Company Quick10K Filing
Quick10K
AO Smith
Closing Price ($) Shares Out (MM) Market Cap ($MM)
$46.13 169 $7,800
10-Q 2019-09-30 Quarter: 2019-09-30
10-Q 2019-06-30 Quarter: 2019-06-30
10-Q 2019-03-31 Quarter: 2019-03-31
10-K 2018-12-31 Annual: 2018-12-31
10-Q 2018-09-30 Quarter: 2018-09-30
10-Q 2018-06-30 Quarter: 2018-06-30
10-Q 2018-03-31 Quarter: 2018-03-31
10-K 2017-12-31 Annual: 2017-12-31
10-Q 2017-09-30 Quarter: 2017-09-30
10-Q 2017-06-30 Quarter: 2017-06-30
10-Q 2017-03-31 Quarter: 2017-03-31
10-K 2016-12-31 Annual: 2016-12-31
10-Q 2016-09-30 Quarter: 2016-09-30
10-Q 2016-06-30 Quarter: 2016-06-30
10-Q 2016-03-31 Quarter: 2016-03-31
10-K 2015-12-31 Annual: 2015-12-31
10-Q 2015-09-30 Quarter: 2015-09-30
10-Q 2015-06-30 Quarter: 2015-06-30
10-Q 2015-03-31 Quarter: 2015-03-31
10-K 2014-12-31 Annual: 2014-12-31
10-Q 2014-09-30 Quarter: 2014-09-30
10-Q 2014-06-30 Quarter: 2014-06-30
10-Q 2014-03-31 Quarter: 2014-03-31
10-K 2013-12-31 Annual: 2013-12-31
8-K 2019-10-29 Earnings, Exhibits
8-K 2019-07-30 Earnings, Exhibits
8-K 2019-06-03 Regulation FD
8-K 2019-06-03 Regulation FD, Exhibits
8-K 2019-04-30 Earnings, Exhibits
8-K 2019-04-09 Shareholder Vote
8-K 2019-04-08 Other Events, Exhibits
8-K 2019-01-29 Earnings, Exhibits
8-K 2019-01-21 Officers, Exhibits
8-K 2019-01-21 Officers, Exhibits
8-K 2019-01-11 Officers, Exhibits
8-K 2018-10-30 Earnings, Exhibits
8-K 2018-07-25 Earnings, Exhibits
8-K 2018-07-11 Officers, Exhibits
8-K 2018-04-25 Earnings, Exhibits
8-K 2018-04-09 Shareholder Vote
8-K 2018-01-30 Earnings, Exhibits
SNE Sony 69,429
PHG Koninklijke Philips Nv 42,601
EMR Emerson Electric 35,567
WHR Whirlpool 8,710
SONO Sonos 1,406
UEIC Universal Electronics 625
ARLO Arlo Technologies 215
MSN Emerson Radio 22
KOSS Koss 14
IMTE Integrated Media Technology 0
AOS 2019-09-30
Part I - Financial Information
Item 1 - Financial Statements
Item 2 - Management's Discussion and Analysis of Financial Condition and Results of Operations
Item 3 - Quantitative and Qualitative Disclosures About Market Risk
Item 4 - Controls and Procedures
Part II - Other Information
Item 1 - Legal Proceedings
Item 6 - Exhibits
EX-31.1 d816891dex311.htm
EX-31.2 d816891dex312.htm
EX-32.1 d816891dex321.htm
EX-32.2 d816891dex322.htm

