Cover Page
Cover Page - shares | 9 Months Ended | |
Sep. 30, 2019 | Oct. 31, 2019 | |
Document Information [Line Items] | ||
Document Type | 10-Q | |
Document Period End Date | Sep. 30, 2019 | |
Entity Registrant Name | SMITH A O CORP | |
Entity Small Business | false | |
Trading Symbol | AOS | |
Entity Emerging Growth Company | false | |
Document Quarterly Report | true | |
Document Transition Report | false | |
Entity File Number | 1-475 | |
Entity Incorporation, State or Country Code | DE | |
Entity Tax Identification Number | 39-0619790 | |
Entity Address, Address Line One | 11270 West Park Place | |
Entity Address, State or Province | WI | |
Entity Address, Postal Zip Code | 53224-9508 | |
Entity Address, City or Town | Milwaukee | |
Security Exchange Name | NYSE | |
Entity Current Reporting Status | Yes | |
Entity Interactive Data Current | Yes | |
Title of 12(b) Security | Common Stock | |
Entity Filer Category | Large Accelerated Filer | |
City Area Code | 414 | |
Local Phone Number | 359-4000 | |
Entity Shell Company | false | |
Amendment Flag | false | |
Document Fiscal Year Focus | 2019 | |
Document Fiscal Period Focus | Q3 | |
Entity Central Index Key | 0000091142 | |
Current Fiscal Year End Date | --12-31 | |
Common Class A | ||
Document Information [Line Items] | ||
Entity Common Stock, Shares Outstanding | 26,052,953 | |
Common Stock | ||
Document Information [Line Items] | ||
Entity Common Stock, Shares Outstanding | 137,059,015 |
CONDENSED CONSOLIDATED STATEMEN
CONDENSED CONSOLIDATED STATEMENTS OF EARNINGS - USD ($) $ in Millions | 3 Months Ended | 9 Months Ended | ||
Sep. 30, 2019 | Sep. 30, 2018 | Sep. 30, 2019 | Sep. 30, 2018 | |
Net sales | $ 728.2 | $ 754.1 | $ 2,241.8 | $ 2,375.4 |
Cost of products sold | 444 | 448.1 | 1,356.1 | 1,406.9 |
Gross profit | 284.2 | 306 | 885.7 | 968.5 |
Selling, general and administrative expenses | 172.3 | 177.6 | 535.7 | 567.7 |
Restructuring and impairment expenses | 0 | 0 | 0 | 6.7 |
Interest expense | 3.1 | 2 | 8.5 | 6.6 |
Other income | (4) | (5.1) | (15.1) | (15.5) |
Earnings before provision for income taxes | 112.8 | 131.5 | 356.6 | 403 |
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 |
CONDENSED CONSOLIDATED STATEM_2
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE EARNINGS - USD ($) $ in Millions | 3 Months Ended | 9 Months Ended | ||
Sep. 30, 2019 | Sep. 30, 2018 | Sep. 30, 2019 | Sep. 30, 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) | 5.6 | 5 | 12.5 |
Comprehensive Earnings | $ 64.1 | $ 90.8 | $ 267.9 | $ 299.2 |
CONDENSED CONSOLIDATED STATEM_3
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE EARNINGS (Parenthetical) - USD ($) $ in Millions | 3 Months Ended | 9 Months Ended | ||
Sep. 30, 2019 | Sep. 30, 2018 | Sep. 30, 2019 | Sep. 30, 2018 | |
Unrealized net gains (losses) on cash flow derivative instruments, related income tax (provision) benefit | $ 0.1 | $ (0.6) | $ (0.1) | $ (0.9) |
Adjustment to pension liability, related income tax provision | $ 0.3 | $ (1.7) | $ (1.6) | $ (3.9) |
CONDENSED CONSOLIDATED BALANCE
CONDENSED CONSOLIDATED BALANCE SHEETS - USD ($) $ in Millions | Sep. 30, 2019 | Dec. 31, 2018 |
Current Assets | ||
Cash and cash equivalents | $ 219.4 | $ 259.7 |
Marketable securities | 294.4 | 385.3 |
Receivables | 614.1 | 647.3 |
Inventories | 310 | 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 |
Goodwill | 547.4 | 513 |
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 | ||
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 | ||
Common Stock, value | 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 |
Total Liabilities and Stockholders' Equity | 3,067.9 | 3,071.5 |
Common Class A | ||
Stockholders' Equity | ||
Common Stock, value | 130.9 | 131 |
Total Stockholders' Equity | $ 130.9 | $ 131 |
CONDENSED CONSOLIDATED BALANC_2
CONDENSED CONSOLIDATED BALANCE SHEETS (Parenthetical) - $ / shares | Sep. 30, 2019 | Dec. 31, 2018 |
Common Stock, Par or Stated Value Per Share | $ 1 | $ 1 |
Common Stock, Shares Authorized | 240,000,000 | 240,000,000 |
Common Stock, shares issued | 164,524,227 | 164,517,431 |
Common Class A | ||
Common Stock, Par or Stated Value Per Share | $ 5 | $ 5 |
Common Stock, Shares Authorized | 27,000,000 | 27,000,000 |
Common Stock, shares issued | 26,183,365 | 26,190,163 |
CONDENSED CONSOLIDATED STATEM_4
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS - USD ($) $ in Millions | 9 Months Ended | |
Sep. 30, 2019 | Sep. 30, 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 | 289.2 |
Investing Activities | ||
Capital expenditures | (50.3) | (58.5) |
Acquisition | (107) | |
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) | (106) |
Payment of contingent consideration | (1) | (2.3) |
Net (payments) proceeds from stock option activity | (1.4) | 0.7 |
Dividends paid | (110) | (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 |
CONDENSED CONSOLIDATED STATEM_5
CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY - USD ($) $ in Millions | Total | Common Class A | Common Stock | Capital in Excess of Par Value | Retained Earnings | Accumulated Other Comprehensive Loss | Treasury Stock |
Balance at Dec. 31, 2017 | $ 131.2 | $ 164.5 | $ 486.5 | $ 1,788.7 | $ (626.5) | ||
Conversion of Class A Common Stock | (0.2) | 0 | 0.2 | ||||
Net earnings | $ 317.9 | 317.9 | |||||
Issuance of share units | (6) | ||||||
Cash dividends on stock | (92.6) | ||||||
Vesting of share units | (2.3) | 2.4 | |||||
Stock based compensation expense | 9 | ||||||
Exercises of stock options | 1.5 | (0.9) | |||||
Stock incentives and directors' compensation | 6.9 | 0.1 | |||||
Shares repurchased | (106) | ||||||
Balance at Sep. 30, 2018 | 1,756.2 | 131 | 164.5 | 495.8 | 2,014 | $ (318.2) | (730.9) |
Balance at Jun. 30, 2018 | 131 | 164.5 | 494.2 | 1,940.1 | (695.1) | ||
Conversion of Class A Common Stock | 0 | 0 | 0 | ||||
Net earnings | 104.6 | 104.6 | |||||
Issuance of share units | (0.2) | ||||||
Cash dividends on stock | (30.7) | ||||||
Vesting of share units | 0 | ||||||
Stock based compensation expense | 1.3 | ||||||
Exercises of stock options | 0.3 | 0.5 | |||||
Stock incentives and directors' compensation | 0.2 | ||||||
Shares repurchased | (36.3) | ||||||
Balance at Sep. 30, 2018 | 1,756.2 | 131 | 164.5 | 495.8 | 2,014 | (318.2) | (730.9) |
Balance at Dec. 31, 2018 | 1,717 | 131 | 164.5 | 496.7 | 2,102.8 | (827.2) | |
Conversion of Class A Common Stock | (0.1) | 0 | 0.1 | ||||
Net earnings | 278.7 | 278.7 | |||||
Issuance of share units | (6.2) | ||||||
Cash dividends on stock | (110) | ||||||
Vesting of share units | (2) | 2.1 | |||||
Stock based compensation expense | 11.6 | ||||||
Exercises of stock options | 0.1 | (1.5) | |||||
Stock incentives and directors' compensation | 7 | 0.2 | |||||
Shares repurchased | (230) | ||||||
Balance at Sep. 30, 2019 | 1,656.2 | 130.9 | 164.5 | 507.3 | 2,271.5 | (361.6) | (1,056.4) |
Balance at Jun. 30, 2019 | 130.9 | 164.5 | 506.7 | 2,220.2 | (958.8) | ||
Conversion of Class A Common Stock | 0 | 0 | 0 | ||||
Net earnings | 87.3 | 87.3 | |||||
Issuance of share units | 0 | ||||||
Cash dividends on stock | (36) | ||||||
Vesting of share units | 0 | 0 | |||||
Stock based compensation expense | 1.1 | ||||||
Exercises of stock options | (0.5) | (0.2) | |||||
Stock incentives and directors' compensation | 0 | 0 | |||||
Shares repurchased | (97.4) | ||||||
Balance at Sep. 30, 2019 | $ 1,656.2 | $ 130.9 | $ 164.5 | $ 507.3 | $ 2,271.5 | $ (361.6) | $ (1,056.4) |
Basis of Presentation
Basis of Presentation | 9 Months Ended |
Sep. 30, 2019 | |
Organization, Consolidation and Presentation of Financial Statements [Abstract] | |
Basis of Presentation | 1. Basis of Presentation The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States (GAAP) for interim financial information and pursuant to the rules and regulations of the Securities and Exchange Commission (SEC). Accordingly, they do not include all of the information and footnotes required for complete financial statements. In the opinion of management, all adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation have been included. Operating results for the three and nine months ended September 30, 2019 are not necessarily indicative of the results expected for the full year. It is suggested the accompanying condensed consolidated financial statements be read in conjunction with the audited consolidated financial statements and the notes thereto included in the A. O. Smith Corporation’s (the Company) 10-K Recent Accounting Pronouncements In January 2017, the Financial Accounting Standards Board (FASB) amended Accounting Standards Codification (ASC) 350, Intangibles – Goodwill and Other 2017-04, 2017-04 In June 2016, the FASB issued ASC 326, Financial Instruments – Credit Losses 2016-13) 2016-13 2016-13 In February 2016, the FASB amended ASC 842, Leases 2016-02). non-lease 2016-02 |
