☒ | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
☐ | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
Delaware | 39-0619790 | |||
(State or other jurisdiction of incorporation or organization) | (I.R.S. Employer Identification No.) |
11270 West Park Place, Milwaukee, Wisconsin | 53224-9508 | |||
(Address of principal executive office) | (Zip Code) |
Title of Each Class | Trading Symbol | Name of Each Exchange on Which Registered | ||
Common Stock (par value $1.00 per share) | AOS | New York Stock Exchange |
Large accelerated filer | ☒ | Accelerated Filer | ☐ | ||||||
☐ | |||||||||
Emerging growth company | ☐ |
Page | |||||||||
Part I. | |||||||||
3 | |||||||||
3 | |||||||||
4 | |||||||||
5 | |||||||||
6 | |||||||||
Item 2. | 25-33 | ||||||||
Item 3. | 33 | ||||||||
Item 4. | 33 | ||||||||
Part II. | |||||||||
Item | 34 | ||||||||
34-35 | |||||||||
Item 2. | 35 | ||||||||
Item 6. | 35 | ||||||||
36 | |||||||||
37 |
Three Months Ended September 30, | Nine Months Ended September 30, | |||||||||||||||
2019 | 2018 | 2019 | 2018 | |||||||||||||
Net sales | $ | 728.2 | $ | 754.1 | $ | 2,241.8 | $ | 2,375.4 | ||||||||
Cost of products sold | 444.0 | 448.1 | 1,356.1 | 1,406.9 | ||||||||||||
Gross profit | 284.2 | 306.0 | 885.7 | 968.5 | ||||||||||||
Selling, general and administrative expenses | 172.3 | 177.6 | 535.7 | 567.7 | ||||||||||||
Restructuring and impairment expenses | — | — | — | 6.7 | ||||||||||||
Interest expense | 3.1 | 2.0 | 8.5 | 6.6 | ||||||||||||
Other income | (4.0 | ) | (5.1 | ) | (15.1 | ) | (15.5 | ) | ||||||||
Earnings before provision for income taxes | 112.8 | 131.5 | 356.6 | 403.0 | ||||||||||||
Provision for income taxes | 25.5 | 26.9 | 77.9 | 85.1 | ||||||||||||
Net Earnings | $ | 87.3 | $ | 104.6 | $ | 278.7 | $ | 317.9 | ||||||||
Net Earnings Per Share of Common Stock | $ | 0.53 | $ | 0.61 | $ | 1.68 | $ | 1.86 | ||||||||
Diluted Net Earnings Per Share of Common Stock | $ | 0.53 | $ | 0.61 | $ | 1.66 | $ | 1.84 | ||||||||
Dividends Per Share of Common Stock | $ | 0.22 | $ | 0.18 | $ | 0.66 | $ | 0.54 | ||||||||
Three Months Ended June 30, | Six Months Ended June 30, | |||||||||||||||
2020 | 2019 | 2020 | 2019 | |||||||||||||
Net sales | $ | 663.9 | $ | 765.4 | $ | 1,300.8 | $ | 1,513.6 | ||||||||
Cost of products sold | 416.4 | 456.7 | 813.8 | 912.1 | ||||||||||||
Gross profit | 247.5 | 308.7 | 487.0 | 601.5 | ||||||||||||
Selling, general and administrative expenses | 155.9 | 178.7 | 329.7 | 363.4 | ||||||||||||
Severance and restructuring expenses | 6.1 | — | 6.1 | — | ||||||||||||
Interest expense | 2.5 | 3.4 | 4.7 | 5.4 | ||||||||||||
Other income | (4.0 | ) | (5.6 | ) | (8.2 | ) | (11.1 | ) | ||||||||
Earnings before provision for income taxes | 87.0 | 132.2 | 154.7 | 243.8 | ||||||||||||
Provision for income taxes | 19.2 | 30.1 | 35.2 | 52.4 | ||||||||||||
Net Earnings | $ | 67.8 | $ | 102.1 | $ | 119.5 | $ | 191.4 | ||||||||
Net Earnings Per Share of Common Stock | $ | 0.42 | $ | 0.61 | $ | 0.74 | $ | 1.14 | ||||||||
Diluted Net Earnings Per Share of Common Stock | $ | 0.42 | $ | 0.61 | $ | 0.74 | $ | 1.14 | ||||||||
Dividends Per Share of Common Stock | $ | 0.24 | $ | 0.22 | $ | 0.48 | $ | 0.44 | ||||||||
A. O. SMITH CORPORATION CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE EARNINGS (dollars in millions) (unaudited) | ||||||||||||||||
Three Months Ended June 30, | Six Months Ended June 30, | |||||||||||||||
2020 | 2019 | 2020 | 2019 | |||||||||||||
Net earnings | $ | 67.8 | $ | 102.1 | $ | 119.5 | $ | 191.4 | ||||||||
Other comprehensive earnings (loss) | ||||||||||||||||
Foreign currency translation adjustments | 3.7 | (10.1 | ) | (14.3 | ) | 5.8 | ||||||||||
Unrealized net (losses) gains on cash flow derivative instruments, less related income tax benefit (provision) of $0.3 and $0.2 in 2020, ($0.2) and ($0.1) in 2019 | (0.8 | ) | 0.7 | (0.5 | ) | 0.6 | ||||||||||
Adjustment to pension liability, less related income tax provision of ($1.2) and ($2.4) in 2020 and ($0.8) and ($1.8) in 2019 | 3.7 | 3.1 | 7.3 | 6.0 | ||||||||||||
Comprehensive Earnings | $ | 74.4 | $ | 95.8 | $ | 112.0 | $ | 203.8 | ||||||||
Three Months Ended September 30, | Nine Months Ended September 30, | |||||||||||||||
2019 | 2018 | 2019 | 2018 | |||||||||||||
Net earnings | $ | 87.3 | $ | 104.6 | $ | 278.7 | $ | 317.9 | ||||||||
Other comprehensive (loss) earnings | ||||||||||||||||
Foreign currency translation adjustments | (21.9 | ) | (20.7 | ) | (16.1 | ) | (33.3 | ) | ||||||||
Unrealized net (losses) gains on cash flow derivative instruments, less related income tax benefit (provision) of $0.1 and ($0.1) in 2019, ($0.6) and ($0.9) in 2018 | (0.3 | ) | 1.3 | 0.3 | 2.1 | |||||||||||
Adjustment to pension liability, less related income tax benefit (provision) of $0.3 and ($1.6) in 2019 and ($1.7) and ($3.9) in 2018 | (1.0 | ) | 5.6 | 5.0 | 12.5 | |||||||||||
Comprehensive Earnings | $ | 64.1 | $ | 90.8 | $ | 267.9 | $ | 299.2 | ||||||||
(unaudited) September 30, 2019 | December 31, 2018 | |||||||
Assets | ||||||||
Current Assets | ||||||||
Cash and cash equivalents | $ | 219.4 | $ | 259.7 | ||||
Marketable securities | 294.4 | 385.3 | ||||||
Receivables | 614.1 | 647.3 | ||||||
Inventories | 310.0 | 304.7 | ||||||
Other current assets | 66.5 | 41.5 | ||||||
Total Current Assets | 1,504.4 | 1,638.5 | ||||||
Property, plant and equipment | 1,137.5 | 1,096.8 | ||||||
Less accumulated depreciation | (593.9 | ) | (556.8 | ) | ||||
Net property, plant and equipment | 543.6 | 540.0 | ||||||
Goodwill | 547.4 | 513.0 | ||||||
Other intangibles | 339.5 | 293.1 | ||||||
Operating lease assets | 48.3 | — | ||||||
Other assets | 84.7 | 86.9 | ||||||
Total Assets | $ | 3,067.9 | $ | 3,071.5 | ||||
Liabilities | ||||||||
Current Liabilities | ||||||||
Trade payables | $ | 483.1 | $ | 543.8 | ||||
Accrued payroll and benefits | 61.8 | 79.4 | ||||||
Accrued liabilities | 135.9 | 120.4 | ||||||
Product warranties | 42.8 | 41.7 | ||||||
Debt due within one year | 6.8 | — | ||||||
Total Current Liabilities | 730.4 | 785.3 | ||||||
