~~we ~~volume~~had ~~was~~no borrowings ~~partially~~under ~~offset~~our byrevolving acredit 2agreement.4% ~~increase~~Outstanding ~~related~~commercial toand astandby ~~more~~letters ~~favorable~~of ~~product~~credit ~~mix,~~issued ~~including~~under the ~~continued~~credit ~~shift~~facility tototaled ~~higher~~$33.5 ~~priced,~~million ~~higher~~as ~~SEER cooling~~of ~~products~~March 31, 2010.

~~Cost~~In ofApril ~~goods sold. Cost of goods sold for the three months ended September 30~~2010, ~~2009~~we ~~was~~made ~~$357.4 million,~~ a $227.91 million ~~decrease~~prepayment ~~from~~on ~~$380.3~~our ~~million~~term ~~for~~loan ~~the~~credit ~~three~~agreement ~~months~~further ~~ended~~reducing ~~September 30, 2008. Cost of goods sold as a percentage of net sales decreased from 71.3% for~~ the ~~three~~outstanding ~~months~~balance ~~ended~~due ~~September 30, 2008 to 67.4% for the three~~at ~~months~~maturity ~~ended September 30, 2009. This decrease~~ in ~~cost~~February ~~of goods sold as a percentage of net sales was due to cost-reducing product designs, a reduction in certain raw material costs and the shift in product mix to higher margin products~~2014.

~~Selling,~~We ~~general~~anticipate ~~and~~paying ~~administrative~~approximately ~~expense~~$108.6 ~~Selling,~~million ~~general~~in ~~and~~cash ~~administrative~~interest expense ~~was~~in ~~$61.7~~2010 ~~million~~related to our outstanding debt, assuming our current debt levels and interest rates remain constant for the ~~three~~ ~~months~~year. ~~ended~~At ~~September~~March 3031, ~~2009~~2010, awe ~~$9.4~~were ~~million~~in ~~increase~~compliance ~~from~~with ~~$52.3~~all ~~million~~of ~~for~~ the ~~three~~covenants ~~months~~under ~~ended~~our ~~September 30,~~term ~~2008~~loan ~~which~~credit ~~related~~agreement, ~~primarily~~revolving tocredit ~~increases~~agreement inand ~~payroll-related~~senior subordinated ~~expenses~~notes.

~~Depreciation~~In ~~and~~April ~~amortization~~2010, ~~expense.~~Goodman ~~Depreciation~~Global, Inc. and ~~amortization~~its ~~expense~~consolidated ~~for~~subsidiaries ~~the~~received ~~three~~two ~~months~~Notices ~~ended~~of ~~September 30,~~Proposed Adjustment ~~2009~~from ~~was $12.0~~the ~~million,~~Department aof ~~$0.9~~Treasury ~~million~~– ~~decrease~~Internal ~~from~~Revenue ~~$12.9~~Service ~~million~~covering its consolidated return for the ~~three~~period ~~months~~January 1 ~~ended~~through ~~September~~February 3013, 2008. The ~~decrease~~proposed ~~was~~adjustments disallow as non-recoverable costs deductions for certain expenses related to the ~~result~~2008 ofAcquisition and would increase income taxes by approximately $11.5 million plus interest, which would be recorded as a ~~certain~~charge ~~group~~to ofincome ~~assets~~tax expense. We believe that the deductions were ~~assigned~~appropriate aand ~~one~~are ~~year~~in discussion ~~life~~with onthe IRS regarding this matter. At this time, the ~~date~~IRS has not concluded its review of Goodman Global, Inc.’s consolidated returns for the ~~2008~~years ~~Acquisition~~ended ~~and~~December 31, ~~became fully~~2006 ~~depreciated~~and in2007 and the ~~first~~period ~~quarter~~January 1 ofto February 13, ~~2009~~2008.

~~Operating~~We ~~profit.~~have ~~Operating~~funded, ~~profit~~and ~~for~~expect ~~the~~to ~~three~~continue ~~months~~to ~~ended September 30~~fund, ~~2009~~operations ~~was~~through ~~$99.4~~cash ~~million,~~flows angenerated ~~$11.2~~by ~~million~~operating activities ~~increase~~and ~~from~~borrowings ~~$88.2~~under ~~million~~our ~~reported~~revolving ~~for~~credit ~~the three months ended September 30, 2008~~agreement. ~~The~~We ~~increase~~also ~~was~~expect ~~primarily~~that ~~due~~ongoing torequirements ~~favorability~~for indebt ~~cost~~service ofand ~~goods~~capital ~~sold~~expenditures ~~that~~will ~~was~~be ~~partially~~funded ~~offset~~from bythese ~~an increase in selling, general and administrative payroll-related expenses~~sources.

~~Interest~~Based ~~expense,~~on ~~net.~~our ~~Interest~~current ~~expense~~level of operations, ~~net for~~we ~~the~~believe ~~three~~that ~~months~~cash ~~ended~~flow ~~September 30~~from operations and available cash, ~~2009~~together ~~was~~with ~~$32.6~~available borrowings ~~million~~under our revolving credit agreement, awill ~~decrease~~be ofadequate ~~$6.7~~to ~~million~~meet ~~from~~our ~~$39.3~~short-term ~~million~~and ~~reported~~long-term ~~for~~liquidity needs over the ~~three~~next ~~months~~12 ~~ended~~to ~~September 30,~~24 ~~2008~~months. ~~This~~Our ~~decrease~~future ~~was~~liquidity ~~primarily~~requirements ~~the~~will ~~result~~be offor ~~having~~working ~~less~~capital, capital expenditures, debt ~~outstanding~~service and ~~lower~~general ~~interest~~corporate ~~rates~~purposes. onOur ability to meet our ~~term~~working ~~loan~~capital and ~~revolving~~debt ~~credit~~service ~~agreements~~requirements, inhowever, ~~the~~is ~~three~~subject ~~months~~to ~~ended~~future ~~September 30,~~economic ~~2009~~conditions asand ~~compared~~ to ~~the~~financial, ~~three~~business ~~months~~and ~~ended~~other ~~September 30~~factors, ~~2008~~many of which are beyond our control. ~~Our~~If ~~outstanding~~we ~~debt~~are not ~~was~~able $1to meet such requirements,~~176~~ we may be required to seek additional financing.7 ~~million~~There can be no assurance that we will be able to obtain financing from other sources on terms acceptable to us, if at ~~September 30~~ all. Based on our current business plans, ~~2009~~we expect asto ~~compared~~make annual capital expenditures of approximately $20 million to $~~1,347.5~~25 million atover ~~September 30,~~the ~~2008~~next two years.

From time to time, we may pursue acquisitions, but the timing, size or success of any acquisition effort and the related potential capital commitments cannot be predicted. We expect to fund any future acquisitions primarily with cash flow from operations and borrowings, including borrowing from amounts available under our revolving credit agreement or through new debt issuances. We or our Parent may also issue additional equity either directly or in connection with any such acquisitions. As of March 31, 2010, other than routine leasing agreements, we had no off-balance sheet arrangements.

Operating activities. Cash provided by operating activities for the three months ended March 31, 2010 was $18.1 million, a $43.0 million increase when compared to $24.9 million of cash used in operating activities for the three months ended March 31, 2009. The increase was primarily the result of $28.4 million in incremental net income and a $13.5 million change in operating assets and liabilities. A net decrease of $25.6 million in inventories and accounts payable related primarily to the timing of raw material purchases and a decrease of $8.1 million in other receivables related primarily to income tax refunds and changes in fair value of commodity hedges designated as cash flow hedges. This was partially offset by an increase of $20.2 million in accounts receivable that was primarily related to $70.5 in increased revenues.