AO Smith Earnings 2019-09-30

AOS 10Q Quarterly Report

Balance SheetIncome StatementCash Flow

10-Q
SMITH A O CORP3333false2019Q3000009114212-31Includes the results of Water-Right, Inc. from April 8, 2019, the date of acquisitionincludes restructuring and impairment expenses of: $ — $ — $ — $ 6.7These accumulated other comprehensive loss components are included in the computation of net periodic pension cost. See Note 11 - Pensions for additional detailsIncludes 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. 0000091142 2019-01-01 2019-09-30 0000091142 2018-01-01 2018-09-30 0000091142 2019-07-01 2019-09-30 0000091142 2018-07-01 2018-09-30 0000091142 2019-09-30 0000091142 2018-12-31 0000091142 2019-04-01 2019-06-30 0000091142 2019-01-01 2019-03-31 0000091142 2018-01-01 2018-03-31 0000091142 2017-12-31 0000091142 2018-09-30 0000091142 2019-06-30 0000091142 2018-06-30 0000091142 2019-03-31 0000091142 us-gaap:ForeignExchangeContractMember 2018-07-01 2018-09-30 0000091142 us-gaap:RestrictedStockMember 2018-07-01 2018-09-30 0000091142 us-gaap:CommonClassAMember 2018-07-01 2018-09-30 0000091142 us-gaap:CommonStockMember 2018-07-01 2018-09-30 0000091142 us-gaap:AdditionalPaidInCapitalMember 2018-07-01 2018-09-30 0000091142 us-gaap:RetainedEarningsMember 2018-07-01 2018-09-30 0000091142 us-gaap:TreasuryStockMember 2018-07-01 2018-09-30 0000091142 aos:WaterHeatersAndRelatedPartsMember aos:NorthAmericaSegmentMember us-gaap:OperatingSegmentsMember 2018-07-01 2018-09-30 0000091142 aos:BoilersAndRelatedPartsMember aos:NorthAmericaSegmentMember us-gaap:OperatingSegmentsMember 2018-07-01 2018-09-30 0000091142 aos:WaterTreatmentProductsMember aos:NorthAmericaSegmentMember us-gaap:OperatingSegmentsMember 2018-07-01 2018-09-30 0000091142 aos:NorthAmericaSegmentMember us-gaap:OperatingSegmentsMember 2018-07-01 2018-09-30 0000091142 us-gaap:OperatingSegmentsMember aos:RestOfWorldMember country:CN 2018-07-01 2018-09-30 0000091142 aos:AllOtherRestOfWorldMember aos:RestOfWorldMember us-gaap:OperatingSegmentsMember 2018-07-01 2018-09-30 0000091142 us-gaap:OperatingSegmentsMember aos:RestOfWorldMember 2018-07-01 2018-09-30 0000091142 us-gaap:IntersegmentEliminationMember 2018-07-01 2018-09-30 0000091142 us-gaap:NetInvestmentHedgingMember us-gaap:NonUsMember 2018-07-01 2018-09-30 0000091142 us-gaap:CorporateNonSegmentMember 2018-07-01 2018-09-30 0000091142 us-gaap:AccumulatedTranslationAdjustmentMember 2018-07-01 2018-09-30 0000091142 us-gaap:AccumulatedNetGainLossFromDesignatedOrQualifyingCashFlowHedgesMember 2018-07-01 2018-09-30 0000091142 us-gaap:AccumulatedDefinedBenefitPlansAdjustmentMember 2018-07-01 2018-09-30 0000091142 us-gaap:AccumulatedGainLossNetCashFlowHedgeParentMember 2018-07-01 2018-09-30 0000091142 us-gaap:AccumulatedDefinedBenefitPlansAdjustmentNetUnamortizedGainLossMember 2018-07-01 2018-09-30 0000091142 us-gaap:AccumulatedDefinedBenefitPlansAdjustmentNetPriorServiceCostCreditMember 2018-07-01 2018-09-30 0000091142 us-gaap:ForeignExchangeContractMember 2019-07-01 2019-09-30 0000091142 us-gaap:RestrictedStockMember 2019-07-01 2019-09-30 0000091142 us-gaap:ForeignExchangeContractMember us-gaap:CostOfSalesMember 2019-07-01 2019-09-30 0000091142 us-gaap:CostOfSalesMember us-gaap:CommodityContractMember 2019-07-01 2019-09-30 0000091142 us-gaap:CommonStockMember 2019-07-01 2019-09-30 0000091142 us-gaap:AdditionalPaidInCapitalMember 2019-07-01 2019-09-30 0000091142 us-gaap:CommonClassAMember 2019-07-01 2019-09-30 0000091142 us-gaap:RetainedEarningsMember 2019-07-01 2019-09-30 0000091142 us-gaap:TreasuryStockMember 2019-07-01 2019-09-30 0000091142 aos:WaterHeatersAndRelatedPartsMember aos:NorthAmericaSegmentMember us-gaap:OperatingSegmentsMember 