Long-term debt | 312.4 | 221.4 | ||||||
Pension liabilities | 36.5 | 49.4 | ||||||
Long-term operating lease liabilities | 39.6 | — | ||||||
Other liabilities | 292.8 | 298.4 | ||||||
Total Liabilities | 1,411.7 | 1,354.5 | ||||||
Stockholders’ Equity | ||||||||
Class A Common Stock, $5 par value: authorized 27,000,000 shares; issued 26,183,365 and 26,190,163 | 130.9 | 131.0 | ||||||
Common Stock, $1 par value: authorized 240,000,000 shares; issued 164,524,227 and 164,517,431 | 164.5 | 164.5 | ||||||
Capital in excess of par value | 507.3 | 496.7 | ||||||
Retained earnings | 2,271.5 | 2,102.8 | ||||||
Accumulated other comprehensive loss | (361.6 | ) | (350.8 | ) | ||||
Treasury stock at cost | (1,056.4 | ) | (827.2 | ) | ||||
Total Stockholders’ Equity | 1,656.2 | 1,717.0 | ||||||
Total Liabilities and Stockholders’ Equity | $ | 3,067.9 | $ | 3,071.5 | ||||
(unaudited) June 30, 2020 | December 31, 2019 | |||||||
Assets | ||||||||
Current Assets | ||||||||
Cash and cash equivalents | $ | 442.7 | $ | 374.0 | ||||
Marketable securities | 126.0 | 177.4 | ||||||
Receivables | 515.9 | 589.5 | ||||||
Inventories | 306.0 | 303.0 | ||||||
Other current assets | 53.8 | 56.5 | ||||||
Total Current Assets | 1,444.4 | 1,500.4 | ||||||
Property, plant and equipment | 1,170.5 | 1,156.9 | ||||||
Less accumulated depreciation | (636.7 | ) | (611.5 | ) | ||||
Net property, plant and equipment | 533.8 | 545.4 | ||||||
Goodwill | 544.0 | 546.0 | ||||||
Other intangibles | 329.5 | 338.4 | ||||||
Operating lease assets | 45.2 | 46.9 | ||||||
Other assets | 87.3 | 80.9 | ||||||
Total Assets | $ | 2,984.2 | $ | 3,058.0 | ||||
Liabilities | ||||||||
Current Liabilities | ||||||||
Trade payables | $ | 435.7 | $ | 509.6 | ||||
Accrued payroll and benefits | 59.7 | 64.6 | ||||||
Accrued liabilities | 188.4 | 143.7 | ||||||
Product warranties | 44.8 | 41.8 | ||||||
Debt due within one year | 6.8 | 6.8 | ||||||
Total Current Liabilities | 735.4 | 766.5 | ||||||
Long-term debt | 274.3 | 277.2 | ||||||
Pension liabilities | 13.8 | 27.8 | ||||||
Long-term operating lease liabilities | 37.5 | 38.7 | ||||||
Other liabilities | 265.1 | 281.0 | ||||||
Total Liabilities | 1,326.1 | 1,391.2 | ||||||
Stockholders’ Equity | ||||||||
Class A Common Stock, $5 par value: authorized 27,000,000 shares; issued , 26,172,713 and 26,180,885 | 130.9 | 130.9 | ||||||
Common Stock, $1 par value: authorized 240,000,000 shares; issued 164,534,881 and 164,526,709 | 164.5 | 164.5 | ||||||
Capital in excess of par value | 517.1 | 509.0 | ||||||
Retained earnings | 2,365.1 | 2,323.4 | ||||||
Accumulated other comprehensive loss | (355.8 | ) | (348.3 | ) | ||||
Treasury stock at cost | (1,163.7 | ) | (1,112.7 | ) | ||||
Total Stockholders’ Equity | 1,658.1 | 1,666.8 | ||||||
Total Liabilities and Stockholders’ Equity | $ | 2,984.2 | $ | 3,058.0 | ||||
Nine Months Ended September 30, | ||||||||
2019 | 2018 | |||||||
Operating Activities | ||||||||
Net earnings | $ | 278.7 | $ | 317.9 | ||||
Adjustments to reconcile net earnings to cash provided by (used in) operating activities: | ||||||||
Depreciation and amortization | 58.1 | 53.2 | ||||||
Stock based compensation expense | 12.3 | 9.7 | ||||||
Net changes in operating assets and liabilities: | ||||||||
Current assets and liabilities | (43.8 | ) | (70.9 | ) | ||||
Noncurrent assets and liabilities | (25.3 | ) | (20.7 | ) | ||||
Cash Provided by Operating Activities | 280.0 | 289.2 | ||||||
Investing Activities | ||||||||
Capital expenditures | (50.3 | ) | (58.5 | ) | ||||
Acquisition | (107.0 | ) | — | |||||
Investments in marketable securities | (237.3 | ) | (345.4 | ) | ||||
Net proceeds from sale of marketable securities | 318.8 | 418.3 | ||||||
Cash (Used in) Provided by Investing Activities | (75.8 | ) | 14.4 | |||||
Financing Activities | ||||||||
Long-term debt incurred (repaid) | 97.9 | (217.1 | ) | |||||
Common stock repurchases | (230.0 | ) | (106.0 | ) | ||||
Payment of contingent consideration | (1.0 | ) | (2.3 | ) | ||||
Net (payments) proceeds from stock option activity | (1.4 | ) | 0.7 | |||||
Dividends paid | (110.0 | ) | (92.5 | ) | ||||
Cash Used In Financing Activities | (244.5 | ) | (417.2 | ) | ||||
Net decrease in cash and cash equivalents | (40.3 | ) | (113.6 | ) | ||||
Cash and cash equivalents - beginning of period | 259.7 | 346.6 | ||||||
Cash and Cash Equivalents - End of Period | $ | 219.4 | $ | 233.0 | ||||
Six Months Ended June 30, | ||||||||
2020 | 2019 | |||||||
Operating Activities | ||||||||
Net earnings | $ | 119.5 | $ | 191.4 | ||||
Adjustments to reconcile net earnings to cash provided by (used in) operating activities: | ||||||||
Depreciation and amortization | 40.0 | 38.4 | ||||||
Stock based compensation expense | 10.4 | 10.8 | ||||||
Net changes in operating assets and liabilities: | ||||||||
Current assets and liabilities | 35.9 | (75.9 | ) | |||||
Noncurrent assets and liabilities | (26.5 | ) | (21.0 | ) | ||||
Cash Provided by Operating Activities | 179.3 | 143.7 | ||||||
Investing Activities | ||||||||
Capital expenditures | (24.8 | ) | (36.5 | ) | ||||
Acquisition | — | (107.0 | ) | |||||
Investments in marketable securities | (91.1 | ) | (202.3 | ) | ||||
Net proceeds from sale of marketable securities | 140.1 | 293.8 | ||||||
Cash Provided by (Used in) Investing Activities | 24.2 | (52.0 | ) | |||||
Financing Activities | ||||||||
Long-term debt (repaid) incurred | (2.9 | ) | 137.3 | |||||
Common stock repurchases | (56.7 | ) | (132.6 | ) | ||||
Net payments from stock option activity | 2.6 | (0.5 | ) | |||||
Dividends paid | (77.8 | ) | (74.0 | ) | ||||
Cash Used in Financing Activities | (134.8 | ) | (69.8 | ) | ||||
Net increase in cash and cash equivalents | 68.7 | 21.9 | ||||||
Cash and cash equivalents - beginning of period | 374.0 | 259.7 | ||||||
Cash and Cash Equivalents - End of Period | $ | 442.7 | $ | 281.6 | ||||
Three Months Ended September 30, | Nine Months Ended September 30, | |||||||||||||||
2019 | 2018 | 2019 | 2018 | |||||||||||||
Class A Common Stock | ||||||||||||||||