~~Other~~Investing ~~(income) expense, net~~activities. ~~Other~~Cash ~~income~~used ~~for the three months ended September 30, 2009 was $1.8 million, a net change of $2.1 million from $0.3 million~~ in ~~other~~investing ~~expense~~activities ~~reported~~ for the three months ended ~~September~~ March 3031, ~~2008.~~2010 ~~Other~~and ~~income for the three months ended September~~March 3031, 2009 ~~consisted primarily~~was of $14.62 million inand ~~foreign currency gains~~$6.1 ~~Other~~million, ~~expense for the three months ended September 30~~respectively, ~~2008~~and consisted primarily of anpurchases ~~expense~~ of ~~$0.6~~property, ~~million~~plant ~~related~~and ~~to the ineffective portion of our commodity hedges that qualify for hedge accounting treatment offset by $0~~equipment.4 ~~million in gains recognized on the disposal of fixed assets.~~

~~Provision~~Financing ~~for income taxes~~activities. ~~Income~~Cash ~~tax expense for the three months ended September 30, 2009,~~ was ~~$25.5~~neither ~~million,~~provided anby ~~increase~~or ofused ~~$7.1~~in ~~million~~financing ~~compared~~activities toin ~~$18.4 million for~~ the three months ended ~~September~~March 3031, ~~2008. The effective tax rate for the three~~2010 ~~months ended September 30, 2009~~ and ~~September~~March 3031, ~~2008 were comparable at 37~~2009.~~25%~~ ~~and 37.71%, respectively.~~

Nine Months Ended September 30, 2009 Compared to September 30, 2008

Sales, net. Net sales for the nine months ended September 30, 2009 were $1,432.6 million, a $54.3 million decrease from $1,486.9 million for the nine months ended September 30, 2008. Sales volume for the nine months ended September 30, 2009 was 7.3% lower than the same period in the previous year, primarily as a result of the declines in the residential new construction market and the overall downturn in the economy. The decline in sales volume was partially offset by a 2.9% increase related to a more favorable product mix, including the continued shift to higher priced, higher SEER cooling products and 0.7% in price increases.

Cost of goods sold. Cost of goods sold for the nine months ended September 30, 2009 was $998.7 million, a $139.1 million decrease from $1,137.8 million for the nine months ended September 30, 2008. Cost of goods sold for the nine months ended September 30, 2008 was negatively affected by a $48.0 million purchase accounting treatment of the step-up in the basis of inventory related to the 2008 Acquisition. Excluding the effect of the amortization of the inventory step-up, cost of goods sold as a percentage of net sales decreased from 73.3% for the nine months ended September 30, 2008 to 69.7% for the nine months ended September 30, 2009. This decrease in cost of goods sold as a percentage of net sales was due to cost-reducing product designs, a reduction in certain raw material costs and the shift in product mix to higher margin products.

Selling, general and administrative expense. Selling, general and administrative expense was $173.3 million for the nine months ended September 30, 2009, a $12.1 million increase from $161.2 million for the nine months ended September 30, 2008 which related primarily to payroll-related expenses.

Acquisition-related expenses. We incurred $42.9 million in transaction-related expenses in the nine months ended September 30, 2008 as a result of the 2008 Acquisition.

Depreciation and amortization expense. Depreciation and amortization expense was $36.3 million for the nine months ended September 30, 2009, a $0.3 million decrease from $36.6 million for the nine months ended September 30, 2008. A $1.5 million decrease in depreciation expense related to fully depreciated assets was partially offset by a $1.2 million increase in amortization expense related to the 2008 Acquisition.

Operating profit (loss). Operating profit for the nine months ended September 30, 2009 was $224.3 million, a $115.8 million increase from a $108.5 million operating profit reported for the nine months ended September 30, 2008. The operating profit for the nine months ended September 30, 2008 was negatively impacted by the $48.0 million amortization of the inventory step-up and the $42.9 million transaction-related expenses. In addition to the impact of the inventory step-up and the transaction-related expenses, operating profit for the nine months ended September 30, 2009 increased $24.9 million. The increase was primarily due to favorability in cost of goods sold that was partially offset by an increase in selling, general and administrative payroll-related expenses.

Interest expense, net. Interest expense, net for the nine months ended September 30, 2009 was $102.9 million, a decrease of $51.1 million from $154.0 million reported for the nine months ended September 30, 2008. Interest expense, net for the nine months ended September 30, 2008 included a $49.8 million charge related to the retirement of our predecessor company’s outstanding debt. Excluding the charge related to the extinguishment of predecessor company debt, interest expense for the nine months ended September 30, 2008 was $104.2 million. The 2008 Acquisition debt was issued in mid-February 2008 and, on a comparative basis, was outstanding for a longer period in 2009. However, a reduction of our term loan interest rate to 6.25% from 6.5%, the repurchase of $76.0 million of senior notes and the $100.0 million repayment of our revolving credit agreement in 2009 resulted in lower interest expense in the nine months ended September 30, 2009 as compared to the nine month period ended September 30, 2008. Our outstanding debt was $1,176.7 million at September 30, 2009 and $1,347.5 million at September 30, 2008.

Other (income) expense, net. Other income for the nine months ended September 30, 2009 was $18.9 million, a net change of $18.4 million from $0.5 million in other income reported for the nine months ended September 30, 2008. Other income for the nine months ended September 30, 2009 consisted primarily of $16.6 million gain related to the repurchase of our senior subordinated notes, $2.3 million in foreign currency gains. Other income for the nine months ended September 30, 2008 consisted primarily of $0.4 million in gains recognized on the disposal of fixed assets.

Provision for income taxes. The income tax expense for the nine months ended September 30, 2009 was $53.5 million, an increase of $62.9 million compared to an income tax benefit of $9.4 million for the nine months ended September 30, 2008. The effective tax rate for the nine months ended September 30, 2009 was 38.1%, a 17.2% increase from the effective tax rate of 20.9% for the nine months ended September 30, 2008. The difference was primarily the result of non-deductible transaction costs in the nine months ended September 30, 2008 related to the 2008 Acquisition.

Liquidity and Capital Resources and Off-balance Sheet Arrangements

As of September 30, 2009, we had unrestricted cash and cash equivalents of $124.9 million, working capital of $322.5 million and $197.5 million of availability under our revolving credit agreement.

At September 30, 2009, we had $1,176.7 million of net indebtedness outstanding that included $424.0 million of senior subordinated notes and $772.0 million related to our term loan credit agreement. At September 30, 2009, we had no borrowings under our revolving credit agreement. Outstanding commercial and standby letters of credit issued under the credit facility totaled $33.5 million as of September 30, 2009.

In July 2009, we made a $50 million payment to reduce the outstanding balance of our revolving credit agreement to $0. In April 2009, in two separate transactions, we purchased for $58.9 million (inclusive of $1.9 million in accrued interest) approximately $76.0 million aggregate face value of our 13.5%/14% senior subordinated notes. We recognized a gain of $16.6 million as a result of the early extinguishment of debt. The repurchased notes are currently held by Goodman Global Finance (Delaware) LLC, an unrestricted subsidiary of Goodman Global, Inc. In July 2008, we made a prepayment of $26.0 million on our term loan credit agreement. The next payment required on our long-term debt obligations is a $2.0 million quarterly payment on our term loan credit agreement due December 2011.

We anticipate paying approximately $115.7 million in interest expense in 2009 related to our outstanding debt. At September 30, 2009, we were in compliance with all of the covenants under our term loan credit agreement and revolving credit agreement.

We have funded, and expect to continue to fund, operations through cash flows generated by operating activities and borrowings under our revolving credit agreement. We also expect that ongoing requirements for debt service and capital expenditures will be funded from these sources.

Based on our current level of operations, we believe that cash flow from operations and available cash, together with available borrowings under our revolving credit agreement, will be adequate to meet our short-term and long-term liquidity needs over the next 12 to 24 months. Our future liquidity requirements will be for working capital, capital expenditures, debt service and general corporate purposes. Our ability to meet our working capital and debt service requirements, however, is subject to future economic conditions and to financial, business and other factors, many of which are beyond our control. If we are not able to meet such requirements, we may be required to seek additional financing. There can be no assurance that we will be able to obtain financing from other sources on terms acceptable to us, if at all.