2019-07-01 2019-09-30 0000091142 aos:BoilersAndRelatedPartsMember aos:NorthAmericaSegmentMember us-gaap:OperatingSegmentsMember 2019-07-01 2019-09-30 0000091142 aos:WaterTreatmentProductsMember aos:NorthAmericaSegmentMember us-gaap:OperatingSegmentsMember 2019-07-01 2019-09-30 0000091142 aos:NorthAmericaSegmentMember us-gaap:OperatingSegmentsMember 2019-07-01 2019-09-30 0000091142 us-gaap:OperatingSegmentsMember aos:RestOfWorldMember country:CN 2019-07-01 2019-09-30 0000091142 aos:AllOtherRestOfWorldMember aos:RestOfWorldMember us-gaap:OperatingSegmentsMember 2019-07-01 2019-09-30 0000091142 us-gaap:OperatingSegmentsMember aos:RestOfWorldMember 2019-07-01 2019-09-30 0000091142 us-gaap:IntersegmentEliminationMember 2019-07-01 2019-09-30 0000091142 us-gaap:FacilityClosingMember 2019-07-01 2019-09-30 0000091142 us-gaap:EmployeeSeveranceMember 2019-07-01 2019-09-30 0000091142 us-gaap:NonUsMember us-gaap:NetInvestmentHedgingMember 2019-07-01 2019-09-30 0000091142 us-gaap:CostOfSalesMember 2019-07-01 2019-09-30 0000091142 us-gaap:SellingGeneralAndAdministrativeExpensesMember 2019-07-01 2019-09-30 0000091142 us-gaap:CorporateNonSegmentMember 2019-07-01 2019-09-30 0000091142 us-gaap:AccumulatedTranslationAdjustmentMember 2019-07-01 2019-09-30 0000091142 us-gaap:AccumulatedNetGainLossFromDesignatedOrQualifyingCashFlowHedgesMember 2019-07-01 2019-09-30 0000091142 us-gaap:AccumulatedDefinedBenefitPlansAdjustmentMember 2019-07-01 2019-09-30 0000091142 us-gaap:AccumulatedGainLossNetCashFlowHedgeParentMember 2019-07-01 2019-09-30 0000091142 us-gaap:AccumulatedDefinedBenefitPlansAdjustmentNetUnamortizedGainLossMember 2019-07-01 2019-09-30 0000091142 us-gaap:AccumulatedDefinedBenefitPlansAdjustmentNetPriorServiceCostCreditMember 2019-07-01 2019-09-30 0000091142 us-gaap:ForeignExchangeContractMember 2018-01-01 2018-09-30 0000091142 us-gaap:EmployeeStockOptionMember 2018-01-01 2018-09-30 0000091142 us-gaap:RestrictedStockMember 2018-01-01 2018-09-30 0000091142 us-gaap:CostOfSalesMember us-gaap:ForeignExchangeContractMember 2018-01-01 2018-09-30 0000091142 us-gaap:CostOfSalesMember us-gaap:CommodityContractMember 2018-01-01 2018-09-30 0000091142 us-gaap:AdditionalPaidInCapitalMember 2018-01-01 2018-09-30 0000091142 us-gaap:CommonStockMember 2018-01-01 2018-09-30 0000091142 us-gaap:CommonClassAMember 2018-01-01 2018-09-30 0000091142 us-gaap:RetainedEarningsMember 2018-01-01 2018-09-30 0000091142 us-gaap:StockAppreciationRightsSARSMember 2018-01-01 2018-09-30 0000091142 us-gaap:TreasuryStockMember 2018-01-01 2018-09-30 0000091142 aos:WaterHeatersAndRelatedPartsMember aos:NorthAmericaSegmentMember us-gaap:OperatingSegmentsMember 2018-01-01 2018-09-30 0000091142 aos:BoilersAndRelatedPartsMember aos:NorthAmericaSegmentMember us-gaap:OperatingSegmentsMember 2018-01-01 2018-09-30 0000091142 aos:WaterTreatmentProductsMember aos:NorthAmericaSegmentMember us-gaap:OperatingSegmentsMember 2018-01-01 2018-09-30 0000091142 aos:NorthAmericaSegmentMember us-gaap:OperatingSegmentsMember 2018-01-01 2018-09-30 0000091142 us-gaap:OperatingSegmentsMember aos:RestOfWorldMember country:CN 2018-01-01 2018-09-30 0000091142 aos:AllOtherRestOfWorldMember aos:RestOfWorldMember us-gaap:OperatingSegmentsMember 2018-01-01 2018-09-30 0000091142 us-gaap:OperatingSegmentsMember aos:RestOfWorldMember 2018-01-01 2018-09-30 0000091142 us-gaap:IntersegmentEliminationMember 2018-01-01 2018-09-30 0000091142 us-gaap:NetInvestmentHedgingMember us-gaap:NonUsMember 2018-01-01 2018-09-30 0000091142 us-gaap:CorporateNonSegmentMember 2018-01-01 2018-09-30 0000091142 us-gaap:AccumulatedTranslationAdjustmentMember 2018-01-01 2018-09-30 0000091142 