Balance at the beginning of period | $ | 130.9 | $ | 131.0 | $ | 131.0 | $ | 131.2 | ||||||||
Conversion of Class A Common Stock | — | — | (0.1 | ) | (0.2 | ) | ||||||||||
Balance at end of period | $ | 130.9 | $ | 131.0 | $ | 130.9 | $ | 131.0 | ||||||||
Common Stock | ||||||||||||||||
Balance at the beginning of period | $ | 164.5 | $ | 164.5 | $ | 164.5 | $ | 164.5 | ||||||||
Conversion of Class A Common Stock | — | — | — | — | ||||||||||||
Balance at end of period | $ | 164.5 | $ | 164.5 | $ | 164.5 | $ | 164.5 | ||||||||
Capital in Excess of Par Value | ||||||||||||||||
Balance at the beginning of period | $ | 506.7 | $ | 494.2 | $ | 496.7 | $ | 486.5 | ||||||||
Conversion of Class A Common Stock | — | — | 0.1 | 0.2 | ||||||||||||
Issuance of share units | — | (0.2 | ) | (6.2 | ) | (6.0 | ) | |||||||||
Vesting of share units | — | — | (2.0 | ) | (2.3 | ) | ||||||||||
Stock based compensation expense | 1.1 | 1.3 | 11.6 | 9.0 | ||||||||||||
Exercises of stock options | (0.5 | ) | 0.3 | 0.1 | 1.5 | |||||||||||
Stock incentives | — | 0.2 | 7.0 | 6.9 | ||||||||||||
Balance at end of period | $ | 507.3 | $ | 495.8 | $ | 507.3 | $ | 495.8 | ||||||||
Retained Earnings | ||||||||||||||||
Balance at the beginning of period | $ | 2,220.2 | $ | 1,940.1 | $ | 2,102.8 | $ | 1,788.7 | ||||||||
Net earnings | 87.3 | 104.6 | 278.7 | 317.9 | ||||||||||||
Cash dividends on stock | (36.0 | ) | (30.7 | ) | (110.0 | ) | (92.6 | ) | ||||||||
Balance at end of period | $ | 2,271.5 | $ | 2,014.0 | $ | 2,271.5 | $ | 2,014.0 | ||||||||
Accumulated Other Comprehensive Loss (see Note 17) | $ | (361.6 | ) | $ | (318.2 | ) | $ | (361.6 | ) | $ | (318.2 | ) | ||||
Treasury Stock | ||||||||||||||||
Balance at the beginning of period | $ | (958.8 | ) | $ | (695.1 | ) | $ | (827.2 | ) | $ | (626.5 | ) | ||||
Exercise of stock options | (0.2 | ) | 0.5 | (1.5 | ) | (0.9 | ) | |||||||||
Stock incentives and directors’ compensation | — | — | 0.2 | 0.1 | ||||||||||||
Shares repurchased | (97.4 | ) | (36.3 | ) | (230.0 | ) | (106.0 | ) | ||||||||
Vesting of share units | — | — | 2.1 | 2.4 | ||||||||||||
Balance at end of period | $ | (1,056.4 | ) | $ | (730.9 | ) | $ | (1,056.4 | ) | $ | (730.9 | ) | ||||
Total Stockholders’ Equity | $ | 1,656.2 | $ | 1,756.2 | $ | 1,656.2 | $ | 1,756.2 | ||||||||
Three Months Ended June 30, | Six Months Ended June 30, | |||||||||||||||
2020 | 2019 | 2020 | 2019 | |||||||||||||
Class A Common Stock | ||||||||||||||||
Balance at the beginning of period | $ | 130.9 | $ | 131.0 | $ | 130.9 | $ | 131.0 | ||||||||
Conversion of Class A Common Stock | — | (0.1 | ) | — | (0.1 | ) | ||||||||||
Balance at end of period | $ | 130.9 | $ | 130.9 | $ | 130.9 | $ | 130.9 | ||||||||
Common Stock | ||||||||||||||||
Balance at the beginning of period | $ | 164.5 | $ | 164.5 | $ | 164.5 | $ | 164.5 | ||||||||
Balance at end of period | $ | 164.5 | $ | 164.5 | $ | 164.5 | $ | 164.5 | ||||||||
Capital in Excess of Par Value | ||||||||||||||||
Balance at the beginning of period | $ | 516.1 | $ | 503.5 | $ | 509.0 | $ | 496.7 | ||||||||
Conversion of Class A Common Stock | — | 0.1 | — | 0.1 | ||||||||||||
Issuance of share units | — | (0.1 | ) | (6.5 | ) | (6.2 | ) | |||||||||
Vesting of share units | — | (0.1 | ) | (1.6 | ) | (2.0 | ) | |||||||||
Stock based compensation expense | 1.4 | 1.9 | 10.2 | 10.5 | ||||||||||||
Exercises of stock options | (1.1 | ) | 0.5 | (1.2 | ) | 0.6 | ||||||||||
Stock incentives | 0.7 | 0.9 | 7.2 | 7.0 | ||||||||||||
Balance at end of period | $ | 517.1 | $ | 506.7 | $ | 517.1 | $ | 506.7 | ||||||||
Retained Earnings | ||||||||||||||||
Balance at the beginning of period | $ | 2,336.1 | $ | 2,155.0 | $ | 2,323.4 | $ | 2,102.8 | ||||||||
Net earnings | 67.8 | 102.1 | 119.5 | 191.4 | ||||||||||||
Cash dividends on stock | (38.8 | ) | (36.9 | ) | (77.8 | ) | (74.0 | ) | ||||||||
Balance at end of period | $ | 2,365.1 | $ | 2,220.2 | $ | 2,365.1 | $ | 2,220.2 | ||||||||
Accumulated Other Comprehensive Loss (see Note 17) | $ | (355.8 | ) | $ | (338.4 | ) | $ | (355.8 | ) | $ | (338.4 | ) | ||||
Treasury Stock | ||||||||||||||||
Balance at the beginning of period | $ | (1,168.9 | ) | $ | (872.7 | ) | $ | (1,112.7 | ) | $ | (827.2 | ) | ||||
Exercise of stock options | 4.8 | 0.6 | 3.7 | (1.3 | ) | |||||||||||
Stock incentives and directors’ compensation | 0.4 | 0.2 | 0.4 | 0.2 | ||||||||||||
Shares repurchased | — | (87.0 | ) | (56.7 | ) | (132.6 | ) | |||||||||
Vesting of share units | — | 0.1 | 1.6 | 2.1 | ||||||||||||
Balance at end of period | $ | (1,163.7 | ) | $ | (958.8 | ) | $ | (1,163.7 | ) | $ | (958.8 | ) | ||||
Total Stockholders’ Equity | $ | 1,658.1 | $ | 1,725.1 | $ | 1,658.1 | $ | 1,725.1 | ||||||||
1. | Basis of Presentation |
2. | Revenue Recognition |
2. | Revenue Recognition (continued) |
2. |
(dollars in millions) | ||||||||||||||||
Three Months Ended September 30, | Nine Months Ended September 30, | |||||||||||||||
2019 | 2018 | 2019 | 2018 | |||||||||||||
North America | ||||||||||||||||
Water heaters and related parts | $ | 415.9 | $ | 405.2 | $ | 1,310.5 | $ | 1,318.1 | ||||||||
Boilers and related parts | 60.2 | 58.6 | 150.8 | 143.0 | ||||||||||||
Water treatment products (1) | 38.5 | 23.1 | 99.1 | 61.7 | ||||||||||||
Total North America | 514.6 | 486.9 | 1,560.4 | 1,522.8 | ||||||||||||
Rest of World | ||||||||||||||||
China | $ | 189.6 | $ | 246.2 | $ | 626.8 | $ | 806.4 | ||||||||
All other Rest of World | 30.7 | 27.9 | 74.7 | 69.6 | ||||||||||||
Total Rest of World | 220.3 | 274.1 | 701.5 | 876.0 | ||||||||||||
Inter-segment sales | (6.7 | ) | (6.9 | ) | (20.1 | ) | (23.4 | ) | ||||||||
Total Net Sales | $ | 728.2 | $ | 754.1 | $ | 2,241.8 | $ | 2,375.4 | ||||||||
(dollars in millions) | ||||||||||||||||
Three Months June 30, | Six Months Ended June 30, | |||||||||||||||
2020 | 2019 | 2020 | 2019 | |||||||||||||
North America | ||||||||||||||||
Water heaters and related parts | $ | 396.8 | $ | 438.9 | $ | 844.6 | $ | 894.6 | ||||||||
Boilers and related parts | 41.0 | 48.0 | 82.5 | 90.6 | ||||||||||||
Water treatment products (1) | 42.7 | 37.1 | 86.3 | 60.6 | ||||||||||||