From time to time, we may pursue acquisitions, but the timing, size or success of any acquisition effort and the related potential capital commitments cannot be predicted. We expect to fund any future acquisitions primarily with cash flow from operations and borrowings, including borrowing from amounts available under our revolving credit agreement or through new debt issuances. We may also issue additional equity either directly or in connection with any such acquisitions. There can be no assurance that acquisition funds will be available on terms acceptable to us, or at all.

We and our subsidiaries, affiliates or significant stockholders may from time to time, in our or their sole discretion, continue to purchase, repay, redeem or retire any of our outstanding debt or equity securities in privately negotiated or open market transactions, by tender offer or otherwise. However, we have no formal plan of doing so at this time.

Operating activities. Cash provided by operations for the nine months ended September 30, 2009 was $153.0 million and primarily consisted of net operating income of $86.8 million, increased by $36.3 million in non-cash depreciation and amortization expenses; $11.8 million in non-cash amortization related to our long term debt that included the original issue discount and deferred financing costs; $3.8 million in non-cash compensation related to our stock options; a $16.3 million increase in deferred taxes; and, a $15.0 million increase in working capital consistent with the seasonality of our business. This was partially offset by a $16.6 million non-cash gain on the repurchase of $76.0 million in senior notes. Cash provided by operations for the nine months ended September 30, 2008 was $142.7 million and consisted primarily of a net operating loss of $35.7 million that was offset by approximately $78.6 million of expenses related to the 2008 Acquisition, $36.6 million in depreciation and amortization and $60 million received in tax refunds.

Investing activities. Cash used in investing activities for the nine months ended September 30, 2009 was $16.3 million and consisted primarily of $16.3 million in purchases of property, plant and equipment. Cash used in operations in the nine months ended September 30, 2008 was $1,952.4 million and consisted primarily of $1,940.6 million related to the 2008 Acquisition and $12.9 million in purchases of property, plant and equipment.

Financing activities. Cash used in financing activities for the nine months ended September 30, 2009 was $156.0 million and consisted primarily of payments of $100.0 million to fully satisfy our outstanding obligations under our revolving credit facility and payments of $57.0 million (exclusive of accrued interest) to reduce $76.0 million in face value of our senior notes. Cash provided by financing activities for the nine months ended September 30, 2008, was $1,948.9 and consisted primarily of 2008 Acquisition related transactions including net long-term debt proceeds of $1,373.0 million and equity contributions of $1,278.2 million partially offset by the repayment of $683.5 million in Predecessor debt. We also incurred debt financing fees of $45.8 million and equity issuance costs of $8.0 million associated with the 2008 Acquisition.

Recent Accounting Pronouncements

Refer to Note 1 to the notes to condensed consolidated financial statements for a discussion of recent accounting pronouncements.

Cautionary Note on Forward Looking Statements

This quarterly report ~~on Form 10-Q~~ contains forward-looking statements. In particular, statements about our expectations, beliefs, plans, objectives, assumptions or future events or performance or other statements that are not historical statements that are contained in this quarterly report under the heading “Management’s Discussion and Analysis of Financial Condition and Results of Operations” are forward-looking statements. ~~Examples of forward-looking statements include statements such as the statement of our belief that we have sufficient liquidity to fund our business operations for at least the next twelve months.~~ The words “believe,” “expect,” “anticipate,” “intend,” “estimate” and other expressions that are predictions of or indicate future events and trends and that do not relate to historical matters identify forward-looking statements. We have based these forward-looking statements on our current expectations about future events. While we believe these expectations are reasonable, these forward-looking statements are inherently subject to risks and uncertainties, many of which are beyond our control. Our actual results may differ materially from those suggested by these forward-looking statements for various reasons, including those discussed in ~~our~~this ~~2008~~quarterly ~~Annual Report~~report ~~on Form 10-K~~ under the heading “~~Risk~~Management’s ~~Factors”~~Discussion asand ~~amended~~Analysis orof ~~supplemented~~Financial byCondition ~~the~~and ~~information,~~Results ifof ~~any~~Operations,” in Part II, Item 1A below and in our Annual Report on Form 10-K for the fiscal year ended December 31, 2009 under the heading “Management’s Discussion and Analysis of Financial Condition and Results of Operations.” Given these risks and uncertainties, you are cautioned not to place undue reliance on these forward-looking statements. Some of the key factors that could cause actual results to differ from our expectations are:

• ~~general~~adverse ~~economic~~ conditions affecting the U.S. economy;

•

volatility and disruption of the capital and credit markets and adverse changes in the U.S. and global economy, which may negatively impact our and our customers’ ability to access financing;

•

changes in weather patterns and seasonal fluctuations;

• ~~changes~~a infailure ~~governmental~~by ~~regulation~~us ~~and~~to ~~policy~~improve ~~and~~our ~~effects~~existing onproducts, ~~our~~develop ~~business~~new ~~from~~products ~~our~~or ~~compliance~~keep pace with ~~regulations~~our competitors’ product development;

• ~~changes~~increased incompetition, ~~customer~~as ~~demand~~well as consolidation among independent distributors;

• significant fluctuations in the ~~maturation~~cost of raw materials and components and a decline in our ~~new~~relationships ~~company-operated~~with ~~distribution~~key ~~centers~~suppliers;

• ~~increased~~a ~~competition~~significant ~~and~~impairment ~~technological~~of ~~and~~the ~~product~~value ~~changes~~of ~~and~~our ~~advances~~intangible assets or long-lived assets;

• ~~increases~~a decline in ~~the~~our ~~cost~~relations ofwith ~~raw~~our ~~materials,~~key ~~components and warranty expenses~~distributors;

• damage or injury caused by our ~~relations~~products, which may result in material liabilities associated with ~~our~~product ~~independent~~recalls ~~distributors~~or reworks;

• ~~damage~~the orincurrence ~~injury~~of ~~caused~~material bycosts ~~our~~as ~~products~~a result of product liability or warranty claims;

• ~~increases~~higher inthan ~~interest~~expected tax rates; ~~and~~or exposure to additional income tax liabilities;

• ~~access~~the bycosts usof complying with, or ~~our~~addressing ~~customers~~liabilities under, laws relating to ~~credit~~the protection of the environment and ~~financing.~~worker health and safety;

•

labor disputes with our employees;

•

the loss of members of our management team;

•

natural or man-made disruptions to our distribution and manufacturing facilities;

•

our inability to access funds generated by our subsidiaries, making us unable to meet our financial obligations;

•

our failure to adequately protect our intellectual property rights or claims that we are in violation of the intellectual property rights of third parties;

•

the requirements of being a public company, which may strain our resources and distract management;

•

our substantial indebtedness, which may adversely affect our financial condition, our ability to operate our business, react to changes in the economy or our industry and pay our debts and could divert our cash flow from operations for debt payments;

•

the incurrence by us or our subsidiaries of substantially more debt, which could further exacerbate the risks associated with our substantial leverage;

•

our need to generate cash to service our indebtedness;

•

restrictions in our debt agreements that limit our flexibility in operating our business; and

•

other factors detailed from time to time in our filings with the SEC.

The forward-looking statements included in this quarterly report are made only as of the date hereof. We do not undertake and specifically decline any obligation to publicly update or revise any forward-looking statement, whether as a result of new information, future events or developments, changed circumstances or otherwise.

Item 3.

Quantitative and Qualitative Disclosures about Market Risk

We are exposed to market risks, which arise during the normal course of business from changes in interest rates, foreign exchange rates and commodity prices. ~~and~~A ~~foreign~~discussion ~~exchange~~of ~~rates~~our primary market risks are presented below.