Revenue Recognition
Revenue Recognition | 9 Months Ended |
Sep. 30, 2019 | |
Revenue Recognition Disclosure [Text Block] | 2. Revenue Recognition Substantially all of the Company’s sales are from contracts with customers for the purchase of its products. Contracts and customer purchase orders are used to determine the existence of a sales contract. Shipping documents are used to verify shipment. For substantially all of its products, the Company transfers control of products to the customer at the point in time when title and risk are passed to the customer, which generally occurs upon shipment of the product. Each unit sold is considered an independent, unbundled performance obligation. The Company’s sales arrangements do not include other performance obligations that are material in the context of the contract. The nature, timing and amount of revenue for a respective performance obligation are consistent for each customer. The Company measures the sales transaction price based upon the payment terms associated with the transaction and whether the sales price is subject to refund or adjustment. Sales and value added taxes are excluded from the measurement of transaction price. The Company’s payment terms for the majority of its customers are 30 to 90 days from shipment. Additionally, certain customers in China pay the Company prior to the shipment of products resulting in a customer deposits liability of $43.7 million and $47.0 million at September 30, 2019 and December 31, 2018, respectively. The Company assesses collectability of customer receivables based on the creditworthiness of a customer as determined by credit checks and analysis, as well as the customer’s payment history. The Company’s allowance for doubtful accounts was $6.2 million and $6.4 million at September 30, 2019 and December 31, 2018, respectively . Rebates and incentives are based on pricing agreements and are tied to sales volume. The amount of revenue is reduced for variable consideration related to customer rebates which are calculated using expected values and are based on program specific factors such as expected rebate percentages based on expected volumes. In situations where the customer has the right to return eligible products, the Company reduces revenue for its estimates of expected product returns, which are primarily based on an analysis of historical experience. Changes in such accruals may be required if actual sales volume differs from estimated sales volume or if future returns differ from historical experience. Shipping and handling costs billed to customers are included in net sales and the related costs are included in cost of products sold and are activities performed to fulfill the promise to transfer products. Disaggregation of Net Sales The Company is comprised of two reporting segments: North America and Rest of World. The Rest of World segment is primarily comprised of China, Europe and India. Both segments manufacture and market comprehensive lines of residential and commercial gas and electric water heaters, boilers, tanks, and water treatment products. Both segments primarily manufacture and market in their respective regions of the world. The Rest of World segment also manufactures and markets in-home As each segment manufactures and markets products in its respective region of the world, the Company has determined that geography is the primary factor in reporting its sales. The Company further disaggregates its North America segment sales by major product line as each of North America’s major product lines is sold through distinct distribution channels and these product lines may be impacted differently by certain economic factors. Within the Rest of World segment, particularly in China and India, the Company’s major customers purchase across the Company’s product lines, utilizing the same distribution channel regardless of product type. In addition, the impact of economic factors is unlikely to be differentiated by product line in the Rest of World segment. The North America segment major product lines are defined as the following: Water heaters Boilers Water treatment products point-of-entry on-the-go point-of-use The following table disaggregates the Company’s net sales by segment. As described above, the Company’s North America segment sales are further disaggregated by major product line. In addition, the Company’s Rest of World segment sales are disaggregated by China and all other Rest of World. (dollars in millions) Three Months Ended Nine Months Ended 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 (1) Includes the results of Water-Right, Inc. from April 8, 2019, the date of acquisition |
Acquisitions
Acquisitions | 9 Months Ended |
Sep. 30, 2019 | |
Acquisitions | 3. Acquisitions On April 8, 2019, the Company acquired 100 percent of the shares of Water-Right, Inc. and its affiliated entities (Water-Right), a Wisconsin-based water treatment company. With the addition of Water-Right, the Company grew its North America water treatment platform. Water-Right is included in the Company’s North America segment for reporting purposes. The Company paid an aggregate cash purchase price of $107.0 million, net of cash acquired. In addition, the Company established a $4.0 million escrow to satisfy any potential obligations of the former owners of Water-Right, should they arise. The following table summarizes the preliminary estimate of the fair value of the assets acquired and liabilities assumed at the date of acquisition of Water-Right for purposes of allocating the purchase price. The Company is in the process of finalizing the fair value estimates; therefore, the allocation of the purchase price is subject to refinement. The preliminary $57.6 million of acquired identifiable intangible assets was comprised of the following: $38.3 million of customer relationships being amortized over 20 years, $18.2 million of trademarks not subject to amortization, and $1.1 million of non-compete 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 The acquisition was accounted for using the purchase method of accounting, and accordingly, the results of operations have been included in the Company’s consolidated financial statements from April 8, 2019, the date of acquisition. Revenues and pre-tax for the nine months ended September 30, 2019 |
Leases
Leases | 9 Months Ended |
Sep. 30, 2019 | |
Leases [Abstract] | |
Leases | 4. Leases The Company’s lease portfolio consists of operating leases for buildings and equipment, such as forklifts and copiers, primarily in the United States and China. The Company defines a lease as a contract that gives the Company the right to control the use of a physical asset for a stated term. The Company pays the lessor for that right, with a series of payments defined in the contract and a corresponding right of use operating lease asset and liability are recorded. The Company has elected not to record leases with an initial term of 12 months or less on its condensed consolidated balance sheet. To determine balance sheet amounts, required legal payments are discounted using the Company’s incremental borrowing rate. The incremental borrowing rate is the rate of interest that the Company would incur if it were Certain leases include one or more options to renew or terminate. Renewal terms can extend the lease term from one to five years and options to terminate can be effective within one year. The exercise of lease renewal or termination is at the Company’s discretion and when it is determined to be reasonably certain to renew or terminate, the option is reflected in the measurement of lease asset and liability. The Company’s lease agreements do not contain any material residual value guarantees or material restrictive covenants or material subleases. Cash flows associated with leases are materially Supplemental balance sheet information related to leases was as follows: (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 Weighted-average discount rate 4.00 % The components of lease expense were as follows: (dollars in millions) Three months Nine months ended Lease Expense Classification September 30, 2019 September 30, 2019 Operating lease expense (1) Cost of products sold $ 0.7 $ 2.0 Selling, general and administrative expenses 4.3 13.3 (1) Includes short-term lease expense of $0.4 million and $1.4 million for the three and nine months ended September 30, 2019, respectively. Includes variable lease cost of $0.4 million and $1.4 million for the three and nine months ended September 30, 2019, respectively. Maturities of lease liabilities were as follows: (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 |