Total North America | 480.5 | 524.0 | 1,013.4 | 1,045.8 | ||||||||||||
Rest of World | ||||||||||||||||
China | $ | 172.7 | $ | 224.2 | $ | 263.7 | $ | 437.2 | ||||||||
All other Rest of World | 17.0 | 24.9 | 36.2 | 44.0 | ||||||||||||
Total Rest of World | 189.7 | 249.1 | 299.9 | 481.2 | ||||||||||||
Inter-segment sales | (6.3 | ) | (7.7 | ) | (12.5 | ) | (13.4 | ) | ||||||||
Total Net Sales | $ | 663.9 | $ | 765.4 | $ | 1,300.8 | $ | 1,513.6 | ||||||||
(1) | Includes the results of Water-Right, Inc. and its affiliated entities (Water-Right) from April 8, 2019, the date of acquisition |
3. | Acquisition |
3. | Acquisition (continued) |
April 8, 2019 (dollars in millions) | ||||
Current assets, net of cash acquired | $ | 9.7 | ||
Property, plant and equipment | 8.6 | |||
Intangible assets | 57.6 | |||
Goodwill | 33.7 | |||
Total assets acquired | 109.6 | |||
Current liabilities | (2.6 | ) | ||
Total liabilities assumed | (2.6 | ) | ||
Net assets acquired | $ | 107.0 | ||
April 8, 2019 (dollars in millions) | ||||
Current assets, net of cash acquired | $ | 9.7 | ||
Property, plant and equipment | 8.6 | |||
Intangible assets | 60.4 | |||
Goodwill | 31.0 | |||
Total assets acquired | 109.7 | |||
Current liabilities | (2.7 | ) | ||
Net assets acquired | $ | 107.0 | ||
4. | Severance and Restructuring Expenses |
(dollars in millions) | ||||||||||||
Severance Expenses | Restructuring Expenses | Total | ||||||||||
Accrued severance and restructuring expenses, March 31, 2020 | $ | — | $ | — | $ | — | ||||||
Charges | 5.2 | 0.9 | 6.1 | |||||||||
Cash Payments | (2.2 | ) | (0.3 | ) | (2.5 | ) | ||||||
Accrued severance and restructuring expenses, June 30, 2020 | $ | 3.0 | $ | 0.6 | $ | 3.6 | ||||||
5. | Leases |
(dollars in millions) | ||||
September 30, 2019 | ||||
Liabilities | ||||
Short term: Accrued liabilities | $ | 12.2 | ||
Long term: Operating lease liabilities | 39.6 | |||
Total operating lease liabilities | $ | 51.8 | ||
Less: Rent incentives and deferrals | (3.5 | ) | ||
Assets | ||||
Operating lease assets | $ | 48.3 | ||
Lease Term and Discount Rate | September 30, 2019 | |||
Weighted-average remaining lease term | 10 years | |||
Weighted-average discount rate | 4.00 | % |
(dollars in millions) | ||||||||
June 30, 2020 | December 31, 2019 | |||||||
Liabilities | ||||||||
Short term: Accrued liabilities | $ | 11.5 | $ | 12.0 | ||||
Long term: Operating lease liabilities | 37.5 | 38.7 | ||||||
Total operating lease liabilities | $ | 49.0 | $ | 50.7 | ||||
Less: Rent incentives and deferrals | (3.8 | ) | (3.8 | ) | ||||
Assets | ||||||||
Operating lease assets | $ | 45.2 | $ | 46.9 | ||||
Lease Term and Discount Rate | June 30, 2020 | |||
Weighted-average remaining lease term | 9.8 years | |||
Weighted-average discount rate | 3.83 | % |
5. | Leases (continued) |
(dollars in millions) | ||||||||||||||||||||
Three months ended | Nine months ended | Three months ended June 30, | ||||||||||||||||||
Lease Expense | Classification | September 30, 2019 | September 30, 2019 | Classification | 2020 (1) | 2019 (2) | ||||||||||||||
Operating lease expense | Cost of products sold | $ | 0.7 | $ | 2.0 | Cost of products sold | $ | 0.8 | $ | 0.7 | ||||||||||
Selling, general and administrative expenses | 4.3 | 13.3 | Selling, general and administrative expenses | $ | 4.2 | $ | 4.1 |
(1) | 2020 includes short-term and variable lease expenses of $0.6 million and $0.5 million, respectively. |
2019 includes short-term and variable lease |
(dollars in millions) | ||||||||||
Six months ended June 30, | ||||||||||
Lease Expense | Classification | 2020 (1) | 2019 (2) | |||||||
Operating lease expense | Cost of products sold | $ | 1.5 | $ | 1.3 | |||||
Selling, general and administrative expenses | $ | 8.2 | $ | 9.0 |
(1) | 2020 includes short-term and |
(2) | 2019 includes short-term and variable lease expenses of $1.0 million and $1.0 million, respectively. |
(dollars in millions) | ||||
September 30, 2019 | ||||
2019 | $ | 3.1 | ||
2020 | 13.4 | |||
2021 | 9.9 | |||
2022 | 8.5 | |||
2023 | 4.4 | |||
After 2023 | 26.2 | |||
Total lease payments | 65.5 | |||
Less: imputed interest | (13.7 | ) | ||
Present value of operating lease liabilities | $ | 51.8 | ||
(dollars in millions) | ||||
June 30, 2020 | ||||
2020 | $ | 7.0 | ||
2021 | 11.7 | |||
2022 | 9.9 | |||
2023 | 5.5 | |||
2024 | 4.4 | |||
After 2024 | 23.0 | |||
Total lease payments | 61.5 | |||
Less: imputed interest | (12.5 | ) | ||
Present value of operating lease liabilities | $ | 49.0 | ||
(dollars in millions) | ||||||||||||
Severance Costs | Lease Exit Costs | Total | ||||||||||
Balance at January 1, 2019 | $ | 0.2 | $ | 1.3 | $ | 1.5 | ||||||
Cash payments | — | (0.1 | ) | (0.1 | ) | |||||||
Balance at March 31, 2019 | 0.2 | 1.2 | 1.4 | |||||||||
Cash payments | — | (0.1 | ) | (0.1 | ) | |||||||
Balance at June 30, 2019 | $ | 0.2 | $ | 1.1 | $ | 1.3 | ||||||
Cash payments | (0.2 | ) | — | (0.2 | ) | |||||||
Balance at September 30, 2019 | $ | — | $ | 1.1 | $ | 1.1 | ||||||
6. | Inventories |
(dollars in millions) | ||||||||
September 30, 2019 | December 31, 2018 | |||||||
Finished products | $ | 140.2 | $ | 137.6 | ||||
Work in process | 24.6 | 23.3 | ||||||
Raw materials | 175.7 | 174.4 | ||||||
Inventories, at FIFO cost | 340.5 | 335.3 | ||||||
LIFO reserve | (30.5 | ) | (30.6 | ) | ||||
Net inventory | $ | 310.0 | $ | 304.7 | ||||
(dollars in millions) | ||||||||
June 30, 2020 | December 31, 2019 | |||||||
Finished products | $ | 134.3 | $ | 136.8 | ||||
Work in process | 22.7 | 21.7 | ||||||
Raw materials | 172.8 | 168.3 | ||||||
Inventories, at FIFO cost | 329.8 | 326.8 | ||||||
LIFO reserve | (23.8 | ) | (23.8 | ) | ||||
Net inventory | $ | 306.0 | $ | 303.0 | ||||
7. | Product Warranties |
Three September 30, | ||||||||
(dollars in millions) | ||||||||
2019 | 2018 | |||||||
Balance at July 1, | $ | 134.0 | $ | 141.6 | ||||
Expense | 11.0 | 8.7 | ||||||
Claims settled | (11.6 | ) | (9.8 | ) | ||||
Balance at September 30, | $ | 133.4 | $ | 140.5 | ||||
Nine September 30, | ||||||||