WeInterest ~~are subject to interest~~ rate ~~and related cash flow~~ risk ~~in connection with borrowings under our term loan and revolving credit facility~~ which totaled $772.0 million at September 30, 2009. To reduce the risk associated with fluctuations in the interest rate of our floating rate debt: (1) in May 2008, we entered into a two-year interest rate cap with a notional amount of $150.0 million that matures in May 2010; (2) in March 2009, we entered into an interest rate swap with a notional amount of $200.0 million which matures in March 2010; and (3) in March 2009, we entered into an interest rate swap with a notional amount of $300.0 million which matures in March 2011.

27We are subject to interest rate and related cash flow risk in connection with borrowings under our term loan and revolving credit facilities which totaled $754.0 million at March 31, 2010. To reduce the risk associated with fluctuations in the interest rate of our floating rate debt: (1) in May 2008, we entered into a two-year interest rate cap with a notional amount of $150.0 million that matures in May 2010; (2) in March 2009, we entered into an interest rate swap with a notional amount of $200.0 million that matured in March 2010; and (3) in March 2009, we entered into an interest rate swap with a notional amount of $300.0 million that matures in March 2011.

Our results of operations can be affected by changes in interest rates due to variable interest rates on our term loan credit agreement and revolving credit agreement. ~~The~~A ~~annual impact of a~~ 1% increase or decrease in the overall interest ~~rates~~rate would ~~change~~have ~~our~~resulted ~~results~~in ofapproximately ~~operations~~a by $70.17 million ($40.4 million, net of tax), ~~after~~increase ~~taking~~or decrease in our ~~into~~interest ~~consideration~~expense in the ~~impact~~three ofmonths ~~the~~ended March 31, 2010 on our variable rate indebtedness, after taking into consideration our interest rate swaps.

WeForeign ~~are~~currency ~~subject~~exchange torate ~~price~~ risk as it relates to our principal raw materials: copper, aluminum and steel. Cost variability of raw materials can have a material impact on our results of operations. To enhance stability in the cost of major raw material commodities, such as copper and aluminum used in the manufacturing process, we have entered and may continue to enter into commodity derivative arrangements. Maturity dates of the contracts are scheduled to coincide with market purchases of the commodity. Cash proceeds or payments between the derivative counter-party and us at maturity of the contracts are recognized as an adjustment to the cost of the commodity purchased, to the extent the hedge is effective. Charges or credits resulting from ineffective hedges are recognized in income immediately. We have entered into swaps for a portion of our commodity supply which expire through December 31, 2011 which had a net fair value as an asset of $15.8 million ($9.7 million, net of tax) as of September 30, 2009. A 10% change in the price of commodities hedged would change the fair value of the hedge contracts by approximately $8.4 million ($5.1 million, net of tax) as of September 30, 2009.

We conduct our business primarily in the United States. We have limited sales in Canada, which are transacted in Canadian dollars. Other export sales, primarily to Latin America and the Middle East, are transacted in United States dollars. Therefore, we have only minor exposure to changes in foreign currency exchange rates. Sales outside the United States have not exceeded 5% in any of the three years ended December 31, 2009, 2008 or 2007. Approximately 1% of our total assets are outside the United States. There has been minimal impact on operations due to currency fluctuations.

Commodity price risk

We are subject to price risk as it relates to our principal raw materials: copper, aluminum and steel. Cost variability of raw materials can have a material impact on our results of operations. To enhance stability in the cost of major raw material commodities, such as copper and aluminum used in the manufacturing process, we have entered and may continue to enter into commodity derivative arrangements. Maturity dates of the contracts are scheduled to coincide with market purchases of the commodity. Cash proceeds or payments between the derivative counter-party and us at maturity of the contracts are recognized as an adjustment to the cost of the commodity purchased, to the extent the hedge is effective. Charges or credits resulting from ineffective hedges are recognized in income immediately. We have entered into swaps for a portion of our commodity supply that expire through December 31, 2011. These swaps had a net fair value as an asset of $22.4 million ($13.8 million, net of tax) as of March 31, 2010. A 10% change in the price of commodities hedged would change the fair value of the hedge contracts by approximately $12.6 million ($7.7 million, net of tax) as of March 31, 2010.

We continue to monitor and evaluate the prices of our principal raw materials and may decide to enter into hedging contracts in the future.

Item 4.

Controls and Procedures

We maintain disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) promulgated under the Securities Exchange Act of 1934, or the “Exchange Act”) that are designed to ensure that information required to be disclosed in Exchange Act reports is recorded, processed, summarized, and reported within the time periods specified in the rules and forms of the SEC and that such information is accumulated and communicated to our management, including our Chief Executive Officer and Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosure. Any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives.

Our management, with the participation of our Chief Executive Officer and Chief Financial Officer, has evaluated the effectiveness of the design and operation of our disclosure controls and procedures as of the end of the period covered by this report. Based upon that evaluation and subject to the foregoing, our Chief Executive Officer and Chief Financial Officer concluded that our disclosure controls and procedures were effective.

Our Chief Executive Officer and Chief Financial Officer do not expect that our disclosure controls or our internal controls will prevent all error and all fraud. The design of a control system must reflect the fact that there are resource constraints and the benefit of controls must be considered relative to their cost. Because of the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that we have detected all of our control issues and all instances of fraud, if any. The design of any system of controls also is based partly on certain assumptions about the likelihood of future events and there can be no assurance that any design will succeed in achieving our stated goals under all potential future conditions.

There have been no changes in our internal control over financial reporting that occurred during our fiscal quarter ended ~~September~~March 3031, 2010 ~~2009,~~ that have materially affected or are reasonably likely to materially affect, our internal control over financial reporting.

2826

Part II. Other Information

Item 1.

Legal Proceedings

The information regarding litigation and environmental matters described in Note 9 of the Notes to the Consolidated Condensed Financial Statements included elsewhere in this Quarterly Report on Form 10-Q is incorporated herein by reference.

Item 1A.

Risk Factors

~~There have~~You ~~been~~should nocarefully ~~material~~consider ~~changes~~the ~~from~~risk factors set forth below as well as the ~~Risk~~other ~~Factors~~information wecontained ~~previously~~in ~~disclosed~~this quarterly report, including our consolidated financial statements and related notes, and in our Annual Report on Form 10-K for the fiscal year ended December 31, ~~2008~~2009. ~~filed~~The ~~with~~risks described below are not the ~~Securities~~only risks facing us. Additional risks and ~~Exchange~~uncertainties ~~Commission~~not oncurrently ~~March 13~~known to us or those we currently view to be immaterial may also materially and adversely affect our business or results of operations. Any of the following risks could materially and adversely affect our business, ~~2009~~financial condition or results of operations.

Risks related to our business

Our business has been, and may continue to be, adversely impacted by conditions affecting the U.S. economy.

Our business is affected by a number of economic factors, including the level of economic activity in the markets in which we operate. Throughout 2008 and 2009, the decline in economic activity in the United States affected our business, financial condition and results of operations. Sales in the residential and commercial new construction market correlate closely to the number of new homes and buildings that are built, which in turn is influenced by factors such as interest rates, inflation or deflation, consumers’ spending habits, employment rates and other macroeconomic factors over which we have no control. Declining economic activity as a result of these factors resulted in a reduction in new construction and replacement purchases, which has affected, and may continue to affect, our sales volume and profitability.

The volatility and disruption of the capital and credit markets and adverse changes in the U.S. and global economy may negatively impact our ability, and the ability of our customers, to access financing and may impede our internal growth.