Restructuring and Impairment Ex
Restructuring and Impairment Expenses | 9 Months Ended |
Sep. 30, 2019 | |
Restructuring and Impairment Expenses | 5. Restructuring and Impairment Expenses In the first quarter of 2018, the Company announced a move of manufacturing operations from its Renton, Washington facility to other U.S. facilities. At that time, the Company recognized $6.7 million of restructuring and impairment expenses, comprised of $4.0 million of severance and compensation related costs, lease exit costs of $2.1 million and impairment charges related to long-lived assets totaling $0.6 million, as well as a corresponding $1.7 million tax benefit related to the charges. The consolidation of operations from the Renton facility to other U.S. facilities was completed in 2018. The following table presents an analysis of the Company’s restructuring reserve as of and for the ni n e (dollars in millions) Severance Lease Exit 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 |
Inventories
Inventories | 9 Months Ended |
Sep. 30, 2019 | |
Inventories | 6. Inventories The following table presents the components of the Company’s inventory balances: (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 |
Product Warranties
Product Warranties | 9 Months Ended |
Sep. 30, 2019 | |
Product Warranties Disclosures [Abstract] | |
Product Warranties | 7. Product Warranties The Company offers warranties on the sales of certain of its products with terms that are consistent with the market and records an accrual for the estimated future claims. The following table presents the Company’s warranty liability activity. 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 |
Long-Term Debt
Long-Term Debt | 9 Months Ended |
Sep. 30, 2019 | |
Debt Disclosure [Abstract] | |
Long-Term Debt | 8. Long-Term Debt The Company has a $500 million multi-year multi-currency revolving credit agreement with a group of nine December 15, 2021 Borrowings under bank credit lines and commercial paper borrowings are supported by the $500 million revolving credit agreement. As a result of the long-term nature of this facility, the Company’s commercial paper and credit line borrowings are classified as long-term debt at September 30, 2019. At its option, the Company either maintains cash balances or pays fees for bank credit and services. |
Earnings per Share of Common St
Earnings per Share of Common Stock | 9 Months Ended |
Sep. 30, 2019 | |
Earnings Per Share [Abstract] | |
Earnings per Share of Common Stock | 9. Earnings per Share of Common Stock The numerator for the calculation of basic and diluted earnings per share is net earnings. The following table sets forth the computation of basic and diluted weighted-average shares used in the earnings per share calculations: 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 |
Stock Based Compensation
Stock Based Compensation | 9 Months Ended |
Sep. 30, 2019 | |
Stock Based Compensation | 10. Stock Based Compensation The Company adopted the A. O. Smith Combined Incentive Compensation Plan (the Plan) effective January 1, 2007. The Plan was reapproved by stockholders on April 16, 2012. The Plan is a continuation of the A. O. Smith Combined Executive Incentive Compensation Plan which was originally approved by stockholders in 2002. The number of shares available for granting of options or share units at September 30, 2019 was 1,873,064. Upon stock option exercise or share unit vesting, shares are issued from treasury stock. Total stock based compensation expense recognized in the three months ended September 30, 2019 and 2018 was $1.5 million and $1.8 million, respectively. Total stock based compensation expense recognized in the nine months ended September 30, 2019 and 2018 was $12.3 million and $9.7 million, respectively. Stock Options The stock options granted in the nine months ended September 30, 2019 and 2018 have three year pro rata vesting from the date of grant. Stock options are issued at exercise prices equal to the fair value of the Company’s Common Stock on the date of grant. For active employees, all options granted in 2019 and 2018 expire ten years Changes in options, all of which relate to the Company’s Common Stock, were as follows for the nine months ended September 30, 2019: Weighted- Number of Average Aggregate 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 $ 36.0 Exercisable at September 30, 2019 29.89 1,894,160 6 $ 36.0 The weighted-average fair value per option at the date of grant during the nine months ended September 30, 2019 and 2018 using the Black-Scholes option-pricing model was $10.83 and $14.80, respectively. Assumptions were as follows: 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 % The expected lives of options for purposes of these models are based on historical exercise behavior. The risk-free interest rates for purposes of these models are based on the U.S. Treasury yield curve in effect on the date of grant for the respective expected lives of the option. The expected dividend yields for purposes of these models are based on the dividends paid in the preceding four quarters divided by the grant date market value of the Common Stock. The expected volatility for purposes of these models are based on the historical volatility of the Common Stock. Stock Appreciations Rights (SARs) In 2015, certain non-U.S.-based ed d No Restricted Stock and Share Units Participants may also be awarded shares of restricted stock or share units under the Plan. Share units vest three years after the date of grant. three-year non-U.S.-based A summary of share unit activity under the plan is as follows for the nine months ended September 30, 2019: 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 |
Pensions
Pensions | 9 Months Ended |
Sep. 30, 2019 | |
Pensions | 11. Pensions The following table presents the components of the Company’s net pension income. 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 ) The service cost component of net periodic benefit cost is presented within cost of products sold and selling, general and administrative expenses within the condensed consolidated statements of earnings while the other components of pension income are reflected in other income. The Company was not required to and did not make a contribution to its U.S. pension plan in 2018. The Company is not required to make a contribution in 2019. |
Segment Results
Segment Results | 9 Months Ended |
Sep. 30, 2019 | |
Segment Results | 12. Segment Results The Company is comprised of two reporting segments: North America and Rest of World. The Rest of World segment is primarily comprised of China, Europe and India. Both segments manufacture and market comprehensive lines of residential and commercial gas and electric water heaters, boilers, tanks, and water treatment products. Both segments primarily manufacture and market in their respective regions of the world. The Rest of World segment also manufactures and markets in-home The following table presents the Company’s segment results: (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 |
Fair Value Measurements
Fair Value Measurements | 9 Months Ended |
Sep. 30, 2019 | |