(dollars in millions) | ||||||||
2019 | 2018 | |||||||
Balance at January 1, | $ | 139.4 | $ | 141.2 | ||||
Expense | 31.8 | 31.4 | ||||||
Claims settled | (37.8 | ) | (32.1 | ) | ||||
Balance at September 30, | $ | 133.4 | $ | 140.5 | ||||
Three Months Ended June 30, | ||||||||
(dollars in millions) | ||||||||
2020 | 2019 | |||||||
Balance at April 1, | $ | 135.3 | $ | 136.2 | ||||
Expense | 12.3 | 11.4 | ||||||
Claims settled | (11.6 | ) | (13.6 | ) | ||||
Balance at June 30, | $ | 136.0 | $ | 134.0 | ||||
Six Months Ended June 30, | ||||||||
(dollars in millions) | ||||||||
2020 | 2019 | |||||||
Balance at January 1, | $ | 134.3 | $ | 139.4 | ||||
Expense | 25.8 | 20.8 | ||||||
Claims settled | (24.1 | ) | (26.2 | ) | ||||
Balance at June 30, | $ | 136.0 | $ | 134.0 | ||||
8. | Long-Term Debt |
9. | Earnings per Share of Common Stock |
Three Months Ended September 30, | Nine Months Ended September 30, | |||||||||||||||
2019 | 2018 | 2019 | 2018 | |||||||||||||
Denominator for basic earnings per share - weighted average shares | 164,298,458 | 170,507,922 | 166,296,444 | 171,030,747 | ||||||||||||
Effect of dilutive stock options and share units | 1,244,787 | 1,576,694 | 1,265,777 | 1,687,050 | ||||||||||||
Denominator for diluted earnings per share | 165,543,245 | 172,084,616 | 167,562,221 | 172,717,797 | ||||||||||||
Three Months Ended June 30, | Six Months Ended June 30, | |||||||||||||||
2020 | 2019 | 2020 | 2019 | |||||||||||||
Denominator for basic earnings per share - weighted average shares | 161,208,194 | 166,825,601 | 161,539,991 | 167,311,995 | ||||||||||||
Effect of dilutive stock options and share units | 965,648 | 1,260,667 | 995,675 | 1,276,451 | ||||||||||||
Denominator for diluted earnings per share | 162,173,842 | 168,086,268 | 162,535,666 | 168,588,446 | ||||||||||||
10. | Stock Based Compensation |
Weighted- PerAvg. Share Exercise Price | Number of Options | Average Remaining Contractual Life | Aggregate Intrinsic Value (dollars in millions) | |||||||||||||
Outstanding at January 1, 2019 | $ | 33.05 | 2,432,689 | |||||||||||||
Granted | 49.49 | 557,045 | ||||||||||||||
Exercised | 15.97 | (177,306 | ) | |||||||||||||
Forfeited | 54.29 | (8,704 | ) | |||||||||||||
Outstanding at September 30, 2019 | 37.33 | 2,803,724 | 7 years | $ | 36.0 | |||||||||||
Exercisable at September 30, 2019 | 29.89 | 1,894,160 | 6 years | $ | 36.0 |
Weighted- Avg. Per Share Exercise Price | Number of Options | Average Remaining Contractual Life | Aggregate Intrinsic Value (dollars in millions) | |||||||||||||
Outstanding at January 1, 2020 | $ | 37.64 | 2,728,350 | |||||||||||||
Granted | 42.39 | 784,300 | ||||||||||||||
Exercised | 14.79 | (271,844 | ) | |||||||||||||
Forfeited | 48.50 | (68,654 | ) | |||||||||||||
Outstanding at June 30, 2020 | 40.54 | 3,172,152 | 7 years | $ | 28.2 | |||||||||||
Exercisable at June 30, 2020 | 38.42 | 1,922,832 | 7 years | $ | 28.2 | |||||||||||
Nine Months Ended | ||||||||
2019 | 2018 | |||||||
Expected life (years) | 5.5 | 5.7 | ||||||
Risk-free interest rate | 2.7 | % | 2.9 | % | ||||
Dividend yield | 1.6 | % | 1.0 | % | ||||
Expected volatility | 22.8 | % | 22.1 | % |
Six Months Ended June 30, | ||||||||
2020 | 2019 | |||||||
Expected life (years) | 5.7 | 5.5 | ||||||
Risk-free interest rate | 1.6 | % | 2.7 | % | ||||
Dividend yield | 2.1 | % | 1.6 | % | ||||
Expected volatility | 23.6 | % | 22.8 | % |
10. | Stock Based Compensation (continued) |
Number of Units | Weighted-Average Grant Date Value | |||||||
Issued and unvested at January 1, 2019 | 379,601 | $ | 42.93 | |||||
Granted | 139,892 | 49.52 | ||||||
Vested | (147,642 | ) | 31.35 | |||||
Forfeited | (4,509 | ) | 55.57 | |||||
Issued and unvested at September 30, 2019 | 367,342 | 50.05 | ||||||
Number of Units | Weighted-Average Grant Date Value | |||||||
Issued and unvested at January 1, 2020 | 366,102 | $ | 49.92 | |||||
Granted | 169,539 | 42.39 | ||||||
Vested | (100,735 | ) | 49.21 | |||||
Forfeited | (10,656 | ) | 52.48 | |||||
Issued and unvested at June 30, 2020 | 424,250 | 46.93 | ||||||
11. | Pensions |
Three Months Ended September 30, | Nine Months Ended September 30, | |||||||||||||||
2019 | 2018 | 2019 | 2018 | |||||||||||||
Service cost | $ | 0.4 | $ | 0.5 | $ | 1.3 | $ | 1.5 | ||||||||
Interest cost | 8.0 | 7.2 | 23.7 | 21.7 | ||||||||||||
Expected return on plan assets | (14.3 | ) | (14.5 | ) | (43.1 | ) | (43.6 | ) | ||||||||
Amortization of unrecognized loss | 4.4 | 4.9 | 12.4 | 14.2 | ||||||||||||
Amortization of prior service cost | (0.2 | ) | (0.2 | ) | (0.4 | ) | (0.4 | ) | ||||||||
Defined benefit plan income | $ | (1.7 | ) | $ | (2.1 | ) | $ | (6.1 | ) | $ | (6.6 | ) | ||||
Three Months Ended June 30, | Six Months Ended June 30, | |||||||||||||||
2020 | 2019 | 2020 | 2019 | |||||||||||||
Service cost | $ | 0.3 | $ | 0.5 | $ | 0.7 | $ | 0.9 | ||||||||
Interest cost | 5.8 | 7.8 | 11.5 | 15.7 | ||||||||||||
Expected return on plan assets | (13.0 | ) | (14.4 | ) | (26.0 | ) | (28.7 | ) | ||||||||
Amortization of unrecognized loss | 5.0 | 4.0 | 9.9 | 8.0 | ||||||||||||
Amortization of prior service cost | (0.1 | ) | (0.1 | ) | (0.2 | ) | (0.2 | ) | ||||||||
Defined benefit plan income | $ | (2.0 | ) | $ | (2.2 | ) | $ | (4.1 | ) | $ | (4.3 | ) | ||||
12. | Segment Results |
12. | Segment Results (continued) |
(dollars in millions) | ||||||||||||||||
Three Months Ended September 30, | Nine Months Ended September 30, | |||||||||||||||
2019 | 2018 | 2019 | 2018 | |||||||||||||
Net sales | ||||||||||||||||
North America | $ | 514.6 | $ | 486.9 | $ | 1,560.4 | $ | 1,522.8 | ||||||||
Rest of World | 220.3 | 274.1 | 701.5 | 876.0 | ||||||||||||
Inter-segment | (6.7 | ) | (6.9 | ) | (20.1 | ) | (23.4 | ) | ||||||||
$ | 728.2 | $ | 754.1 | $ | 2,241.8 | $ | 2,375.4 | |||||||||
Segment earnings | ||||||||||||||||
North America (1) | $ | 121.6 | $ | 105.6 | $ | 360.5 | $ | 336.5 | ||||||||
Rest of World | 4.1 | 39.1 | 38.8 | 109.8 | ||||||||||||
Inter-segment | — | — | (0.1 | ) | — | |||||||||||
125.7 | 144.7 | 399.2 | 446.3 | |||||||||||||