In late 2007, 2008 and early 2009, the capital and credit markets experienced volatility and disruption at unprecedented levels. Significant declines in the housing market during that period, coupled with falling home prices, increasing foreclosures and high levels of unemployment, have resulted in significant write-downs of asset values by financial institutions, including government-sponsored entities and major commercial and investment banks. These write-downs have caused many financial institutions to seek government assistance and additional capital, to merge with larger and stronger institutions and, in some cases, to fail. Many lenders and institutional investors have reduced, and in some cases ceased to provide, funding to borrowers, including other financial institutions. These disruptions in the financial markets may not only impact our liquidity but that of our suppliers, our independent distributors and our customers. If these market disruptions re-emerge, our business, financial condition, results of operations and cash flows could be adversely affected.

Changes in weather patterns and seasonal fluctuations may adversely affect our operating results.

Weather fluctuations may adversely affect our operating results and our ability to maintain our sales volume. Our operations may be adversely affected by unseasonably warm weather in the months of November to February and unseasonably cool weather in the months of May to August, which has the effect of diminishing customer demand for heating, ventilation and air conditioning systems and decreasing our sales volumes. Many of our operating expenses cannot be easily reduced during periods of decreased demand for our products. Accordingly, our results of operations will be negatively impacted in quarters with lower sales due to such weather fluctuations. In addition, our sales volumes and operating results in certain regions can be negatively impacted during inclement weather conditions in these regions.

In addition, our quarterly results may vary significantly within the fiscal year. Although there is demand for our products throughout the year, in each of the past three fiscal years between 58% and 60% of our total sales occurred in the second and third quarters of the fiscal year. Our peak production also typically occurs in the second and the third quarters of the fiscal year. Therefore, quarterly comparisons of our sales and operating results should not be relied upon as an indication of future performance, and the results of any quarterly period may not be indicative of expected results for a full year.

If we fail to improve our existing products or develop new products, or if our competitors develop products that are superior to ours, our competitiveness in the marketplace, financial condition, results of operations and cash flows may be adversely affected.

Product innovation and new product development are important to maintaining the competitive position of our business and growing our sales and profit margins. Company-sponsored research and development expenses were $3.1 million for the three months ended March 31, 2010 and $11.2 million, $10.5 million and $9.1 million for the years ended December 31, 2009, 2008 and 2007, respectively. We intend to continue to conduct research and development activities as a means of improving existing products and developing new products. However, there can be no assurance that we will be able to improve existing products or develop new products on a cost-effective and timely basis or at all, that such products will compete favorably with products developed by our competitors, or that our existing technology will not be superseded by other technological developments that may be utilized by our competitors. If we fail to improve existing products or develop new products, or our competitors develop products that are superior to ours, we could experience lower revenues or lower profit margins, which could have an adverse effect on our competitiveness in the marketplace, business, financial condition, results of operations and cash flows.

Increased competition, as well as consolidation among independent distributors, may reduce our market share and our future sales.

The production and sale of HVAC equipment by manufacturers is highly competitive. According to industry sources, the top six domestic manufacturers (including us) represented approximately 90% of the unit sales in the U.S. residential and light commercial HVAC market in 2008. According to industry sources, our four largest competitors in this market are Carrier Corporation (a division of United Technologies Corporation), Trane Inc. (a wholly-owned subsidiary of Ingersoll-Rand Company Limited), Lennox International, Inc. and Rheem Manufacturing Company. Several of our competitors may have greater financial and other resources than we have. A number of factors affect competition in the HVAC industry, including an increasing emphasis on the development of more efficient HVAC products. Existing and future competitive pressures may materially and adversely affect our business, financial condition or results of operations, including pricing pressure if our competitors improve their cost structure. In addition, our company-operated distribution centers face competition from independent distributors and dealers owned by our competitors, some of whom may be able to provide their products or services at lower prices than we can. We may not be able to compete successfully against current and future competition, and current and future competitive pressures faced by us may adversely affect our profitability and performance.

There are several companies that have recently sought to purchase, or have purchased, independent distributors and dealers and consolidate them into large enterprises. These consolidated enterprises may be able to exert pressure on us to reduce prices. Additionally, these new enterprises tend to emphasize their company name, rather than the brand of the manufacturer, in their promotional activities, which could lead to dilution of the importance and value of our brand names. Future price reductions and any brand dilution caused by the consolidation among HVAC distributors and dealers could have an adverse effect on our business, financial condition and results of operations.

Significant fluctuations in the cost of raw materials and components have reduced, and may in the future reduce, our operating margins. In addition, a decline in our relationships with key suppliers may have an adverse effect on our business, financial condition or results of operations.

Our operations depend on the supply of various raw materials and components, including copper, aluminum, steel, refrigerants, motors and compressors, from domestic and foreign suppliers. We do not enter into long-term supply contracts for many of our raw materials and component requirements. As a result, our suppliers may discontinue providing products to us at attractive prices, and we may be unable to obtain such products in the future from these or other providers on the scale and within the time frames we require. For example, our purchases of raw materials and components from international suppliers are subject to risks associated with changes in, and application of, laws, regulations and policies, including those related to tariffs (such as anti-dumping and countervailing duties) and other trade barriers. If a key supplier were unable or unwilling to meet our supply requirements, we could experience supply interruptions and cost increases which (to the extent that we are not able to find alternate suppliers or pass on these additional costs to our customers) could adversely affect our business, financial condition or results of operations. To the extent that any of our suppliers experiences a shortage of components that we purchase, we may not receive shipments of those components and, if we were unable to obtain substitute components on a timely basis, our production would be impaired.

Between 2004 and 2008, commodity prices rose significantly to levels well above prices seen in the prior decade. To help address the rise in commodity costs, we implemented price increases in 2006 and 2008 on the majority of our products. A further increase in commodity prices could have a material adverse effect on our results of operations. We may not be able to increase the prices of our products further or reduce our costs to offset the higher commodity prices.

We are subject to price risk as it relates to our principal raw materials: copper, aluminum and steel. Cost variability of raw materials can have a material impact on our results of operations. To create stability in the cost of major raw material commodities, such as copper and aluminum used in the manufacturing process, we have entered into and intend to continue to enter into commodity derivative arrangements. Maturity dates of the contracts are scheduled to occur at various times in 2010 and 2011 with respect to the various commodities. With respect to any given commodity, the maturities of our derivative arrangements may not be sufficiently long term to protect us from fluctuations in market prices. Cash proceeds or payments between the derivative counter-party and us at maturity of the contracts are recognized as an adjustment to the cost of the commodity purchased, to the extent the hedge is effective. Charges or credits resulting from ineffective hedges are recognized in income immediately. A 10% change in the price of commodities hedged would change the fair value of the hedge contracts by approximately $12.6 million and $8.8 million as of March 31, 2010 and December 31, 2009, respectively. Our efforts to mitigate rising raw materials costs could adversely affect our results of operations if commodity prices were to unexpectedly decline.

We continue to monitor and evaluate the prices of our principal raw materials and may decide to enter into additional hedging contracts in the future.

Any determination that a significant impairment of the value of our intangible assets or long-lived assets has occurred could have a material adverse effect on our consolidated financial condition and results of operations.

As a result of the 2008 Acquisition, goodwill and other acquired intangible assets represent a substantial portion of our assets. Goodwill was approximately $1.4 billion and other identifiable intangible assets were approximately $777.2 million as of March 31, 2010. We also have long-lived assets consisting of property and equipment, net of depreciation, of $166.7 million as of March 31, 2010. We review these assets both on a periodic basis as well as when events or circumstances indicate that the carrying amount of an asset may not be recoverable. Any future determination that an impairment of the fair value of our goodwill, unamortized intangible assets or long-lived assets has occurred would require us to write-down the impaired portion of those assets to fair value, which would reduce our assets and stockholders’ equity and could have a material adverse effect on our business, financial condition and results of operations.

A decline in our relations with our key distributors may adversely affect our business.