Fair Value Measurements | 13. Fair Value Measurements ASC 820, Fair Value Measurements The following table presents assets measured at fair value on a recurring basis. (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 Items measured at fair value were comprised of the Company’s marketable securities (Level 1) and derivative instruments (Level 2). There were no changes in the Company’s valuation techniques used to measure fair values on a recurring basis during the nine months ended September 30, 2019. |
Derivative Instruments
Derivative Instruments | 9 Months Ended |
Sep. 30, 2019 | |
Derivative Instruments | 14. Derivative Instruments The Company utilizes certain derivative instruments to enhance its ability to manage currency exposure as well as raw materials price risk. Derivative instruments are entered into for periods consistent with the related underlying exposures and do not constitute positions independent of those exposures. The Company does not enter into contracts for speculative purposes. The contracts are executed with major financial institutions with no credit loss anticipated for failure of the counterparties to perform. Cash Flow Hedges With the exception of its net investment hedges, the Company designates that all of its hedging instruments are cash flow hedges. For derivative instruments that are designated and qualify as a cash flow hedge (i.e., hedging the exposure to variability in expected future cash flows that is attributable to a particular risk), gains or losses on the derivative instrument are reported as a component of other comprehensive loss, net of tax, and are reclassified into earnings in the same line item associated with the forecasted transaction and in the same period or periods during which the hedged transaction affects earnings. Foreign Currency Forward Contracts The Company is exposed to foreign currency exchange risk as a result of transactions in currencies other than the functional currency of certain subsidiaries. The Company utilizes foreign currency forward purchase and sale contracts to manage the volatility associated with foreign currency purchases, sales and certain intercompany transactions in the normal course of business. Principal currencies for which the Company utilizes foreign currency forward contracts include the British pound, Canadian dollar, Euro and Mexican peso. Gains and losses on these instruments are recorded in accumulated other comprehensive loss, net of tax, until the underlying transaction is recorded in earnings. When the hedged item is realized, gains or losses are reclassified from accumulated other comprehensive loss to the consolidated statement of earnings. The assessment of effectiveness for forward contracts is based on changes in the forward rates. These hedges have been determined to be effective. (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 Net Investment Hedges The Company enters into certain foreign currency forward contracts to hedge the exposure to a portion of the Company’s net investments in certain non-U.S . ubsidiaries against the effect of exchange rate fluctuations on the translation of foreign currency balances to the U.S. dollar. For the derivative instruments that are designated and qualify as net investment hedges, gains and losses are reported in other comprehensive loss where they offset gains and losses recorded on the Company’s net investments in its non-U.S. subsidiaries. These hedges are determined to be effective. The Company recognized $ 2.7 million of after-tax gains associated with hedges of a net investment in non-U.S. subsidiaries in currency translation adjustment in other comprehensive income in the three and , respectively . The Company recognized $ million and $ million of after-tax gains associated with hedges of a net investment in non-U.S. subsidiaries in currency translation adjustment in other comprehensive income in the three and nine months ended September 30, 2018, respectively. The contractual amount of the Company’s foreign currency forward contracts that are designated as net investment hedges is $ million as of September 30, 2019. The following tables present the impact of derivative contracts on the Company’s financial statements. Fair value of derivatives designated as hedging instruments under ASC 815: (dollars in millions) Balance September 30, 2019 December 31, 2018 Foreign currency contracts Other $ 10.3 $ 3.9 Other non-current — 5.1 Accrued liabilities (1.9 ) (0.6 ) Commodities contracts Accrued liabilities — (0.9 ) Total derivatives designated as hedging instruments $ 8.4 $ 7.5 The effect of cash flow hedges on the condensed consolidated statement of earnings: Three Months Ended September 30 (dollars in millions): Derivatives in ASC 815 cash flow hedging relationships Amount of gain (loss) Location of gain (loss) Amount of gain (loss) 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 ) $ — Nine Months Ended September 30 (dollars in millions): Derivatives in ASC 815 cash flow hedging relationships Amount of gain (loss) Location of gain (loss) Amount of gain (loss) 2019 2018 2019 2018 Foreign currency contracts $ (0.6 ) $ 3.3 Cost of products sold $ (0.1 ) $ 0.1 Commodities contracts (0.5 ) — Cost of products sold (1.4 ) 0.3 $ (1.1 ) $ 3.3 $ (1.5 ) $ 0.4 |
Income Taxes
Income Taxes | 9 Months Ended |
Sep. 30, 2019 | |
Income Taxes | 15. Income Taxes The Company’s effective income tax rates for the three and nine months ended September 30, 2019 were 22.6 percent and 21.8 percent, respectively. The Company estimates that its annual effective income tax rate for the full year 2019 will be approximately 22.0 percent. The effective income tax rates for the three and nine months ended September 30, 2018 were 20.5 percent and 21.1 percent, respectively. The change in the effective income tax rate s s change in the geographic As of September 30, 2019, the Company had $7.8 million of unrecognized tax benefits of which $0.8 million would affect its effective income tax rate if recognized. The Company recognizes potential interest and penalties related to unrecognized tax benefits as a component of income tax expense. The Company’s U.S. federal income tax returns for 2016-2019 are subject to audit. The Company is subject to state and local income tax audits for tax years 2002-2019. The Company is subject to non-U.S. |
Commitments and Contingencies
Commitments and Contingencies | 9 Months Ended |
Sep. 30, 2019 | |
Commitments and Contingencies | 16. Commitments and Contingencies The Company maintains a commercial relationship with a supply-chain service provider (the Provider) in connection with the Company’s business in China. In this capacity, the Provider offers order-entry, warehousing and logistics support. The Provider also offers asset-backed financing to certain of the Company’s distributors in China to facilitate their working capital needs. To facilitate its financing support business, the Provider has collateralized lending facilities in place with multiple Chinese banks under which the Company has agreed to repurchase inventory if both requested by the banks and certain defined conditions are met, primarily related to the aging of the distributors’ notes. The Provider is required to indemnify the Company for any losses the Company would incur in the event of an inventory repurchase under these arrangements. Potential losses under the repurchase arrangements represent the difference between the repurchase price and net proceeds from the resale of product plus costs incurred in the process, less related distributor rebates. Before considering any reduction of distributor rebate accruals of $17.1 and $25.1 million as of September 30, 2019 and December 31, 2018, respectively, and from the resale of the related inventory, the gross amount the Company would be obligated to repurchase, which would be contingent on the default of all of the outstanding loans, was approximately $56.3 million and $75.8 million as of September 30, 2019 and December 31, 2018, respectively. The Company’s reserves for estimated losses under repurchase arrangements were immaterial as of September 30, 2019 and December 31, 2018. |
Changes in Accumulated Other Co
Changes in Accumulated Other Comprehensive Loss by Component | 9 Months Ended |
Sep. 30, 2019 | |