Corporate expense | (9.8 | ) | (11.2 | ) | (34.1 | ) | (36.7 | ) | ||||||||
Interest expense | (3.1 | ) | (2.0 | ) | (8.5 | ) | (6.6 | ) | ||||||||
Earnings before income taxes | 112.8 | 131.5 | 356.6 | 403.0 | ||||||||||||
Provision for income taxes | 25.5 | 26.9 | 77.9 | 85.1 | ||||||||||||
Net earnings | $ | 87.3 | $ | 104.6 | $ | 278.7 | $ | 317.9 | ||||||||
(1) includes restructuring and impairment expenses of: | $ | — | $ | — | $ | — | $ | 6.7 |
(dollars in millions) | ||||||||||||||||
Three Months Ended June 30, | Six Months Ended June 30, | |||||||||||||||
2020 | 2019 | 2020 | 2019 | |||||||||||||
Net sales | ||||||||||||||||
North America | $ | 480.5 | $ | 524.0 | $ | 1,013.4 | $ | 1,045.8 | ||||||||
Rest of World | 189.7 | 249.1 | 299.9 | 481.2 | ||||||||||||
Inter-segment | (6.3 | ) | (7.7 | ) | (12.5 | ) | (13.4 | ) | ||||||||
$ | 663.9 | $ | 765.4 | $ | 1,300.8 | $ | 1,513.6 | |||||||||
Segment earnings | ||||||||||||||||
North America (1) | $ | 105.4 | $ | 122.9 | $ | 232.5 | $ | 238.9 | ||||||||
Rest of World (2) | (5.8 | ) | 22.4 | (48.0 | ) | 34.7 | ||||||||||
Inter-segment | (0.3 | ) | (0.1 | ) | (0.3 | ) | (0.1 | ) | ||||||||
99.3 | 145.2 | 184.2 | 273.5 | |||||||||||||
Corporate expense | (9.8 | ) | (9.6 | ) | (24.8 | ) | (24.3 | ) | ||||||||
Interest expense | (2.5 | ) | (3.4 | ) | (4.7 | ) | (5.4 | ) | ||||||||
Earnings before income taxes | 87.0 | 132.2 | 154.7 | 243.8 | ||||||||||||
Provision for income taxes | 19.2 | 30.1 | 35.2 | 52.4 | ||||||||||||
Net earnings | $ | 67.8 | $ | 102.1 | $ | 119.5 | $ | 191.4 | ||||||||
(1) includes severance and restructuring expenses of: | $ | 2.2 | $ | — | $ | 2.2 | $ | — | ||||||||
(2) includes severance and restructuring expenses of: | $ | 3.9 | $ | — | $ | 3.9 | $ | — |
13. | Fair Value Measurements |
(dollars in millions) | ||||||||
Fair Value Measurement Using | September 30, 2019 | December 31, 2018 | ||||||
Quoted prices in active markets for identical assets (Level 1) | $ | 294.4 | $ | 385.3 | ||||
Significant other observable inputs (Level 2) | 8.4 | 7.5 |
(dollars in millions) | ||||||||
Fair Value Measurement Using | June 30, 2020 | December 31, 2019 | ||||||
Quoted prices in active markets for identical assets (Level 1) | $ | 126.0 | $ | 177.4 | ||||
Significant other observable inputs (Level 2) | (0.4 | ) | 6.9 |
13. | Fair Value Measurements (continued) |
14. | Derivative Instruments |
(dollars in millions) | ||||||||||||||||
September 30, 2019 | December 31, 2018 | |||||||||||||||
Buy | Sell | Buy | Sell | |||||||||||||
British pound | $ | — | $ | 0.3 | $ | — | $ | 1.0 | ||||||||
Canadian dollar | — | 39.4 | — | — | ||||||||||||
Euro | 44.7 | — | 32.0 | — | ||||||||||||
Mexican peso | 23.0 | — | 27.8 | — | ||||||||||||
Total | $ | 67.7 | $ | 39.7 | $ | 59.8 | $ | 1.0 | ||||||||
(dollars in millions) | ||||||||||||||||
June 30, 2020 | December 31, 2019 | |||||||||||||||
Buy | Sell | Buy | Sell | |||||||||||||
British pound | $ | — | $ | 0.6 | $ | — | $ | 1.3 | ||||||||
Canadian dollar | — | 39.6 | — | 49.7 | ||||||||||||
Euro | 24.6 | — | 36.0 | — | ||||||||||||
Mexican peso | 23.6 | — | 18.6 | — | ||||||||||||
Total | $ | 48.2 | $ | 40.2 | $ | 54.6 | $ | 51.0 | ||||||||
14. | Derivative Instruments (continued) |
(dollars in millions) | ||||||||||||
Balance | September 30, 2019 | December 31, 2018 | ||||||||||
Foreign currency contracts | Other | $ | 10.3 | $ | 3.9 | |||||||
Other non-current assets | — | 5.1 | ||||||||||
Accrued liabilities | (1.9 | ) | (0.6 | ) | ||||||||
Commodities contracts | Accrued liabilities | — | (0.9 | ) | ||||||||
Total derivatives designated as hedging instruments | $ | 8.4 | $ | 7.5 | ||||||||
(dollars in millions) | ||||||||||
Balance Sheet Location | June 30, 2020 | December 31, 2019 | ||||||||
Foreign currency contracts | Other current assets | $ | 1.6 | $ | 8.4 | |||||
Accrued liabilities | (1.9 | ) | (1.5 | ) | ||||||
Commodities contracts | Accrued liabilities | (0.1 | ) | — | ||||||
Total derivatives designated as hedging instruments | $ | (0.4 | ) | $ | 6.9 | |||||
14. | Derivative Instruments (continued) |
Derivatives in ASC 815 cash flow hedging relationships | Amount of gain (loss) recognized in other comprehensive on derivative | Location of gain (loss) reclassified from accumulated other comprehensive loss into | Amount of gain (loss) reclassified from accumulated other comprehensive into earnings | |||||||||||||||||
2019 | 2018 | 2019 | 2018 | |||||||||||||||||
Foreign currency contracts | $ | (1.1 | ) | $ | 1.9 | Cost of products sold | $ | (0.1 | ) | $ | — | |||||||||
Commodities contracts | — | — | Cost of products sold | (0.6 | ) | — | ||||||||||||||
$ | (1.1 | ) | $ | 1.9 | $ | (0.7 | ) | $ | — | |||||||||||
Derivatives in ASC 815 cash flow hedging relationships | Amount of gain (loss) recognized in other comprehensive on derivative | Location of gain (loss) reclassified from accumulated other comprehensive loss into earnings | Amount of gain (loss) reclassified from accumulated other comprehensive loss into earnings | Amount of gain (loss) recognized in other comprehensive loss on derivatives | Location of gain (loss) reclassified from accumulated other comprehensive loss into earnings | Amount of gain (loss) reclassified from accumulated other comprehensive loss into earnings | ||||||||||||||||||||||||||||||||||
2019 | 2018 | 2019 | 2018 | 2020 | 2019 | 2020 | 2019 | |||||||||||||||||||||||||||||||||
Foreign currency contracts | $ | (0.6 | ) | $ | 3.3 | Cost of products sold | $ | (0.1 | ) | $ | 0.1 | $ | (0.6 | ) | $ | 0.5 | Cost of products sold | $ | 0.5 | $ | — | |||||||||||||||||||
Commodities contracts | (0.5 | ) | — | Cost of products sold | (1.4 | ) | 0.3 | 0.1 | (0.3 | ) | Cost of products sold | — | (0.8 | ) | ||||||||||||||||||||||||||
$ | (1.1 | ) | $ | 3.3 | $ | (1.5 | ) | $ | 0.4 | $ | (0.5 | ) | $ | 0.2 | $ | 0.5 | $ | (0.8 | ) | |||||||||||||||||||||
Derivatives in ASC 815 cash flow hedging relationships | Amount of gain (loss) recognized in other comprehensive loss on derivatives | Location of gain (loss) reclassified from accumulated other comprehensive loss into earnings | Amount of gain (loss) reclassified from accumulated other comprehensive loss into earnings | |||||||||||||||||