Our operations also depend upon our ability to maintain our relationships with our independent distributors. While we generally enter into contracts with our independent distributors, these contracts typically last for two years and can be terminated by either party upon 30 days’ notice. If our key distributors are unwilling to continue to sell our products or if our key distributors merge with or are purchased by a competitor, we could experience a decline in sales. If we are unable to replace such distributors or otherwise replace the resulting loss of sales, our business and results of operations could be adversely affected. For 2008 and 2009, approximately 45% and 43%, respectively, of our net sales were made through our independent distributors.

Damage or injury caused by our products could result in material liabilities associated with product recalls or reworks.

In the event that we produce a product that is alleged to contain a design or manufacturing defect, we could be required to incur costs involved to recall or rework that product. The costs required to recall or rework any defective products could be material, which may have a material adverse effect on our business. Any recalls or reworks may adversely affect our reputation as a manufacturer of quality, safe products and could have a material adverse effect on our business, financial condition and results of operations.

We may incur material costs as a result of product liability or warranty claims that would negatively affect our profitability.

The development, manufacture, sale and use of our products involve a risk of product liability and warranty claims, including personal injury and property damage arising from fire, soot, mold and carbon monoxide. We currently carry insurance and maintain reserves for potential product liability claims. However, our insurance coverage or reserves may be inadequate if such claims arise and any liability not covered by insurance could have a material adverse effect on our business. Moreover, our insurance premiums may increase in the future as a consequence of conditions in the insurance business generally or our situation in particular. Any such increase could result in lower profits or cause the need to reduce our insurance coverage. Any product liability claim may also include the imposition of punitive damages, the award of which, pursuant to certain state laws, may not be covered by insurance. Our product liability insurance policies have limits that if exceeded, may result in material costs that would have an adverse effect on our future profitability. In addition, warranty claims are not covered by our product liability insurance. Any product liability or warranty issues may adversely affect our reputation as a manufacturer of safe, quality products and could have a material adverse effect on our business, financial condition and results of operations.

Our financial results or liquidity may be adversely impacted by higher than expected tax rates or exposure to additional income tax liabilities.

Our effective tax rate is highly dependent upon the geographic composition of our earnings and tax regulations governing each region. We are subject to income taxes in multiple jurisdictions within the United States and Canada, and significant judgment is required to determine our tax liabilities. Our effective tax rate as well as the actual tax ultimately payable could be adversely affected by changes in the split of earnings between jurisdictions with differing statutory tax rates, in the valuation of deferred tax assets, in tax laws or by material audit assessments, which could affect our profitability. In particular, the carrying value of deferred tax assets, which are predominantly in the United States, is dependent on our ability to generate future taxable income in the United States. In addition, the amount of income taxes we pay is subject to ongoing audits in various jurisdictions, and a material assessment by a governing tax authority could affect our profitability.

We adopted the provisions of Financial Accounting Standards Board (“FASB”) accounting standards that, among other things, require companies to recognize the tax benefits of uncertain positions only when the position is “more likely than not” to be sustained assuming examination by tax authorities. The amount recognized represents the largest amount of tax benefit that is more likely than not to be ultimately realized. A liability is recognized for any benefit claimed, or expected to be claimed, in a tax return in excess of the benefit recorded in the financial statements, along with any interest and penalty (if applicable) on the excess. At March 31, 2010, we had established a $56.5 million liability in respect of such unrecognized tax benefits, of which $4.7 million would impact the effective tax rate at recognition. We may be required to make cash payments in respect of taxes (and interest thereon) in respect of such unrecognized tax benefit. While we do not expect any such payments to have a material impact on our results of operations due to the liability we have already recognized, any such payments could impact our liquidity at the time they are made.

In April 2010, Goodman Global, Inc. and its consolidated subsidiaries received two Notices of Proposed Adjustment from the Department of Treasury—Internal Revenue Service covering its consolidated return for the period January 1 through February 13, 2008. The proposed adjustments disallow as non-recoverable costs deductions for certain expenses related to the 2008 Acquisition and would increase income taxes by approximately $11.5 million plus interest, which would be recorded as a charge to income tax expense. At this time, the IRS has not concluded its review of Goodman Global, Inc.’s consolidated returns for the years ended December 31, 2006 and 2007 and the period January 1 to February 13, 2008.

The costs of complying with, or addressing liabilities under, laws relating to the protection of the environment and human health and safety may be significant.

We are subject to extensive, evolving and often stringent international, federal, state, provincial, municipal and local laws and regulations relating to the protection of human health and the environment, including those limiting the discharge of pollutants into the environment and those regulating the treatment, storage, disposal and remediation of, and exposure to, solid and hazardous wastes and hazardous materials. Certain environmental laws and regulations impose liability on potentially responsible parties, including past and present owners and operators of sites, to clean up, or contribute to the cost of cleaning up, sites at which hazardous wastes or materials were disposed of or released. Such liability may be imposed without regard to fault and whether or not the responsible party knew of the condition. In addition, the liability may be joint and several, which could result in a party paying for more than its fair share. We are currently, and may in the future be, required to incur costs relating to the investigation or remediation of such sites, or sites owned or operated by third parties where we have, or may have, disposed of our waste. See “Business—Regulation.”

Many applicable environmental laws and regulations provide for substantial fines or civil or criminal sanctions for violations. We incur expenses to maintain such compliance and it is possible that more stringent environmental laws and regulations, more vigorous enforcement or a new interpretation of existing laws and regulations could require us to incur additional costs and penalties. Further, existing or future circumstances, such as the discovery of new or materially different environmental conditions, could cause us to incur unanticipated costs that could have a material adverse effect on our business, financial condition and results of operations.

We are also subject to various laws and regulations relating to health and safety and expect to continue to make capital expenditures at our facilities to improve worker health and safety. Expenditures at our facilities to maintain compliance with the Occupational Safety and Health Administration, or “OSHA,” standards could be significant, and we may become subject to liabilities relating to worker health and safety at our facilities in the future. In addition, future inspections at our facilities may result in enforcement actions by OSHA.

Our products are also subject to international, federal, state, provincial and local laws and regulations. We are required to maintain our products in compliance with applicable current laws and regulations, and any changes which affect our current or future products could have a negative impact on our business and could result in additional compliance costs. For example, effective January 23, 2006, U.S. federal regulations mandated an increase in the minimum seasonal energy efficiency ratio, or “SEER,” from 10 to 13 for central air conditioners and heat pumps manufactured in the United States. On November 19, 2007, the U.S. Department of Energy, or “DOE,” issued new regulations increasing the minimum annual fuel utilization efficiency, or “AFUE,” for several types of residential furnaces. These regulations apply to furnaces manufactured for sale in the U.S. or imported into the United States on and after November 19, 2015. On December 19, 2007, federal legislation was enacted authorizing the DOE to study the establishment of regional efficiency standards for furnaces and air conditioners. In April 2010, the DOE held a public hearing to consider a proposed rule amending the current AFUE for furnaces and establishing two regions for regulatory purposes. The DOE is expected to issue a final rule establishing regional standards by May 1, 2011. The required efficiency levels for our products may be further increased in the future by the relevant regulatory authorities. Any future changes in required efficiency levels or other government regulations could adversely affect our industry, business, financial condition and results of operations.

Labor disputes with our employees could interrupt our operations and adversely affect our business.

We negotiated a three year collective bargaining agreement with the International Association of Machinists and Aerospace Workers, or the union, that was ratified by the union membership on December 5, 2009. As of March 31, 2010, the union represented approximately 23% of our employees, and this agreement covers all hourly employees at our manufacturing facility in Fayetteville, Tennessee. If we are unable to successfully negotiate acceptable terms with the union when the current agreement expires, our operating costs could increase as a result of higher wages or benefits paid to union members, or if we fail to reach an agreement with the union, our operations could be disrupted. Either event could have a material adverse effect on our business. In addition, there have been in the past, and may be in the future, attempts to unionize our non-union facilities. If employees at our non-union facilities unionize in the future, our operating costs could increase.

Our business operations could be significantly disrupted if we lose members of our management team.