Changes in Accumulated Other Comprehensive Loss by Component | 17. Changes in Accumulated Other Comprehensive Loss by Component Changes to accumulated other comprehensive loss by component are as follows: (dollars in millions) Three 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) 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 (2) These accumulated other comprehensive loss components are included in the computation of net periodic pension cost. See Note 11 - Pensions for additional details Changes to accumulated other comprehensive loss by component are as follows: (dollars in millions) Nine 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 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 (2) These accumulated other comprehensive loss components are included in the computation of net periodic pension cost. See Note 11 - Pensions for additional details |
Basis of Presentation (Policies
Basis of Presentation (Policies) | 9 Months Ended |
Sep. 30, 2019 | |
Recent Accounting Pronouncements | Recent Accounting Pronouncements In January 2017, the Financial Accounting Standards Board (FASB) amended Accounting Standards Codification (ASC) 350, Intangibles – Goodwill and Other 2017-04, 2017-04 In June 2016, the FASB issued ASC 326, Financial Instruments – Credit Losses 2016-13) 2016-13 2016-13 In February 2016, the FASB amended ASC 842, Leases 2016-02). non-lease 2016-02 |
Revenue Recognition (Tables)
Revenue Recognition (Tables) | 9 Months Ended |
Sep. 30, 2019 | |
Revenue Recognition [Abstract] | |
Segment Sales Disaggregated by Major Product Line | The following table disaggregates the Company’s net sales by segment. As described above, the Company’s North America segment sales are further disaggregated by major product line. In addition, the Company’s Rest of World segment sales are disaggregated by China and all other Rest of World. (dollars in millions) Three Months Ended Nine Months Ended 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 (1) Includes the results of Water-Right, Inc. from April 8, 2019, the date of acquisition |
Acquisitions (Tables)
Acquisitions (Tables) | 9 Months Ended |
Sep. 30, 2019 | |
Summary of Preliminary Allocation of Fair Value of Assets Acquired and Liabilities Assumed at Date of Acquisition | 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 |
Water-Right, Inc | |
Summary of Preliminary Allocation of Fair Value of Assets Acquired and Liabilities Assumed at Date of Acquisition | 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 |
Leases (Tables)
Leases (Tables) | 9 Months Ended |
Sep. 30, 2019 | |
Leases [Abstract] | |
Schedule Of Supplemental Balance Sheet Information Related To Leases [Table Text Block] | Supplemental balance sheet information related to leases was as follows: (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 Weighted-average discount rate 4.00 % |
Lease, Cost [Table Text Block] | The components of lease expense were as follows: (dollars in millions) Three months Nine months ended Lease Expense Classification September 30, 2019 September 30, 2019 Operating lease expense (1) Cost of products sold $ 0.7 $ 2.0 Selling, general and administrative expenses 4.3 13.3 (1) Includes short-term lease expense of $0.4 million and $1.4 million for the three and nine months ended September 30, 2019, respectively. Includes variable lease cost of $0.4 million and $1.4 million for the three and nine months ended September 30, 2019, respectively. |
Lessee, Operating Lease, Liability, Maturity [Table Text Block] | Maturities of lease liabilities were as follows: (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 |
Restructuring and Impairment _2
Restructuring and Impairment Expenses (Tables) | 9 Months Ended |
Sep. 30, 2019 | |
Analysis of Company's Restructuring Reserve | The following table presents an analysis of the Company’s restructuring reserve as of and for the ni n e (dollars in millions) Severance Lease Exit 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 |
Inventories (Tables)
Inventories (Tables) | 9 Months Ended |
Sep. 30, 2019 | |
Schedule of Inventories | The following table presents the components of the Company’s inventory balances: (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 |
Product Warranties (Tables)
Product Warranties (Tables) | 9 Months Ended |
Sep. 30, 2019 | |
Schedule of Product Warranty Liability Activity | The following table presents the Company’s warranty liability activity. 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 |
Earnings per Share of Common _2
Earnings per Share of Common Stock (Tables) | 9 Months Ended |
Sep. 30, 2019 | |
Schedule of Computation of Basic and Diluted Weighted Average Shares Used in EPS Calculations | The following table sets forth the computation of basic and diluted weighted-average shares used in the earnings per share calculations: 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 |
Stock Based Compensation (Table
Stock Based Compensation (Tables) | 9 Months Ended |
Sep. 30, 2019 | |
Schedule of Changes in Option Shares | Changes in options, all of which relate to the Company’s Common Stock, were as follows for the nine months ended September 30, 2019: Weighted- Number of Average Aggregate 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 $ 36.0 Exercisable at September 30, 2019 29.89 1,894,160 6 $ 36.0 |
Schedule of Weighted Average Fair Value per Option at Date of Grant | The weighted-average fair value per option at the date of grant during the nine months ended September 30, 2019 and 2018 using the Black-Scholes option-pricing model was $10.83 and $14.80, respectively. Assumptions were as follows: 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 % |
Schedule of Share Unit Activity Under Plan | A summary of share unit activity under the plan is as follows for the nine months ended September 30, 2019: 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 |
Pensions (Tables)
Pensions (Tables) | 9 Months Ended |
Sep. 30, 2019 | |
Schedule of Components of Net Pension Income | The following table presents the components of the Company’s net pension income. 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 ) |
Segment Results (Tables)
Segment Results (Tables) | 9 Months Ended |
Sep. 30, 2019 | |
Schedule of Segment Earnings | The following table presents the Company’s segment results: (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 |
Fair Value Measurements (Tables
Fair Value Measurements (Tables) | 9 Months Ended |
Sep. 30, 2019 | |
Schedule of Assets and Liabilities Measured at Fair Value on Recurring Basis | The following table presents assets measured at fair value on a recurring basis. (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 |
Derivative Instruments (Tables)
Derivative Instruments (Tables) | 9 Months Ended |
Sep. 30, 2019 | |
Schedule of Summary by Currency of Foreign Currency Forward Contracts | The following table summarizes, by currency, the contractual amounts of the Company’s foreign currency forward contracts that are designated as cash flow hedges. (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 |
Schedule of Impact of Cash Flow Hedges on Company's Financial Statements | The following tables present the impact of derivative contracts on the Company’s financial statements. Fair value of derivatives designated as hedging instruments under ASC 815: (dollars in millions) Balance September 30, 2019 December 31, 2018 Foreign currency contracts Other $ 10.3 $ 3.9 Other non-current — 5.1 Accrued liabilities (1.9 ) (0.6 ) Commodities contracts Accrued liabilities — (0.9 ) Total derivatives designated as hedging instruments $ 8.4 $ 7.5 |
Schedule of Effect of Derivatives Instruments on Condensed Consolidated Statement of Earnings | The effect of cash flow hedges on the condensed consolidated statement of earnings: Three Months Ended September 30 (dollars in millions): Derivatives in ASC 815 cash flow hedging relationships Amount of gain (loss) Location of gain (loss) Amount of gain (loss) 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 ) $ — Nine Months Ended September 30 (dollars in millions): Derivatives in ASC 815 cash flow hedging relationships Amount of gain (loss) Location of gain (loss) Amount of gain (loss) 2019 2018 2019 2018 Foreign currency contracts $ (0.6 ) $ 3.3 Cost of products sold $ (0.1 ) $ 0.1 Commodities contracts (0.5 ) — Cost of products sold (1.4 ) 0.3 $ (1.1 ) $ 3.3 $ (1.5 ) $ 0.4 |
Changes in Accumulated Other _2
Changes in Accumulated Other Comprehensive Loss by Component (Tables) | 9 Months Ended |