us-gaap:AccumulatedNetGainLossFromDesignatedOrQualifyingCashFlowHedgesMember 2018-01-01 2018-09-30 0000091142 us-gaap:AccumulatedDefinedBenefitPlansAdjustmentMember 2018-01-01 2018-09-30 0000091142 us-gaap:AccumulatedGainLossNetCashFlowHedgeParentMember 2018-01-01 2018-09-30 0000091142 us-gaap:AccumulatedDefinedBenefitPlansAdjustmentNetUnamortizedGainLossMember 2018-01-01 2018-09-30 0000091142 us-gaap:AccumulatedDefinedBenefitPlansAdjustmentNetPriorServiceCostCreditMember 2018-01-01 2018-09-30 0000091142 aos:CommodityFuturesContractsMember 2019-01-01 2019-09-30 0000091142 us-gaap:RestrictedStockMember 2019-01-01 2019-09-30 0000091142 us-gaap:ForeignExchangeContractMember 2019-01-01 2019-09-30 0000091142 us-gaap:CommodityContractMember 2019-01-01 2019-09-30 0000091142 us-gaap:StockAppreciationRightsSARSMember 2019-01-01 2019-09-30 0000091142 us-gaap:EmployeeStockOptionMember 2019-01-01 2019-09-30 0000091142 aos:WaterRightIncMember 2019-01-01 2019-09-30 0000091142 us-gaap:CostOfSalesMember us-gaap:CommodityContractMember 2019-01-01 2019-09-30 0000091142 us-gaap:ForeignExchangeContractMember us-gaap:CostOfSalesMember 2019-01-01 2019-09-30 0000091142 us-gaap:AdditionalPaidInCapitalMember 2019-01-01 2019-09-30 0000091142 us-gaap:CommonStockMember 2019-01-01 2019-09-30 0000091142 us-gaap:CommonClassAMember 2019-01-01 2019-09-30 0000091142 us-gaap:RetainedEarningsMember 2019-01-01 2019-09-30 0000091142 us-gaap:TreasuryStockMember 2019-01-01 2019-09-30 0000091142 aos:WaterHeatersAndRelatedPartsMember aos:NorthAmericaSegmentMember us-gaap:OperatingSegmentsMember 2019-01-01 2019-09-30 0000091142 aos:BoilersAndRelatedPartsMember aos:NorthAmericaSegmentMember us-gaap:OperatingSegmentsMember 2019-01-01 2019-09-30 0000091142 aos:WaterTreatmentProductsMember aos:NorthAmericaSegmentMember us-gaap:OperatingSegmentsMember 2019-01-01 2019-09-30 0000091142 aos:NorthAmericaSegmentMember us-gaap:OperatingSegmentsMember 2019-01-01 2019-09-30 0000091142 us-gaap:OperatingSegmentsMember aos:RestOfWorldMember country:CN 2019-01-01 2019-09-30 0000091142 aos:AllOtherRestOfWorldMember aos:RestOfWorldMember us-gaap:OperatingSegmentsMember 2019-01-01 2019-09-30 0000091142 us-gaap:OperatingSegmentsMember aos:RestOfWorldMember 2019-01-01 2019-09-30 0000091142 us-gaap:IntersegmentEliminationMember 2019-01-01 2019-09-30 0000091142 aos:WaterHeatersMember aos:NorthAmericaSegmentMember 2019-01-01 2019-09-30 0000091142 us-gaap:NetInvestmentHedgingMember us-gaap:NonUsMember 2019-01-01 2019-09-30 0000091142 us-gaap:InternalRevenueServiceIRSMember us-gaap:EarliestTaxYearMember 2019-01-01 2019-09-30 0000091142 us-gaap:InternalRevenueServiceIRSMember us-gaap:LatestTaxYearMember 2019-01-01 2019-09-30 0000091142 us-gaap:StateAndLocalJurisdictionMember us-gaap:EarliestTaxYearMember 2019-01-01 2019-09-30 0000091142 us-gaap:StateAndLocalJurisdictionMember us-gaap:LatestTaxYearMember 2019-01-01 2019-09-30 0000091142 us-gaap:ForeignCountryMember us-gaap:EarliestTaxYearMember 2019-01-01 2019-09-30 0000091142 us-gaap:ForeignCountryMember us-gaap:LatestTaxYearMember 2019-01-01 2019-09-30 0000091142 us-gaap:CostOfSalesMember 2019-01-01 2019-09-30 0000091142 us-gaap:SellingGeneralAndAdministrativeExpensesMember 2019-01-01 2019-09-30 0000091142 us-gaap:CorporateNonSegmentMember 2019-01-01 2019-09-30 0000091142 us-gaap:AccumulatedTranslationAdjustmentMember 2019-01-01 2019-09-30 0000091142 us-gaap:AccumulatedNetGainLossFromDesignatedOrQualifyingCashFlowHedgesMember 2019-01-01 2019-09-30 0000091142 us-gaap:AccumulatedDefinedBenefitPlansAdjustmentMember 2019-01-01 2019-09-30 0000091142 us-gaap:AccumulatedGainLossNetCashFlowHedgeParentMember 2019-01-01 2019-09-30 0000091142 us-gaap:AccumulatedDefinedBenefitPlansAdjustmentNetUnamortizedGainLossMember 