2020 | 2019 | 2020 | 2019 | |||||||||||||||||
Foreign currency contracts | $ | 0.8 | $ | 0.6 | Cost of products sold | $ | 1.3 | $ | — | |||||||||||
Commodities contracts | (0.1 | ) | (0.5 | ) | Cost of products sold | — | (0.8 | ) | ||||||||||||
$ | 0.7 | $ | 0.1 | $ | 1.3 | $ | (0.8 | ) | ||||||||||||
15. | Income Taxes |
16. | Commitments and Contingencies |
17. | Changes in Accumulated Other Comprehensive Loss by Component |
(dollars in millions) | ||||||||
Three September 30, | ||||||||
2019 | 2018 | |||||||
Cumulative foreign currency translation | ||||||||
Balance at beginning of period | $ | (59.1 | ) | $ | (39.1 | ) | ||
Other comprehensive (loss) income before reclassifications | (21.9 | ) | (20.7 | ) | ||||
Balance at end of period | (81.0 | ) | (59.8 | ) | ||||
Unrealized net gain on cash flow derivatives | ||||||||
Balance at beginning of period | (0.1 | ) | (0.1 | ) | ||||
Other comprehensive (loss) gain before reclassifications | (0.8 | ) | 1.3 | |||||
Realized losses (gains) on derivatives reclassified to cost of products sold (net of income tax (benefit) provision of ($0.2) and $ - in 2019 and 2018, respectively) | 0.5 | — | ||||||
Balance at end of period | (0.4 | ) | 1.2 | |||||
Pension liability | ||||||||
Balance at beginning of period | (279.2 | ) | (265.2 | ) | ||||
Other comprehensive (loss) gain before reclassifications | (4.1 | ) | 2.0 | |||||
Amounts reclassified from accumulated other comprehensive loss: (1) | 3.1 | 3.6 | ||||||
Balance at end of period | (280.2 | ) | (259.6 | ) | ||||
Accumulated other comprehensive loss, end of period | $ | (361.6 | ) | $ | (318.2 | ) | ||
(1) Amortization of pension items: | ||||||||
Actuarial losses | $ | 4.4 | (2) | $ | 4.9 | (2) | ||
Prior year service cost | (0.2 | ) (2) | (0.2 | ) (2) | ||||
4.2 | 4.7 | |||||||
Income tax benefit | (1.1 | ) | (1.1 | ) | ||||
Reclassification net of income tax benefit | $ | 3.1 | $ | 3.6 | ||||
(dollars in millions) | ||||||||
Three Months Ended June 30, | ||||||||
2020 | 2019 | |||||||
Cumulative foreign currency translation | ||||||||
Balance at beginning of period | $ | (84.2 | ) | $ | (49.0 | ) | ||
Other comprehensive income (loss) before reclassifications | 3.7 | (10.1 | ) | |||||
Balance at end of period | (80.5 | ) | (59.1 | ) | ||||
Unrealized net gain (loss) on cash flow derivatives | ||||||||
Balance at beginning of period | 0.5 | (0.8 | ) | |||||
Other comprehensive (loss) gain before reclassifications | (0.4 | ) | 0.1 | |||||
Realized (gains) losses on derivatives reclassified to cost of products sold (net of income tax provision (benefit) of $0.1 and ($0.2) in 2020 and 2019, respectively) | (0.4 | ) | 0.6 | |||||
Balance at end of period | (0.3 | ) | (0.1 | ) | ||||
Pension liability | ||||||||
Balance at beginning of period | (278.7 | ) | (282.3 | ) | ||||
Amounts reclassified from accumulated other comprehensive loss: (1) | 3.7 | 3.1 | ||||||
�� | ||||||||
Balance at end of period | (275.0 | ) | (279.2 | ) | ||||
Accumulated other comprehensive loss, end of period | $ | (355.8 | ) | $ | (338.4 | ) | ||
(1) Amortization of pension items: | ||||||||
Actuarial losses | $ | 5.0 | (2) | $ | 4.0 | (2) | ||
Prior year service cost | (0.1 | ) (2) | (0.1 | ) (2) | ||||
4.9 | 3.9 | |||||||
Income tax benefit | (1.2 | ) | (0.8 | ) | ||||
Reclassification net of income tax benefit | $ | 3.7 | $ | 3.1 | ||||
(2) | These accumulated other comprehensive loss components are included in the computation of net periodic pension cost. See Note 11 - Pensions for additional details |
17. | Changes in Accumulated Other Comprehensive Loss by Component (continued) |
(dollars in millions) | ||||||||
Nine September 30, | ||||||||
2019 | 2018 | |||||||
Cumulative foreign currency translation | ||||||||
Balance at beginning of period | $ | (64.9 | ) | $ | (26.5 | ) | ||
Other comprehensive income (loss) before reclassifications | (16.1 | ) | (33.3 | ) | ||||
Balance at end of period | (81.0 | ) | (59.8 | ) | ||||
Unrealized net gain on cash flow derivatives | ||||||||
Balance at beginning of period | (0.7 | ) | (0.9 | ) | ||||
Other comprehensive (loss) gain before reclassifications | (0.8 | ) | 2.4 | |||||
Realized losses (gains) on derivatives reclassified to cost of products sold (net of income tax (benefit) provision of ($0.4) and $0.1 in 2019 and | 1.1 | (0.3 | ) | |||||
Balance at end of period | (0.4 | ) | 1.2 | |||||
Pension liability | ||||||||
Balance at beginning of period | (285.2 | ) | (272.1 | ) | ||||
Other comprehensive (loss) gain before reclassifications | (4.1 | ) | 2.0 | |||||
Amounts reclassified from accumulated other comprehensive loss: (1) | 9.1 | 10.5 | ||||||
Balance at end of period | (280.2 | ) | (259.6 | ) | ||||
Accumulated other comprehensive loss, end of period | $ | (361.6 | ) | $ | (318.2 | ) | ||
(1) Amortization of pension items: | ||||||||
Actuarial losses | $ | 12.4 | (2) | $ | 14.2 | (2) | ||
Prior year service cost | $ | (0.4 | ) (2) | (0.4 | ) (2) | |||
12.0 | 13.8 | |||||||
Income tax benefit | (2.9 | ) | (3.3 | ) | ||||
Reclassification net of income tax benefit | $ | 9.1 | $ | 10.5 | ||||
(dollars in millions) | ||||||||
Six Months Ended June 30, | ||||||||
2020 | 2019 | |||||||
Cumulative foreign currency translation | ||||||||
Balance at beginning of period | $ | (66.2 | ) | $ | (64.9 | ) | ||
Other comprehensive (loss) income before reclassifications | (14.3 | ) | 5.8 | |||||
Balance at end of period | (80.5 | ) | (59.1 | ) | ||||
Unrealized net gain on cash flow derivatives | ||||||||
Balance at beginning of period | 0.2 | (0.7 | ) | |||||
Other comprehensive gain before reclassifications | 0.5 | — | ||||||
Realized (gains) losses on derivatives reclassified to cost of products sold (net of income tax provision (benefit) of $0.3 and ($0.2) in 2020 and 2019, respectively) | (1.0 | ) | 0.6 | |||||
Balance at end of period | (0.3 | ) | (0.1 | ) | ||||