Sep. 30, 2019 | |
Changes to Accumulated Other Comprehensive Loss by Component | Changes to accumulated other comprehensive loss by component are as follows: (dollars in millions) Three 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) 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 (2) These accumulated other comprehensive loss components are included in the computation of net periodic pension cost. See Note 11 - Pensions for additional details Changes to accumulated other comprehensive loss by component are as follows: (dollars in millions) Nine 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 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 (2) These accumulated other comprehensive loss components are included in the computation of net periodic pension cost. See Note 11 - Pensions for additional details |
Revenue Recognition - Additiona
Revenue Recognition - Additional Information (Detail) $ in Millions | 9 Months Ended | |
Sep. 30, 2019USD ($)SegmentDistributor | Dec. 31, 2018USD ($) | |
Customer deposits liability | $ 43.7 | $ 47 |
Allowance for doubtful accounts | $ 6.2 | $ 6.4 |
Number of reporting segments | Segment | 2 | |
Water Heaters | North America | ||
Number of wholesale distributors | Distributor | 1,300 |
Segment Sales Disaggregated by
Segment Sales Disaggregated by Major Product Line (Detail) - USD ($) $ in Millions | 3 Months Ended | 9 Months Ended | |||
Sep. 30, 2019 | Sep. 30, 2018 | Sep. 30, 2019 | Sep. 30, 2018 | ||
Net sales | $ 728.2 | $ 754.1 | $ 2,241.8 | $ 2,375.4 | |
Inter-segment | |||||
Net sales | (6.7) | (6.9) | (20.1) | (23.4) | |
Operating Segments [Member] | North America | |||||
Net sales | 514.6 | 486.9 | 1,560.4 | 1,522.8 | |
Operating Segments [Member] | North America | Water Heaters And Related Parts [Member] | |||||
Net sales | 415.9 | 405.2 | 1,310.5 | 1,318.1 | |
Operating Segments [Member] | North America | Boilers And Related Parts [Member] | |||||
Net sales | 60.2 | 58.6 | 150.8 | 143 | |
Operating Segments [Member] | North America | Water Treatment Products [Member] | |||||
Net sales | [1] | 38.5 | 23.1 | 99.1 | 61.7 |
Operating Segments [Member] | Rest of World [Member] | |||||
Net sales | 220.3 | 274.1 | 701.5 | 876 | |
Operating Segments [Member] | Rest of World [Member] | China | |||||
Net sales | 189.6 | 246.2 | 626.8 | 806.4 | |
Operating Segments [Member] | Rest of World [Member] | All Other Rest Of World [Member] | |||||
Net sales | $ 30.7 | $ 27.9 | $ 74.7 | $ 69.6 | |
[1] | Includes the results of Water-Right, Inc. from April 8, 2019, the date of acquisition |
Acquisitions - Additional Infor
Acquisitions - Additional Information (Detail) - USD ($) $ in Millions | Apr. 08, 2019 | Sep. 30, 2019 |
Business Acquisition [Line Items] | ||
Aggregate cash purchase price of Businesses Net Of Cash Acquired | $ 107 | |
Water-Right, Inc | ||
Business Acquisition [Line Items] | ||
Voting Interests Acquired | 100.00% | |
Aggregate cash purchase price of Businesses Net Of Cash Acquired | $ 107 | |
Acquisition-related costs | 0.4 | |
Acquired intangible assets | $ 57.6 | |
Revenues associated with Water-Right | 29.9 | |
pre-tax earnings associated with Water-Right | 5.4 | |
Effective Date Of Acquisition | Apr. 8, 2019 | |
operating earnings associated with Water-Right | 5 | |
Water-Right, Inc | Escrow Deposit [Member] | ||
Business Acquisition [Line Items] | ||
consideration to former owners | $ 4 | |
Water-Right, Inc | Trademarks [Member] | ||
Business Acquisition [Line Items] | ||
Acquired intangible assets, not subject to amortization | $ 18.2 | |
Water-Right, Inc | Noncompete agreements | ||
Business Acquisition [Line Items] | ||
Acquired intangible assets, subject to amortization | $ 1.1 | |
Acquired intangible assets, amortization period, in years | 7 years 6 months | |
Water-Right, Inc | Customer relationships | ||
Business Acquisition [Line Items] | ||
Acquired intangible assets, subject to amortization | $ 38.3 | |
Acquired intangible assets, amortization period, in years | 20 years |
Summary of Preliminary Allocati
Summary of Preliminary Allocation of Fair Value of Assets Acquired and Liabilities Assumed at Date of Acquisition (Detail) - USD ($) $ in Millions | Sep. 30, 2019 | Apr. 08, 2019 | Dec. 31, 2018 |
Business Acquisition [Line Items] | |||
Goodwill | $ 547.4 | $ 513 | |
Water-Right, Inc | |||
Business Acquisition [Line Items] | |||
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 |
Leases supplemental balance she
Leases supplemental balance sheet (Detail) $ in Millions | 9 Months Ended |
Sep. 30, 2019USD ($) | |
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 | |
Weighted-average remaining lease term | 10 years |
Weighted-average discount rate | 4.00% |
Components of lease expense (De
Components of lease expense (Detail) - USD ($) $ in Millions | 3 Months Ended | 9 Months Ended | |
Sep. 30, 2019 | Sep. 30, 2019 | ||
Short term lease expense | $ 0.4 | $ 1.4 | |
Variable lease expenses | 0.4 | 1.4 | |
Cost of products sold [Member] | |||
Operating lease expense | [1] | 0.7 | 2 |
Selling, general and administrative expenses [Member] | |||
Operating lease expense | $ 4.3 | $ 13.3 | |
[1] | Includes short-term lease expense of $0.4 million and $1.4 million for the three and nine months ended September 30, 2019, respectively. Includes variable lease cost of $0.4 million and $1.4 million for the three and nine months ended September 30, 2019, respectively. |
Maturities of lease liabilities
Maturities of lease liabilities (Detail) $ in Millions | Sep. 30, 2019USD ($) |
Leases [Abstract] | |
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 |
Restructuring and Impairment _3
Restructuring and Impairment Expenses - Additional Information (Detail) - USD ($) $ in Millions | 3 Months Ended | 9 Months Ended | |||
Sep. 30, 2019 | Sep. 30, 2018 | Mar. 31, 2018 | Sep. 30, 2019 | Sep. 30, 2018 | |
Restructuring Costs and Asset Impairment Charges | $ 0 | $ 0 | $ 6.7 | $ 0 | $ 6.7 |
Severance Costs | 4 | ||||
Lease exit cost | 2.1 | ||||
Impairment of long-lived assets | 0.6 | ||||
Tax benefit related to the charges | $ 25.5 | $ 26.9 | $ 77.9 | $ 85.1 | |
Restructuring and Impairment Charges | |||||
Tax benefit related to the charges | $ 1.7 |
Analysis of Company's Restructu
Analysis of Company's Restructuring Reserve (Detail) - USD ($) $ in Millions | 3 Months Ended | ||
Sep. 30, 2019 | Jun. 30, 2019 | Mar. 31, 2019 | |
Beginning balance | $ 1.3 | $ 1.4 | $ 1.5 |
Cash payments | (0.2) | (0.1) | (0.1) |
Ending balance | 1.1 | 1.3 | 1.4 |
Severance Costs | |||
Beginning balance | 0.2 | 0.2 | 0.2 |
Cash payments | (0.2) | 0 | 0 |
Ending balance | 0 | 0.2 | 0.2 |
Lease Exit Costs | |||
Beginning balance | 1.1 | 1.2 | 1.3 |
Cash payments | 0 | (0.1) | (0.1) |
Ending balance | $ 1.1 | $ 1.1 | $ 1.2 |
Schedule of Inventories (Detail
Schedule of Inventories (Detail) - USD ($) $ in Millions | Sep. 30, 2019 | Dec. 31, 2018 |
Inventories | ||
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 | $ 304.7 |
Company's Warranty Liability Ac
Company's Warranty Liability Activity (Detail) - USD ($) $ in Millions | 3 Months Ended | 9 Months Ended | ||
Sep. 30, 2019 | Sep. 30, 2018 | Sep. 30, 2019 | Sep. 30, 2018 | |
Product Warranties Disclosures [Abstract] | ||||
Balance at beginning of year | $ 134 | $ 141.6 | $ 139.4 | $ 141.2 |
Expense | 11 | 8.7 | 31.8 | 31.4 |
Claims settled | (11.6) | (9.8) | (37.8) | (32.1) |
Balance at end of year | $ 133.4 | $ 140.5 | $ 133.4 | $ 140.5 |
Long-Term Debt - Additional Inf
Long-Term Debt - Additional Information (Detail) $ in Millions | 9 Months Ended |
Sep. 30, 2019USD ($) | |
Debt Disclosure [Abstract] | |
Multi-currency revolving credit agreement | $ 500 |
Number of banks involved in multi-year multi-currency revolving credit agreement | 9 |
Revolving credit facility, expiration date | Dec. 15, 2021 |
Multi-currency revolving credit agreement, maximum amount | $ 700 |
Schedule of Computation of Basi
Schedule of Computation of Basic and Diluted Weighted-Average Shares Used in Earnings per Share Calculations (Detail) - shares | 3 Months Ended | 9 Months Ended | ||
Sep. 30, 2019 | Sep. 30, 2018 | Sep. 30, 2019 | Sep. 30, 2018 | |
Earnings Per Share [Abstract] | ||||
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 |
Stock Based Compensation - Addi