2019-01-01 2019-09-30 0000091142 us-gaap:AccumulatedDefinedBenefitPlansAdjustmentNetPriorServiceCostCreditMember 2019-01-01 2019-09-30 0000091142 aos:EscrowDepositMember aos:WaterRightIncMember 2019-01-01 2019-09-30 0000091142 aos:AOSmithCombinedCompensationPlanMember 2019-09-30 0000091142 us-gaap:CommonClassAMember 2019-09-30 0000091142 us-gaap:ShortMember currency:GBP us-gaap:ForeignExchangeForwardMember 2019-09-30 0000091142 us-gaap:LongMember currency:EUR us-gaap:ForeignExchangeForwardMember 2019-09-30 0000091142 us-gaap:LongMember currency:MXN us-gaap:ForeignExchangeForwardMember 2019-09-30 0000091142 us-gaap:LongMember us-gaap:ForeignExchangeForwardMember 2019-09-30 0000091142 us-gaap:ShortMember us-gaap:ForeignExchangeForwardMember 2019-09-30 0000091142 us-gaap:ShortMember currency:CAD us-gaap:ForeignExchangeForwardMember 2019-09-30 0000091142 us-gaap:ForeignExchangeContractMember us-gaap:OtherCurrentAssetsMember us-gaap:DesignatedAsHedgingInstrumentMember 2019-09-30 0000091142 us-gaap:ForeignExchangeContractMember us-gaap:AccruedLiabilitiesMember us-gaap:DesignatedAsHedgingInstrumentMember 2019-09-30 0000091142 us-gaap:StockAppreciationRightsSARSMember 2019-09-30 0000091142 us-gaap:NetInvestmentHedgingMember us-gaap:NonUsMember 2019-09-30 0000091142 us-gaap:FairValueInputsLevel1Member 2019-09-30 0000091142 us-gaap:FairValueInputsLevel2Member 2019-09-30 0000091142 aos:RepurchaseOfInventoryMember 2019-09-30 0000091142 us-gaap:CommonClassAMember 2018-12-31 0000091142 us-gaap:ShortMember currency:GBP us-gaap:ForeignExchangeForwardMember 2018-12-31 0000091142 us-gaap:LongMember currency:EUR us-gaap:ForeignExchangeForwardMember 2018-12-31 0000091142 us-gaap:LongMember currency:MXN us-gaap:ForeignExchangeForwardMember 2018-12-31 0000091142 us-gaap:LongMember us-gaap:ForeignExchangeForwardMember 2018-12-31 0000091142 us-gaap:ShortMember us-gaap:ForeignExchangeForwardMember 2018-12-31 0000091142 us-gaap:ForeignExchangeContractMember us-gaap:OtherCurrentAssetsMember us-gaap:DesignatedAsHedgingInstrumentMember 2018-12-31 0000091142 us-gaap:DesignatedAsHedgingInstrumentMember us-gaap:ForeignExchangeContractMember us-gaap:OtherNoncurrentAssetsMember 2018-12-31 0000091142 us-gaap:ForeignExchangeContractMember us-gaap:AccruedLiabilitiesMember us-gaap:DesignatedAsHedgingInstrumentMember 2018-12-31 0000091142 us-gaap:CommodityContractMember us-gaap:AccruedLiabilitiesMember us-gaap:DesignatedAsHedgingInstrumentMember 2018-12-31 0000091142 us-gaap:FairValueInputsLevel1Member 2018-12-31 0000091142 us-gaap:FairValueInputsLevel2Member 2018-12-31 0000091142 aos:RepurchaseOfInventoryMember 2018-12-31 0000091142 aos:WaterRightIncMember 2019-04-08 0000091142 us-gaap:TrademarksMember aos:WaterRightIncMember 2019-04-08 0000091142 us-gaap:NoncompeteAgreementsMember aos:WaterRightIncMember 2019-04-08 0000091142 aos:WaterRightIncMember us-gaap:CustomerRelationshipsMember 2019-04-08 0000091142 aos:WaterRightIncMember 2019-04-01 2019-04-08 0000091142 aos:WaterRightIncMember us-gaap:CustomerRelationshipsMember 2019-04-01 2019-04-08 0000091142 aos:WaterRightIncMember us-gaap:NoncompeteAgreementsMember 2019-04-01 2019-04-08 0000091142 aos:RestructuringAndImpairmentChargesMember 2018-01-01 2018-03-31 0000091142 us-gaap:FacilityClosingMember 2019-01-01 2019-03-31 0000091142 us-gaap:EmployeeSeveranceMember 2019-01-01 2019-03-31 0000091142 us-gaap:FacilityClosingMember 2019-04-01 2019-06-30 0000091142 us-gaap:EmployeeSeveranceMember 2019-04-01 2019-06-30 0000091142 srt:ScenarioForecastMember 2019-01-01 2019-12-31 0000091142 us-gaap:CommonClassAMember 2019-10-31 0000091142 aos:CommonStockClassUndefinedMember 2019-10-31 0000091142 