Our success depends to a significant degree upon the continued contributions of our executive officers and key employees, both individually and as a group. For example, we have longstanding relationships with most of our independent distributors. In many cases, these relationships have been formed over a period of years through personal networks involving our key personnel. The loss of these personnel could potentially disrupt these longstanding relationships and adversely affect our business. We have employment-related agreements with ten members of our senior management. Our future performance will be substantially dependent on our ability to retain and motivate our management. The loss of the services of any of our executive officers or key employees could prevent us from executing our business strategy.

We may be adversely affected by any natural or man-made disruptions to our distribution and manufacturing facilities.

We are a manufacturing company that is heavily dependent on our manufacturing and distribution facilities in order to maintain our business and remain competitive. Any serious disruption to a significant portion of our distribution or manufacturing facilities resulting from fire, earthquake, weather-related events, an act of terrorism or any other cause could materially impair our ability to manufacture and distribute our products to customers. Moreover, we could incur significantly higher costs and longer lead times associated with manufacturing or distributing our products to our customers during the time that it takes for us to reopen or replace damaged facilities. Many of our facilities are located at or near Houston, Texas, which is in close proximity to the Gulf of Mexico. This region is particularly susceptible to natural disruptions, as evidenced by hurricane activity in recent years. If any of these events were to occur, our business, financial condition, results of operations and cash flows could be materially adversely affected.

If we are unable to access funds generated by our subsidiaries we may not be able to meet our financial obligations.

Because we conduct our operations through our subsidiaries, we depend on those entities for dividends, distributions and other payments to generate the funds necessary to meet our financial obligations. Legal and contractual restrictions in certain agreements governing current and future indebtedness of our subsidiaries, as well as the financial condition and operating requirements of our subsidiaries, may limit our ability to obtain cash from our subsidiaries. All of our subsidiaries are separate and independent legal entities and have no obligation whatsoever to pay any dividends, distributions or other payments to us.

Our business operations could be negatively impacted if we fail to adequately protect our intellectual property rights or if third parties claim that we are in violation of their intellectual property rights.

Our products are marketed primarily under the Goodman^®, Amana^® and Quietflex^® brand names and, as such, we are dependent on those brand names. Failure to protect these brand names and other intellectual property rights or prevent their unauthorized use by third parties could adversely affect our business. We seek to protect our intellectual property rights through a combination of patent, trademark, copyright and trade secret laws, as well as licensing and confidentiality agreements. These protections may not be adequate to prevent competitors from copying or reverse engineering our products, or from developing and marketing products that are substantially equivalent to or superior to our own. In addition, we face the risk of claims that we are infringing third parties’ intellectual property rights. Any such claim, even if it is without merit, could be expensive and time-consuming; could cause us to cease making, using or selling certain products that incorporate the disputed intellectual property; could require us to redesign our products, if feasible; could divert management time and attention; and could require us to enter into costly royalty or licensing arrangements.

The requirements of being a public company may strain our resources, distract management and increase our expenses.

If Goodman Global Group, Inc. becomes a public company, we will need to comply with new laws, regulations and requirements, including certain provisions of the Securities Exchange Act of 1934, or the “Exchange Act,” the related regulations of the Securities and Exchange Commission and the requirements of any stock exchange on which the shares of Goodman Global Group, Inc. are listed. The Exchange Act requires that we file annual, quarterly and current reports with respect to our business and financial condition. The Sarbanes-Oxley Act requires that we maintain effective disclosure controls and procedures and internal control for financial reporting. These requirements may place a strain on our systems and resources. Under Section 404 of the Sarbanes-Oxley Act, Goodman Global Group, Inc. will be required beginning with the year ending December 31, 2011, and Goodman Global, Inc. is currently required, to include a report by management on our internal control over financial reporting in our Annual Report on Form 10-K. Our independent public accountants auditing our financial statements will be required to attest to and report on management’s assessment of the effectiveness of our internal control over financial reporting beginning with Goodman Global, Inc.’s Annual Report on Form 10-K for the fiscal year ending December 31, 2010 and with Goodman Global Group, Inc.’s Annual Report on Form 10-K for the fiscal year ending December 31, 2011. Previously, in connection with the fiscal year ended December 31, 2006, it was determined that some of our predecessor’s commodity derivatives did not qualify for hedge accounting and, as a result, we restated the prior quarters of 2006 to reflect the changes in fair value of those derivatives in other (income) expense, net, and our Chief Executive Officer and Chief Financial Officer concluded that our disclosure controls and procedures were not then effective for this reason. If we are unable to conclude that our disclosure controls and procedures and internal control over financial reporting are effective, or if our independent public accounting firm is unable to provide us with an unqualified report as to the effectiveness of our internal control over financial reporting in future years, investors may lose confidence in our financial reports and the trading price of our securities may decline.

In addition, we expect that, if Goodman Global Group, Inc. becomes a public company, being a public company subject to these rules and regulations will make it more expensive for us to obtain director and officer liability insurance, and we may be required to accept reduced coverage or incur substantially higher costs to obtain coverage. These factors could also make it more difficult for us to attract and retain qualified executive officers and qualified members of our board of directors, particularly to serve on audit and compensation committees.

Risks related to our indebtedness

Our substantial indebtedness could adversely affect our financial condition, our ability to operate our business, react to changes in the economy or our industry and pay our debts and could divert our cash flow from operations for debt payments.

We now have, and will continue to have, a significant amount of indebtedness for the foreseeable future. This indebtedness exposes us to risks that some of our primary competitors, with less outstanding indebtedness, do not face. On March 31, 2010, we had $1,162.4 million of indebtedness, net of original issue discount of $15.6 million, excluding $33.5 million of outstanding and undrawn letters of credit and up to $266.5 million of additional indebtedness that may be borrowed under the terms and conditions of our revolving credit facility, of which $211.4 million was available under our borrowing base as of such date.

Our substantial indebtedness could have important consequences to our business, including:

•

making it more difficult for us to satisfy our obligations with respect to our outstanding notes and other indebtedness;

•

increasing our vulnerability to general adverse economic and industry conditions;

•

requiring us to dedicate a substantial portion of our cash flow from operations to payments on our indebtedness, thereby limiting cash flow available to fund our working capital, capital expenditures or other general corporate requirements;

•

limiting our flexibility in planning for, or reacting to, changes in our business and the industry and making us more vulnerable to economic downturns and adverse industry conditions;

•

compromising our ability to capitalize on business opportunities and to react to competitive pressures, as compared to our competitors, due to our high level of debt and the restrictive covenants in some of our debt agreements; and

•

limiting our ability to obtain additional financing to fund future working capital, capital expenditures, other general corporate requirements and acquisitions.

A substantial portion of our indebtedness bears interest at rates that fluctuate with changes in certain prevailing interest rates including the prime rate. A 1% increase or decrease in the overall interest rate would have resulted in approximately a $0.7 million ($0.4 million, net of tax) increase or decrease in our interest expense in the three months ended March 31, 2010 on our variable rate indebtedness. If interest rates increase dramatically, we may be unable to meet our debt service obligations. For the three months ended March 31, 2010, we had entered into two interest rate swaps, one with a notional amount of $200.0 million, which expired in March 2010, and another with a notional amount of $300.0 million, which expires in March 2011. We are not under any obligation to maintain or renew such arrangements or to enter into additional arrangements, and any such arrangements may not be as effective as we expect in mitigating our exposure to interest rate fluctuations.

Despite current indebtedness levels, we and our subsidiaries may incur substantially more debt. This could further exacerbate the risks associated with our substantial leverage.