Stock Based Compensation - Additional Information (Detail) - USD ($) $ / shares in Units, $ in Millions | 3 Months Ended | 9 Months Ended | |||
Sep. 30, 2019 | Sep. 30, 2018 | Sep. 30, 2019 | Sep. 30, 2018 | Dec. 31, 2018 | |
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | |||||
Total stock based compensation cost recognized | $ 1.5 | $ 1.8 | $ 12.3 | $ 9.7 | |
Stock option compensation expense recognized | $ 0.7 | $ 0.8 | $ 5.9 | $ 4.6 | |
Weighted-average fair value per option at the date of grant | $ 10.83 | $ 14.80 | |||
Number of Options, outstanding | 2,803,724 | 2,803,724 | 2,432,689 | ||
Number of options, exercisable at end of period | 1,894,160 | 1,894,160 | |||
Number of options, exercised | 177,306 | ||||
Share-based Compensation Arrangement by Share-based Payment Award, Award Vesting Rights | Share units vest three years after the date of grant | ||||
Employee Stock Option | |||||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | |||||
Award vesting period | 3 years | 3 years | |||
Award expiration period | 10 years | 10 years | |||
Stock Appreciation Rights (SARs) | |||||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | |||||
Award vesting period | 3 years | ||||
Award expiration period | 10 years | ||||
Number of Options, outstanding | 14,880 | 14,880 | |||
Number of options, exercisable at end of period | 14,880 | 14,880 | |||
Number of Options, granted | 0 | 0 | |||
Number of options, exercised | 1,290 | ||||
Restricted Stock And Share Units | |||||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | |||||
Award vesting period | 3 years | 3 years | 3 years | 3 years | |
Number of Units - Granted | 139,892 | 106,581 | |||
Value of share units at the date of issuance | $ 6.9 | $ 6.6 | |||
Share based compensation expense attributable to share units | $ 0.8 | $ 1 | $ 6.4 | $ 5.1 | |
A.O. Smith Combined Compensation Plan | |||||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | |||||
Number of shares available for granting of options, restricted stock or share units | 1,873,064 | 1,873,064 |
Changes in Option Awards All of
Changes in Option Awards All of Which Related to Common Stock (Detail) $ / shares in Units, $ in Millions | 9 Months Ended |
Sep. 30, 2019USD ($)$ / sharesshares | |
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | |
Weighted-Avg. Per Share Exercise Price, beginning period | $ / shares | $ 33.05 |
Weighted-Avg. Per Share Exercise Price - Granted | $ / shares | 49.49 |
Weighted-Avg. Per Share Exercise Price - Exercised | $ / shares | 15.97 |
Weighted-Avg. Per Share Exercise Price - Forfeited | $ / shares | 54.29 |
Weighted-Avg. Per Share Exercise Price, ending period | $ / shares | 37.33 |
Weighted-Average Per Share Exercise Price, Exercisable | $ / shares | $ 29.89 |
Number of Options Outstanding, Beginning Balance | shares | 2,432,689 |
Number of Options, Granted | shares | 557,045 |
Number of Options, Exercised | shares | (177,306) |
Number of Options, Forfeited | shares | (8,704) |
Number of Options Outstanding, Ending Balance | shares | 2,803,724 |
Number of Options, Exercisable at End of Period | shares | 1,894,160 |
Average remaining contractual life for outstanding options, in years | 7 years |
Average Remaining Contractual Life, Exercisable at End of Period, Years | 6 years |
Aggregate Intrinsic Value, Outstanding at End of Period | $ | $ 36 |
Aggregate Intrinsic Value, Exercisable at End of Period | $ | $ 36 |
Schedule of Weighted-Average Fa
Schedule of Weighted-Average Fair Value per Option at Date of Grant (Detail) | 9 Months Ended | |
Sep. 30, 2019 | Sep. 30, 2018 | |
Stock Based Compensation [Abstract] | ||
Expected life (years) | 5 years 6 months | 5 years 8 months 12 days |
Risk-free interest rate | 2.70% | 2.90% |
Dividend yield | 1.60% | 1.00% |
Expected volatility | 22.80% | 22.10% |
Summary of Share Unit Activity
Summary of Share Unit Activity Under Plan (Detail) - Restricted Stock And Share Units - $ / shares | 9 Months Ended | |
Sep. 30, 2019 | Sep. 30, 2018 | |
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | ||
Number of Units Issued and unvested, Beginning of Period | 379,601 | |
Number of Units - Granted | 139,892 | 106,581 |
Number of Units - Vested | (147,642) | |
Number of Units - Forfeited/cancelled | (4,509) | |
Number of Units Issued and unvested, End of Period | 367,342 | |
Weighted-Average Grant Date Value, Beginning of Period | $ 42.93 | |
Weighted-Average Grant Date Value - Granted | 49.52 | |
Weighted-Average Grant Date Value - Vested | 31.35 | |
Weighted-Average Grant Date Value - Forfeited/cancelled | 55.57 | |
Weighted-Average Grant Date Value, End of Period | $ 50.05 |
Components of Company's Net Pen
Components of Company's Net Pension Income (Detail) - USD ($) $ in Millions | 3 Months Ended | 9 Months Ended | ||
Sep. 30, 2019 | Sep. 30, 2018 | Sep. 30, 2019 | Sep. 30, 2018 | |
Defined Benefit Plan [Abstract] | ||||
Service cost | $ 0.4 | $ 0.5 | $ 1.3 | $ 1.5 |
Interest cost | 8 | 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) |
Schedule of Segment Earnings (D
Schedule of Segment Earnings (Detail) - USD ($) $ in Millions | 3 Months Ended | 9 Months Ended | |||
Sep. 30, 2019 | Sep. 30, 2018 | Sep. 30, 2019 | Sep. 30, 2018 | ||
Segment Reporting Information [Line Items] | |||||
Net sales | $ 728.2 | $ 754.1 | $ 2,241.8 | $ 2,375.4 | |
Segment earnings | 125.7 | 144.7 | 399.2 | 446.3 | |
Other income (expense) | 4 | 5.1 | 15.1 | 15.5 | |
Interest expense | (3.1) | (2) | (8.5) | (6.6) | |
Earnings before provision for income taxes | 112.8 | 131.5 | 356.6 | 403 | |
Provision for income taxes | 25.5 | 26.9 | 77.9 | 85.1 | |
Net earnings | 87.3 | 104.6 | 278.7 | 317.9 | |
Inter-segment | |||||
Segment Reporting Information [Line Items] | |||||
Net sales | (6.7) | (6.9) | (20.1) | (23.4) | |
Segment earnings | (0.1) | ||||
Corporate | |||||
Segment Reporting Information [Line Items] | |||||
Other income (expense) | (9.8) | (11.2) | (34.1) | (36.7) | |
North America | Operating Segments | |||||
Segment Reporting Information [Line Items] | |||||
Net sales | 514.6 | 486.9 | 1,560.4 | 1,522.8 | |
Segment earnings | [1] | 121.6 | 105.6 | 360.5 | 336.5 |
Rest of World | Operating Segments | |||||
Segment Reporting Information [Line Items] | |||||
Net sales | 220.3 | 274.1 | 701.5 | 876 | |
Segment earnings | $ 4.1 | $ 39.1 | $ 38.8 | $ 109.8 | |
[1] | includes restructuring and impairment expenses of: $ — $ — $ — $ 6.7 |
Schedule of Segment Earnings (P
Schedule of Segment Earnings (Parenthetical) (Detail) $ in Millions | 3 Months Ended | 9 Months Ended | |||
Sep. 30, 2019USD ($) | Sep. 30, 2018USD ($) | Mar. 31, 2018USD ($) | Sep. 30, 2019USD ($)Segment | Sep. 30, 2018USD ($) | |
Segment Reporting Information [Line Items] | |||||
Number of reporting segments | Segment | 2 | ||||
Restructuring expense recognized | $ | $ 0 | $ 0 | $ 6.7 | $ 0 | $ 6.7 |
Assets and Liabilities Measured
Assets and Liabilities Measured at Fair Value on Recurring Basis (Detail) - USD ($) $ in Millions | Sep. 30, 2019 | Dec. 31, 2018 |
Quoted Prices In Active Markets For Identical Assets (Level 1) | ||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | ||
Assets measured at fair value on recurring basis | $ 294.4 | $ 385.3 |
Significant other observable inputs (Level 2) [Member] | ||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | ||
Liabilities measured at fair value on recurring basis | $ 8.4 | $ 7.5 |
Schedule of Summary by Currency
Schedule of Summary by Currency of Foreign Currency Forward Contracts (Detail) - Foreign currency forward contracts - USD ($) $ in Millions | Sep. 30, 2019 | Dec. 31, 2018 |
Buy | ||
Derivative Instruments and Hedging Activities Disclosures [Line Items] | ||
Contractual amounts of foreign currency forward contracts | $ 67.7 | $ 59.8 |
Buy | Euro | ||
Derivative Instruments and Hedging Activities Disclosures [Line Items] | ||
Contractual amounts of foreign currency forward contracts | 44.7 | 32 |
Buy | Mexican peso | ||
Derivative Instruments and Hedging Activities Disclosures [Line Items] | ||
Contractual amounts of foreign currency forward contracts | 23 | 27.8 |
Sell | ||
Derivative Instruments and Hedging Activities Disclosures [Line Items] | ||
Contractual amounts of foreign currency forward contracts | 39.7 | 1 |
Sell | British pound | ||