us-gaap:CommonClassAMember 2018-06-30 0000091142 us-gaap:CommonStockMember 2018-06-30 0000091142 us-gaap:AdditionalPaidInCapitalMember 2018-06-30 0000091142 us-gaap:RetainedEarningsMember 2018-06-30 0000091142 us-gaap:TreasuryStockMember 2018-06-30 0000091142 us-gaap:AccumulatedTranslationAdjustmentMember 2018-06-30 0000091142 us-gaap:AccumulatedNetGainLossFromDesignatedOrQualifyingCashFlowHedgesMember 2018-06-30 0000091142 us-gaap:AccumulatedDefinedBenefitPlansAdjustmentMember 2018-06-30 0000091142 us-gaap:AccumulatedDefinedBenefitPlansAdjustmentMember 2018-09-30 0000091142 us-gaap:AccumulatedOtherComprehensiveIncomeMember 2018-09-30 0000091142 us-gaap:AccumulatedNetGainLossFromDesignatedOrQualifyingCashFlowHedgesMember 2018-09-30 0000091142 us-gaap:AccumulatedTranslationAdjustmentMember 2018-09-30 0000091142 us-gaap:CommonClassAMember 2018-09-30 0000091142 us-gaap:CommonStockMember 2018-09-30 0000091142 us-gaap:RetainedEarningsMember 2018-09-30 0000091142 us-gaap:TreasuryStockMember 2018-09-30 0000091142 us-gaap:AdditionalPaidInCapitalMember 2018-09-30 0000091142 us-gaap:CommonClassAMember 2019-06-30 0000091142 us-gaap:CommonStockMember 2019-06-30 0000091142 us-gaap:AdditionalPaidInCapitalMember 2019-06-30 0000091142 us-gaap:RetainedEarningsMember 2019-06-30 0000091142 us-gaap:TreasuryStockMember 2019-06-30 0000091142 us-gaap:AccumulatedTranslationAdjustmentMember 2019-06-30 0000091142 us-gaap:AccumulatedNetGainLossFromDesignatedOrQualifyingCashFlowHedgesMember 2019-06-30 0000091142 us-gaap:AccumulatedDefinedBenefitPlansAdjustmentMember 2019-06-30 0000091142 us-gaap:AccumulatedDefinedBenefitPlansAdjustmentMember 2019-09-30 0000091142 us-gaap:AccumulatedOtherComprehensiveIncomeMember 2019-09-30 0000091142 us-gaap:AccumulatedNetGainLossFromDesignatedOrQualifyingCashFlowHedgesMember 2019-09-30 0000091142 us-gaap:AccumulatedTranslationAdjustmentMember 2019-09-30 0000091142 us-gaap:EmployeeSeveranceMember 2019-09-30 0000091142 us-gaap:FacilityClosingMember 2019-09-30 0000091142 us-gaap:CommonStockMember 2019-09-30 0000091142 us-gaap:RetainedEarningsMember 2019-09-30 0000091142 us-gaap:TreasuryStockMember 2019-09-30 0000091142 us-gaap:AdditionalPaidInCapitalMember 2019-09-30 0000091142 us-gaap:CommonClassAMember 2017-12-31 0000091142 us-gaap:CommonStockMember 2017-12-31 0000091142 us-gaap:AdditionalPaidInCapitalMember 2017-12-31 0000091142 us-gaap:RetainedEarningsMember 2017-12-31 0000091142 us-gaap:TreasuryStockMember 2017-12-31 0000091142 us-gaap:AccumulatedTranslationAdjustmentMember 2017-12-31 0000091142 us-gaap:AccumulatedNetGainLossFromDesignatedOrQualifyingCashFlowHedgesMember 2017-12-31 0000091142 us-gaap:AccumulatedDefinedBenefitPlansAdjustmentMember 2017-12-31 0000091142 us-gaap:RestrictedStockMember 2018-12-31 0000091142 us-gaap:RestrictedStockMember 2019-09-30 0000091142 us-gaap:CommonStockMember 2018-12-31 0000091142 us-gaap:AdditionalPaidInCapitalMember 2018-12-31 0000091142 us-gaap:RetainedEarningsMember 2018-12-31 0000091142 us-gaap:TreasuryStockMember 2018-12-31 0000091142 us-gaap:AccumulatedTranslationAdjustmentMember 2018-12-31 0000091142 us-gaap:AccumulatedNetGainLossFromDesignatedOrQualifyingCashFlowHedgesMember 2018-12-31 0000091142 us-gaap:AccumulatedDefinedBenefitPlansAdjustmentMember 2018-12-31 0000091142 us-gaap:EmployeeSeveranceMember 2018-12-31 0000091142 us-gaap:FacilityClosingMember 2018-12-31 0000091142 us-gaap:EmployeeSeveranceMember 2019-03-31 0000091142 us-gaap:FacilityClosingMember 2019-03-31 0000091142 us-gaap:EmployeeSeveranceMember 2019-06-30 0000091142 us-gaap:FacilityClosingMember 2019-06-30 iso4217:USD xbrli:pure xbrli:shares iso4217:USD xbrli:shares aos:Segment aos:Distributor
Table of Contents
 