Pension liability | ||||||||
Balance at beginning of period | (282.3 | ) | (285.2 | ) | ||||
Amounts reclassified from accumulated other comprehensive loss: (1) | 7.3 | 6.0 | ||||||
Balance at end of period | (275.0 | ) | (279.2 | ) | ||||
Accumulated other comprehensive loss, end of period | $ | (355.8 | ) | $ | (338.4 | ) | ||
(1) Amortization of pension items: | ||||||||
Actuarial losses | $ | 9.9 | (2) | $ | 8.0 | (2) | ||
Prior year service cost | (0.2 | ) (2) | (0.2 | ) (2) | ||||
9.7 | 7.8 | |||||||
Income tax benefit | (2.4 | ) | (1.8 | ) | ||||
Reclassification net of income tax benefit | $ | 7.3 | $ | 6.0 | ||||
(2) | These accumulated other comprehensive loss components are included in the computation of net periodic pension cost. See Note 11 - Pensions for additional details |
Three Months Ended September 30, | Nine Months Ended September 30, | |||||||||||||||
2019 | 2018 | 2019 | 2018 | |||||||||||||
Net Earnings (GAAP) | $ | 87.3 | $ | 104.6 | $ | 278.7 | $ | 317.9 | ||||||||
Restructuring and impairment expenses, before tax | — | — | — | 6.7 | ||||||||||||
Tax effect of restructuring and impairment expenses | — | — | — | (1.7 | ) | |||||||||||
Adjusted Earnings | $ | 87.3 | $ | 104.6 | $ | 278.7 | $ | 322.9 | ||||||||
Diluted EPS (GAAP) | $ | 0.53 | $ | 0.61 | $ | 1.66 | $ | 1.84 | ||||||||
Restructuring and impairment expenses per diluted share | — | — | — | 0.04 | ||||||||||||
Tax effect of restructuring and impairment expenses per diluted share | — | — | — | (0.01 | ) | |||||||||||
Adjusted EPS | $ | 0.53 | $ | 0.61 | $ | 1.66 | $ | 1.87 | ||||||||
Three Months Ended June 30, | Six Months Ended June 30, | |||||||||||||||
2020 | 2019 | 2020 | 2019 | |||||||||||||
Net Earnings (GAAP) | $ | 67.8 | $ | 102.1 | $ | 119.5 | $ | 191.4 | ||||||||
Severance and restructuring expenses, before tax | 6.1 | — | 6.1 | — | ||||||||||||
Tax effect of severance and restructuring expenses | (1.1 | ) | — | (1.1 | ) | — | ||||||||||
Adjusted Earnings | $ | 72.8 | $ | 102.1 | $ | 124.5 | $ | 191.4 | ||||||||
Diluted EPS (GAAP) | $ | 0.42 | $ | 0.61 | $ | 0.74 | $ | 1.14 | ||||||||
Severance and restructuring expenses, per diluted share | 0.04 | — | 0.04 | — | ||||||||||||
Tax effect of severance and restructuring expenses per diluted share | (0.01 | ) | — | (0.01 | ) | — | ||||||||||
Adjusted EPS | $ | 0.45 | $ | 0.61 | $ | 0.77 | $ | 1.14 | ||||||||
Three Months Ended September 30, | Nine Months Ended September 30, | |||||||||||||||
2019 | 2018 (2) | 2019 | 2018 | |||||||||||||
Segment Earnings (GAAP) | ||||||||||||||||
North America | $ | 121.6 | $ | 105.6 | $ | 360.5 | $ | 336.5 | ||||||||
Rest of World | 4.1 | 39.1 | 38.8 | 109.8 | ||||||||||||
Inter-segment earnings elimination | — | — | (0.1 | ) | — | |||||||||||
Total Segment Earnings (GAAP) | $ | 125.7 | $ | 144.7 | $ | 399.2 | $ | 446.3 | ||||||||
Adjustments | ||||||||||||||||
North America (1) | $ | — | $ | — | $ | — | $ | 6.7 | ||||||||
Rest of World | — | — | — | — | ||||||||||||
Inter-segment earnings elimination | — | — | — | — | ||||||||||||
Total Adjustments | $ | — | $ | — | $ | — | $ | 6.7 | ||||||||
Adjusted Segment Earnings | ||||||||||||||||
North America | $ | 121.6 | $ | 105.6 | $ | 360.5 | $ | 343.2 | ||||||||
Rest of World | 4.1 | 39.1 | 38.8 | 109.8 | ||||||||||||
Inter-segment earnings elimination | — | — | (0.1 | ) | — | |||||||||||
Total Adjusted Segment Earnings | $ | 125.7 | $ | 144.7 | $ | 399.2 | $ | 453.0 | ||||||||
Three Months Ended June 30, | Six Months Ended June 30, | |||||||||||||||
2020 | 2019 | 2020 | 2019 | |||||||||||||
Segment Earnings (GAAP) | ||||||||||||||||
North America | $ | 105.4 | $ | 122.9 | $ | 232.5 | $ | 238.9 | ||||||||
Rest of World | (5.8 | ) | 22.4 | (48.0 | ) | 34.7 | ||||||||||
Inter-segment earnings elimination | (0.3 | ) | (0.1 | ) | (0.3 | ) | (0.1 | ) | ||||||||
Total Segment Earnings (GAAP) | $ | 99.3 | $ | 145.2 | $ | 184.2 | $ | 273.5 | ||||||||
Adjustments | ||||||||||||||||
North America (1) | $ | 2.2 | $ | — | $ | 2.2 | $ | — | ||||||||
Rest of World (2) | 3.9 | — | 3.9 | — | ||||||||||||
Total Adjustments | $ | 6.1 | $ | — | $ | 6.1 | $ | — | ||||||||
Adjusted Segment Earnings | ||||||||||||||||
North America | $ | 107.6 | $ | 122.9 | $ | 234.7 | $ | 238.9 | ||||||||
Rest of World | (1.9 | ) | 22.4 | (44.1 | ) | 34.7 | ||||||||||
Inter-segment earnings elimination | (0.3 | ) | (0.1 | ) | (0.3 | ) | (0.1 | ) | ||||||||
Total Adjusted Segment Earnings | $ | 105.4 | $ | 145.2 | $ | 190.3 | $ | 273.5 | ||||||||
(1) | In the second quarter of 2020, the Company recognized |
(2) | In the second quarter of 2020, the Company |
2019 Guidance | 2018 | |||||||
Diluted EPS (GAAP) | $ | 2.25 - 2.28 | $ | 2.58 | ||||
Restructuring and impairment expenses per diluted share, net of tax | — | 0.03 | ||||||
Adjusted EPS | $ | 2.25 - 2.28 | $ | 2.61 | ||||
2020 Guidance | 2019 | |||||||
Diluted EPS (GAAP) | $ | 1.69 - 1.83 | $ | 2.22 | ||||
Severance and Restructuring expenses per diluted share, net of tax | 0.03 | — | ||||||
Adjusted EPS | $ | 1.72 - 1.86 | $ | 2.22 | ||||
ISSUER PURCHASES OF EQUITY SECURITIES | ||||||||||||||||
Period | Total Number of Shares Purchased | Average Price Paid per Share | Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs | Maximum Number of Shares that may yet be Purchased Under the Plans or Programs | ||||||||||||
July 1 – July 31, 2019 | 1,166,600 | $ | 45.16 | 1,166,600 | 5,114,653 | |||||||||||
August 1 – August 31, 2019 | 489,500 | 45.25 | 489,500 | 4,625,153 | ||||||||||||
September 1 – September 30, 2019 | 471,438 | 47.73 | 471,438 | 4,153,715 |
Exhibit Number | Description | |||
31.1 | ||||
31.2 | ||||
32.1 | ||||
32.2 | ||||
101 | ||||
The following materials from A. O. Smith Corporation’s Quarterly Report on Form 10-Q for the quarter ended | ||||
A. O. SMITH CORPORATION | |||||||||
/s/ Helen E. Gurholt | |||||||||
Helen E. Gurholt | |||||||||
Vice President and Controller | |||||||||
/s/ Charles T. Lauber | |||||||||
Charles T. Lauber | |||||||||
Executive Vice President and | |||||||||
Chief Financial Officer |