Derivative Instruments and Hedging Activities Disclosures [Line Items] | ||
Contractual amounts of foreign currency forward contracts | 0.3 | $ 1 |
Sell | Canadian dollar | ||
Derivative Instruments and Hedging Activities Disclosures [Line Items] | ||
Contractual amounts of foreign currency forward contracts | $ 39.4 |
Derivative Instruments - Additi
Derivative Instruments - Additional Information (Detail) - USD ($) $ in Millions | 3 Months Ended | 9 Months Ended | ||
Sep. 30, 2019 | Sep. 30, 2018 | Sep. 30, 2019 | Sep. 30, 2018 | |
Trading Activity, Gains and Losses, Net [Line Items] | ||||
Other Comprehensive Income (Loss), Foreign Currency Transaction and Translation Adjustment, Net of Tax | $ (21.9) | $ (20.7) | $ (16.1) | $ (33.3) |
Net Investment Hedging [Member] | Non-US [Member] | ||||
Trading Activity, Gains and Losses, Net [Line Items] | ||||
Other Comprehensive Income (Loss), Foreign Currency Transaction and Translation Adjustment, Net of Tax | 2.7 | $ 4.1 | 1.8 | $ 7.4 |
Derivative, Notional Amount | $ 100 | $ 100 | ||
Commodity Futures Contracts | ||||
Trading Activity, Gains and Losses, Net [Line Items] | ||||
Reclassification period for effective portion of contract, in years | 1 year |
Impact of Derivative Contracts
Impact of Derivative Contracts on Company's Financial Statements (Detail) - USD ($) $ in Millions | Sep. 30, 2019 | Dec. 31, 2018 |
Derivatives, Fair Value [Line Items] | ||
Fair value of derivative instruments, total | $ 8.4 | $ 7.5 |
Designated as Hedging Instrument | Foreign Currency Contracts | Other Current Assets | ||
Derivatives, Fair Value [Line Items] | ||
Fair value of derivative instruments, assets | 10.3 | 3.9 |
Designated as Hedging Instrument | Foreign Currency Contracts | Accrued Liabilities | ||
Derivatives, Fair Value [Line Items] | ||
Fair value of derivative instruments, liabilities | $ (1.9) | (0.6) |
Designated as Hedging Instrument | Foreign Currency Contracts | Other Noncurrent Assets | ||
Derivatives, Fair Value [Line Items] | ||
Fair value of derivative instruments, assets | 5.1 | |
Designated as Hedging Instrument | Commodities Contracts | Accrued Liabilities | ||
Derivatives, Fair Value [Line Items] | ||
Fair value of derivative instruments, liabilities | $ (0.9) |
Schedule of Effect of Derivativ
Schedule of Effect of Derivatives Instruments on Consolidated Statement of Earnings (Detail) - USD ($) $ in Millions | 3 Months Ended | 9 Months Ended | ||
Sep. 30, 2019 | Sep. 30, 2018 | Sep. 30, 2019 | Sep. 30, 2018 | |
Derivative [Line Items] | ||||
Amount of gain (loss) recognized in other comprehensive loss on derivative | $ (1.1) | $ 1.9 | $ (1.1) | $ 3.3 |
Amount of gain (loss) reclassified from accumulated other comprehensive loss into earnings | (0.7) | (1.5) | 0.4 | |
Foreign Currency Contracts | ||||
Derivative [Line Items] | ||||
Amount of gain (loss) recognized in other comprehensive loss on derivative | (1.1) | $ 1.9 | (0.6) | 3.3 |
Foreign Currency Contracts | Cost Of Products Sold | ||||
Derivative [Line Items] | ||||
Amount of gain (loss) reclassified from accumulated other comprehensive loss into earnings | (0.1) | (0.1) | 0.1 | |
Commodities Contracts | ||||
Derivative [Line Items] | ||||
Amount of gain (loss) recognized in other comprehensive loss on derivative | (0.5) | |||
Commodities Contracts | Cost Of Products Sold | ||||
Derivative [Line Items] | ||||
Amount of gain (loss) reclassified from accumulated other comprehensive loss into earnings | $ (0.6) | $ (1.4) | $ 0.3 |
Income Taxes - Additional Infor
Income Taxes - Additional Information (Detail) - USD ($) $ in Millions | 3 Months Ended | 9 Months Ended | 12 Months Ended | ||
Sep. 30, 2019 | Sep. 30, 2018 | Sep. 30, 2019 | Sep. 30, 2018 | Dec. 31, 2019 | |
Income Tax Contingency [Line Items] | |||||
Unrecognized tax benefits that would affect the effective tax rate, if recognized | $ 0.8 | $ 0.8 | |||
Effective tax rates | 22.60% | 20.50% | 21.80% | 21.10% | |
Unrecognized tax benefits | $ 7.8 | $ 7.8 | |||
State and local | Earliest Tax Year | |||||
Income Tax Contingency [Line Items] | |||||
Income tax examinations, years under examination | 2002 | ||||
State and local | Latest Tax Year | |||||
Income Tax Contingency [Line Items] | |||||
Income tax examinations, years under examination | 2019 | ||||
Non-U.S. | Earliest Tax Year | |||||
Income Tax Contingency [Line Items] | |||||
Income tax examinations, years under examination | 2013 | ||||
Non-U.S. | Latest Tax Year | |||||
Income Tax Contingency [Line Items] | |||||
Income tax examinations, years under examination | 2019 | ||||
U.S. federal | Earliest Tax Year | |||||
Income Tax Contingency [Line Items] | |||||
Income tax examinations, years under examination | 2016 | ||||
U.S. federal | Latest Tax Year | |||||
Income Tax Contingency [Line Items] | |||||
Income tax examinations, years under examination | 2019 | ||||
Scenario, Forecast | |||||
Income Tax Contingency [Line Items] | |||||
Effective tax rates | 22.00% |
Commitment and Contingencies -
Commitment and Contingencies - Additional Information (Detail) - USD ($) $ in Millions | Sep. 30, 2019 | Dec. 31, 2018 |
Commitments and Contingencies [Line Items] | ||
Distributor Rebate Accruals | $ 17.1 | $ 25.1 |
Repurchase Of Inventory [Member] | ||
Commitments and Contingencies [Line Items] | ||
Default In outstanding loans | $ 56.3 | $ 75.8 |
Changes in Accumulated Other _3
Changes in Accumulated Other Comprehensive Loss by Component (Detail) - USD ($) $ in Millions | 3 Months Ended | 9 Months Ended | ||
Sep. 30, 2019 | Sep. 30, 2018 | Sep. 30, 2019 | Sep. 30, 2018 | |
Accumulated Other Comprehensive Income (Loss) [Line Items] | ||||
Balance | $ 1,717 | |||
Balance | $ 1,656.2 | $ 1,756.2 | 1,656.2 | $ 1,756.2 |
Cumulative foreign currency translation | ||||
Accumulated Other Comprehensive Income (Loss) [Line Items] | ||||
Balance | (59.1) | (39.1) | (64.9) | (26.5) |
Other comprehensive (loss) gain before reclassifications | (21.9) | (20.7) | (16.1) | (33.3) |
Balance | (81) | (59.8) | (81) | (59.8) |
Unrealized net gain on cash flow derivatives | ||||
Accumulated Other Comprehensive Income (Loss) [Line Items] | ||||
Balance | (0.1) | (0.1) | (0.7) | (0.9) |
Other comprehensive (loss) gain before reclassifications | (0.8) | 1.3 | (0.8) | 2.4 |
Realized losses (gains) on derivatives reclassified to cost of products sold (net of income tax (benefit) provision of ($0.2) and $0.1 in 2019 and 2018, respectively) | 0.5 | 1.1 | (0.3) | |
Balance | (0.4) | 1.2 | (0.4) | 1.2 |
Pension liability | ||||
Accumulated Other Comprehensive Income (Loss) [Line Items] | ||||
Balance | (279.2) | (265.2) | (285.2) | (272.1) |
Other comprehensive (loss) gain before reclassifications | (4.1) | 2 | (4.1) | 2 |
Amounts reclassified from accumulated other comprehensive loss | 3.1 | 3.6 | 9.1 | 10.5 |
Balance | (280.2) | (259.6) | (280.2) | (259.6) |
Accumulated Other Comprehensive Loss | ||||
Accumulated Other Comprehensive Income (Loss) [Line Items] | ||||
Balance | $ (361.6) | $ (318.2) | $ (361.6) | $ (318.2) |
Changes in Accumulated Other _4
Changes in Accumulated Other Comprehensive Loss by Component (Parenthetical) (Detail) - USD ($) $ in Millions | 3 Months Ended | 9 Months Ended | |||
Sep. 30, 2019 | Sep. 30, 2018 | Sep. 30, 2019 | Sep. 30, 2018 | ||
Unrealized net gain on cash flow derivatives | |||||
Accumulated Other Comprehensive Income (Loss) [Line Items] | |||||
Realized gains on derivatives reclassified to cost of products sold, tax provision | $ (0.2) | $ 0 | $ (0.4) | $ 0.1 | |
Pension liability | |||||
Accumulated Other Comprehensive Income (Loss) [Line Items] | |||||
Reclassification, before income tax benefit | 4.2 | 4.7 | 12 | 13.8 | |
Income tax benefit | (1.1) | (1.1) | (2.9) | (3.3) | |
Reclassification net of income tax benefit | 3.1 | 3.6 | 9.1 | 10.5 | |
Actuarial losses | |||||
Accumulated Other Comprehensive Income (Loss) [Line Items] | |||||
Reclassification, before income tax benefit | [1] | 4.4 | 4.9 | 12.4 | 14.2 |
Prior year service cost | |||||
Accumulated Other Comprehensive Income (Loss) [Line Items] | |||||
Reclassification, before income tax benefit | [1] | $ (0.2) | $ (0.2) | $ (0.4) | $ (0.4) |
[1] | These accumulated other comprehensive loss components are included in the computation of net periodic pension cost. See Note 11 - Pensions for additional details |