 
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
 
FORM
10-Q
 
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 
 
 
 
 
 
 
 
 
 
 
 
For the quarterly period ended September 30, 2019.
or
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 
 
 
 
 
 
 
 
 
 
 
 
For the transition period from
                    
to
                    
Commission File Number
1-475
 
A. O. Smith Corporation
(Exact name of registrant as specified in its charter)
 
         
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)
 
 
 
 
 
 
 
 
 
 
 
 
(414)
359-4000
(Registrant’s telephone number, including area code)
 
Securities registered pursuant to Section 12(b) of the Act:
         
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
 
 
 
 
 
 
 
 
 
 
 
 
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    
  Yes    
  No  
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation
S-T
(§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).    
  Yes    
  No
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a
non-accelerated
filer, smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule
12b-2
of the Exchange Act.
             
Large accelerated filer
 
 
Accelerated Filer
 
             
Non-accelerated
filer
 
 
Smaller reporting company
 
             
 
 
Emerging growth company
 
 
 
 
 
 
 
 
 
 
 
 
 
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.  
Indicate by check mark whether the registrant is a shell company (as defined in Rule
12b-2
of the Act.)    
  Yes    
  No
Class A Common Stock Outstanding as of October 31, 2019 - 26,052,953 shares
Common Stock Outstanding as of October 31, 2019 - 137,059,015 shares
 
 
 

Table of Contents
Index
A. O. Smith Corporation
             
 
 
 
 
 
 
 
 
Page
 
Part I.
 
 
 
 
 
 
 
 
 
 
 
 
 
 
3
 
 
 
 
 
 
 
 
 
 
 
3
 
 
 
 
 
 
 
 
 
 
 
4
 
 
 
 
 
 
 
 
 
 
 
5
 
 
 
 
 
 
 
 
 
 
 
6
 
 
 
 
 
 
 
 
 
 
 
7-
23
 
 
 
 
 
 
 
 
Item 2.
 
 
 
24-
30
 
 
 
 
 
 
 
 
Item 3.
 
 
 
31
 
 
 
 
 
 
 
 
Item 4.
 
 
 
31
 
 
 
 
 
 
 
 
Part II.
 
 
 
 
 
 
 
 
 
 
 
Item 1.
 
 
 
32
 
 
 
 
 
 
 
 
Item 2.
 
 
 
32
 
 
 
 
 
 
 
 
Item 6.
 
 
 
32
 
 
 
 
 
 
 
 
33
 
 
 
 
 
 
 
 
34
 
 
 
 
 
 
 
 
 
 
2
 

Table of Contents 
PART I - FINANCIAL INFORMATION
ITEM 1 - FINANCIAL STATEMENTS
A. O. SMITH CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF EARNINGS
(dollars in millions, except for per share data)
(unaudited)
                                 
 
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
 
                                 
 
 
 
 
 
 
 
 
 
A. O. SMITH CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE EARNINGS
(dollars in millions)
(unaudited)
                                 
 
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
 
                                 
 
 
 
 
 
 
 
 
 
S
ee accompanying notes to unaudited condensed consolidated financial statements.
 
3
 
 

Table of Contents
 
PART I - FINANCIAL INFORMATION
ITEM 1 - FINANCIAL STATEMENTS
 
A. O. SMITH CORPORATION
CONDENSED CONSOLIDATED BALANCE SHEETS
(dollars in millions)
                 
 
(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
 
                 
 
 
 
 
 
 
 
See accompanying notes to unaudited condensed consolidated financial statements
 
4
 

Table of Contents
 
PART I - FINANCIAL INFORMATION
ITEM 1 - FINANCIAL STATEMENTS
 
A. O. SMITH CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(dollars in millions)
(unaudited)
                 
 
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
 
                 
 
 
 
 
 
See accompanying notes to unaudited condensed consolidated financial statements
 
5
 

Table of Contents
 
PART I - FINANCIAL INFORMATION
ITEM 1 - FINANCIAL STATEMENTS
 
A. O. SMITH CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY
(dollars in millions)
(unaudited)
                                 
 
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
 
                                 
 
 
 
 
 
 
 
 
 
See accompanying notes which are an integral part of these statements.
 
6
 

Table of Contents
 
PART I - FINANCIAL INFORMATION
ITEM 1 - FINANCIAL STATEMENTS
A. O. SMITH CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
September 30, 2019
(unaudited)
 
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)
Annual Report on Form
10-K
for the year ended December 31, 2018 filed with the SEC on February 15, 2019.
Recent Accounting Pronouncements
In January 2017, the Financial Accounting Standards Board (FASB) amended Accounting Standards Codification (ASC) 350,
Intangibles – Goodwill and Other
(issued under Accounting Standards Update (ASU)
2017-04,
“Simplifying the Test for Goodwill Impairment”). This amendment simplifies the test for goodwill impairment by only requiring an entity to perform an annual or interim goodwill impairment test by comparing the fair value of a reporting unit with its carrying amount and recognize an impairment charge for the amount that the carrying amount exceeds the reporting unit’s fair value.
 