We and our subsidiaries may be able to incur substantial additional indebtedness in the future. Although the agreements governing our debt instruments contain restrictions on the incurrence of additional indebtedness, these restrictions are subject to a number of qualifications and exceptions, and the indebtedness incurred in compliance with these restrictions could be substantial. If we incur additional debt above the levels currently in effect, the risks associated with our leverage, including those described above, would increase. As of March 31, 2010, we had $266.5 million of undrawn commitments under our revolving credit facility (of which $211.4 million was available under our borrowing base as of such date).

To service our indebtedness, we will require a significant amount of cash. Our ability to generate cash depends on many factors beyond our control.

Our ability to make scheduled payments on or to refinance our debt obligations depends on our financial condition and operating performance. This, to a certain extent, is subject to prevailing economic and competitive conditions and to certain financial, business, regulatory and other factors beyond our control. Our business may not generate sufficient cash flow from operations, and future borrowings may not be available to us under the revolving credit agreement in an amount sufficient to enable us to service our debt or to fund our other liquidity needs. If we are unable to meet our debt obligations or fund our other liquidity needs, we may need to restructure or refinance all or a portion of our debt or sell certain of our assets on or before the maturity of our debt. We may not be able to restructure or refinance any of our debt on commercially reasonable terms, or at all, which could cause us to default on our debt obligations and impair our liquidity. Any refinancing of our indebtedness could be at higher interest rates and may require us to comply with more onerous covenants that could further restrict our business operations.

In addition, if our cash flow and capital resources are insufficient to fund our debt service obligations, we may be forced to reduce or delay investments and capital expenditures, or to sell assets or seek additional capital. These alternative measures may not be available to us, may not be successful and may not permit us to meet our scheduled debt service obligations, which could result in substantial liquidity problems. The senior secured credit facilities and senior subordinated notes restrict our ability to dispose of assets and use the proceeds from the disposition. We may not be able to consummate those dispositions or to obtain the proceeds which we could realize from them and these proceeds may not be adequate to meet any debt service obligations then due.

Our debt agreements contain restrictions that limit our flexibility in operating our business.

The agreements governing our indebtedness contain various covenants that limit our ability to engage in specified types of transactions. These covenants limit our and certain of our subsidiaries’ ability to, among other things:

•

incur additional debt or issue certain capital stock;

•

pay dividends on, repurchase or make distributions in respect of our capital stock or make other restricted payments;

•

make certain investments;

•

sell assets;

•

create liens;

•

consolidate, merge, sell or otherwise dispose of all or substantially all of our assets;

•

enter into certain transactions with our affiliates; and

•

permit restrictions on the ability of our subsidiaries to make distributions.

In addition, under the revolving credit agreement, when (and for as long as) the combined availability under the revolving credit agreement is less than a specified amount for a certain period of time, or if a payment or bankruptcy event of default has occurred and is continuing, funds deposited into any of our depository accounts will be transferred on a daily basis into a blocked account with the administrative agent and applied to prepay loans under the revolving credit agreement and to cash collateralize letters of credit issued thereunder.

Under the senior secured credit facilities, we will also be required to satisfy and maintain specified financial ratios. Our ability to meet those financial ratios can be affected by events beyond our control, and there can be no assurance that we will meet those ratios.

The failure to comply with any of these covenants would cause a default under our debt instruments. A default, if not waived, could result in acceleration of the outstanding indebtedness under such debt instruments, in which case such indebtedness would become immediately due and payable. In addition, a default or acceleration under certain of our debt instruments could result in a default or acceleration of other indebtedness as a result of cross-default or cross-acceleration provisions. If any default occurs, we may not be able to pay our debt or borrow sufficient funds to refinance it. Even if new financing is available, it may not be available on terms that are acceptable to us. Complying with these covenants may cause us to take actions that we otherwise would not take or not take actions that we otherwise would take.

The interests of our controlling stockholder may differ from the interests of the holders of our outstanding debt.

As of March 31, 2010, Hellman & Friedman LLC (H&F) and its affiliates owned, in the aggregate, approximately 87% of Parent’s common stock and Parent indirectly owns all of our common stock. In addition, H&F and its affiliates, by virtue of their ownership of our Parent’s common stock and their voting rights under a stockholders agreement, control the vote in connection with substantially all matters subject to Parent stockholder approval. As a result of this ownership and the terms of a stockholders agreement, H&F is entitled to elect directors with majority voting power on our Parent’s Board of Directors, to appoint new management and to approve actions requiring the approval of the holders of our Parent’s outstanding voting shares as a single class, including adopting most amendments to our certificate of incorporation and approving mergers or sales of all or substantially all of our Parent’s assets. H&F, through its control of Parent and us, also controls all of our subsidiaries that guarantee our debt.

The interests of H&F and its affiliates may differ from yours in material respects. For example, if we encounter financial difficulties or are unable to pay our debts as they mature, the interests of H&F and its affiliates, as equity holders, might conflict with interests of a note holder. H&F and its affiliates may also have an interest in pursuing acquisitions, divestitures, financings or other transactions that, in its judgment, could enhance its equity investments, even though such transactions might involve risks to a note holder, including the incurrence of additional indebtedness. Additionally, certain agreements governing our debt permit us to pay certain advisory fees, dividends or make other restricted payments under certain circumstances, and H&F may have an interest in our doing so.

H&F and its affiliates are in the business of making investments in companies and may, from time to time in the future, acquire interests in businesses that directly or indirectly compete with certain portions of our business or are suppliers or customers of ours. You should consider that the interests of H&F and its affiliates may differ from yours in material respects.

Item 2.

Unregistered Sales of Equity Securities and Use of Proceeds

None.

Item 3.

Defaults Upon Senior Securities

None.

Item 4.

Submission of Matters to a Vote of Security Holders

~~None~~Pursuant to written consents effective as of February 1, 2010, stockholders holding a majority of the outstanding shares of capital stock of Goodman Global Group, Inc. and the sole stockholder of the Company, in each case acting by consent in lieu of a meeting, elected the following individuals as members of the boards of directors of Goodman Global Group, Inc. and the Company, respectively, each for a term of one year expiring in 2011, to serve until their successors are duly elected and qualified, or until the earlier of their death, resignation or removal: David L. Swift, Lawrence M. Blackburn, Charles A. Carroll, Robert B. Henske, Erik Ragatz, Saloni Saraiya Multani.

Item 5.

Other Information

None.

Item 6.

Exhibits

31.1		Certification by Chief Executive Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
31.2		Certification by Chief Financial Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
32.1		Certification by The Chief Executive Officer and Chief Financial Officer Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

See Exhibit Index on the page immediately preceding the exhibits for a list of exhibits files as part of this Quarterly Report on Form 10-Q, which Exhibit Index is incorporated herein by reference.

2936

SIGNATURE

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

		Goodman Global, Inc.
Date: November 10, 2009		/s/ LAWRENCE M. BLACKBURN
Date: May 7, 2010		/S/ LAWRENCE M. BLACKBURN
		Lawrence M. Blackburn
		Executive Vice President and Chief Financial Officer
		Executive Vice President and
		Chief Financial Officer

3037

EXHIBIT INDEX


Exhibit No.		Description of Exhibit

3.1		Amended and Restated Certificate of Incorporation of Goodman Global, Inc. (incorporated by reference to Exhibit 3.1 on Goodman Global, Inc.’s Annual Report on Form 10-K, filed with the SEC on March 13, 2009).

3.2		Amended and Restated Bylaws of Goodman Global, Inc. (incorporated by reference to Exhibit 3.7 on Goodman Global, Inc.’s Amendment No. 1 to the Registration Statement on Form S-4, filed with the SEC on May 30, 2008).

31.1		Certification by Chief Executive Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

31.2		Certification by Chief Financial Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

32.1*		Certification by Chief Executive Officer and Chief Financial Officer Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

*	Exhibit is furnished rather than filed, and will not be deemed to be incorporated into any filing, in accordance with Item 601 of Regulation S-K.

Large accelerated filer

Accelerated filer

Non-accelerated filer

Smaller reporting company

Filing Compare · Goodman Global Inc