Any loss recognized should not exceed the total amount of goodwill allocated to that reporting unit. The amendment requires adoption on January 1, 2020. The Company does not expect that the adoption of ASU
2017-04
will have a material impact on its consolidated balance sheets, statements of earnings or statements of cash flows.
In June 2016, the FASB issued ASC 326,
 Financial Instruments – Credit Losses
(issued under ASU
2016-13)
which modifies the measurement of expected credit losses on certain financial instruments. ASU
2016-13
requires adoption on January 1, 2020. The Company does not expect that the adoption of ASU
2016-13
will have a material impact on its consolidated balance sheets, statements of earnings or statements of cash flows.
In February 2016, the FASB amended ASC 842,
Leases
(issued under ASU
2016-02).
This amendment requires the recognition of lease assets and lease liabilities on the balance sheet for most leasing arrangements classified as operating leases. The Company applied the modified retrospective transition method and elected the transition option to use the effective date of January 1, 2019, as the date of the initial application. The Company elected the package of practical expedients as well as a separate practical expedient not to separate lease and
non-lease
components. The Company did not elect the hindsight practical expedient. The adoption of ASU
2016-02
did not have a material impact on the Company’s consolidated balance sheets, statements of earnings or statements of cash flows. Refer to Note 4, Leases, for additional information.
 
7
 

Table of Contents
 
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
air purification products in China.
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.
 
8
 

Table of Contents
 
2.      Revenue Recognition (continued)
The North America segment major product lines are defined as the following:
Water heaters
The Company’s water heaters are open water heating systems that heat potable water. Typical applications for water heaters include residences, restaurants, hotels and motels, office buildings, laundries, car washes and small businesses. The Company sells residential and commercial water heater products and related parts through its wholesale distribution channel, which includes more than 1,300 independent wholesale plumbing distributors. The Company also sells residential water heaters and related parts through retail and maintenance, repair and operations (MRO) channels. A significant portion of the Company’s water heater sales in the North America segment is derived from the replacement of existing products.
Boilers
The Company’s boilers are closed loop water heating systems used primarily for space heating or hydronic heating. The Company’s boilers are primarily used in applications in commercial settings for hospitals, schools, hotels and other large commercial buildings while residential boilers are used in homes, apartments and condominiums. The Company’s boiler distribution channel is comprised primarily of manufacturer representative firms with the remainder of our boilers distributed through wholesale channels. The Company’s boiler sales in the North America segment are derived from a combination of replacement of existing products and new construction.
Water treatment
products
The Company’s water treatment products range from
point-of-entry
water softeners, solutions for problem well water, and whole-home water filtration products, to
on-the-go
filtration bottles and
point-of-use
carbon and reverse osmosis products. Typical applications for the Company’s water treatment products include residences, restaurants, hotels and offices. The Company sells water treatment products through its wholesale and retail distribution channels, similar to water heater products and related parts. The Company’s water treatment products are also sold through independent water quality dealers as well as directly to consumers including through internet sales channels. A portion of the Company’s sales of water treatment products in the North America segment is comprised of replacement filters.
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.
 
9
 

Table of Contents
 
2.      Revenue Recognition (continued)
                                 
(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
 
                                 
 
 
 
 
 
 
 
 
 
(1)
Includes the results of Water-Right, Inc. from April 8, 2019, the date of acquisition
 
 
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
agreements being amortized over 7.5 years.
 
10
 

Table of Contents
 
3.      Acquisitions (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
 
         
 
 
 
 
 
 
 
 
 
 
 
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
earnings associated with Water-Right included in the consolidated statement of earnings
 
for the nine months ended September 30, 2019
totaled $29.9 million and $5.0 million, respectively, which included $5.4 million of operating earnings less $0.4 million of acquisition-related costs incurred by the Company resulting from the acquisition.
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
to borrow, on a collateralized basis, an amount equal to the value of the leased item over a similar term, in a similar economic environment. Variable lease components not based on an index or rate are excluded from the measurement of the lease asset and liability and expensed as incurred for all asset classes.
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
consistent with the expense recorded in the condensed consolidated statement of earnings.
 
1
1
 

Table of Contents
 
4.      Leases (continued)
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
 
years
 
Weighted-average discount rate
   
4.00
%
 
 
 
 
 
 
 
 
 
 
 
 
 
 
The components of lease expense were as follows:
 
                     
(dollars in millions)
 
 
 
 
 
 
 
Three months
ended
 
 
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
 
         
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
1
2
 

Table of Contents
 
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
months​​​​​​​ ended September 30, 2019:
(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