Document and Entity Information
Document and Entity Information - shares | 3 Months Ended | |
Mar. 31, 2018 | Apr. 30, 2018 | |
Document Information [Line Items] | ||
Document Type | 10-Q | |
Amendment Flag | false | |
Document Period End Date | Mar. 31, 2018 | |
Document Fiscal Year Focus | 2,018 | |
Document Fiscal Period Focus | Q1 | |
Trading Symbol | AOS | |
Entity Registrant Name | SMITH A O CORP | |
Entity Central Index Key | 91,142 | |
Current Fiscal Year End Date | --12-31 | |
Entity Filer Category | Large Accelerated Filer | |
Common Class A | ||
Document Information [Line Items] | ||
Entity Common Stock, Shares Outstanding | 26,065,487 | |
Common Stock | ||
Document Information [Line Items] | ||
Entity Common Stock, Shares Outstanding | 145,076,649 |
CONDENSED CONSOLIDATED STATEMEN
CONDENSED CONSOLIDATED STATEMENTS OF EARNINGS - USD ($) $ in Millions | 3 Months Ended | |
Mar. 31, 2018 | Mar. 31, 2017 | |
Net sales | $ 788 | $ 740 |
Cost of products sold | 466.5 | 439.1 |
Gross profit | 321.5 | 300.9 |
Selling, general and administrative expenses | 192.9 | 183.2 |
Restructuring and impairment expenses | 6.7 | |
Interest expense | 2.3 | 2.2 |
Other income | (5.8) | (4.9) |
Earnings before provision for income taxes | 125.4 | 120.4 |
Provision for income taxes | 26.6 | 32.7 |
Net Earnings | $ 98.8 | $ 87.7 |
Net Earnings Per Share of Common Stock | $ 0.58 | $ 0.51 |
Diluted Net Earnings Per Share of Common Stock | 0.57 | 0.50 |
Dividends Per Share of Common Stock | $ 0.18 | $ 0.14 |
CONDENSED CONSOLIDATED STATEME3
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE EARNINGS - USD ($) $ in Millions | 3 Months Ended | |
Mar. 31, 2018 | Mar. 31, 2017 | |
Net earnings | $ 98.8 | $ 87.7 |
Other comprehensive earnings | ||
Foreign currency translation adjustments | 18.4 | 7.3 |
Unrealized net gain on cash flow derivative instruments, less related income tax provision of $(0.7) in 2018 and ($0.7) in 2017 | 2 | 1.1 |
Adjustment to pension liability, less related income tax provision of $(1.1) in 2018 and $(1.7) in 2017 | 3.4 | 2.6 |
Comprehensive Earnings | $ 122.6 | $ 98.7 |
CONDENSED CONSOLIDATED STATEME4
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE EARNINGS (Parenthetical) - USD ($) $ in Millions | 3 Months Ended | |
Mar. 31, 2018 | Mar. 31, 2017 | |
Unrealized net gain on cash flow derivative instruments, related income tax provision | $ (0.7) | $ (0.7) |
Adjustment to pension liability, related income tax provision | $ (1.1) | $ (1.7) |
CONDENSED CONSOLIDATED BALANCE
CONDENSED CONSOLIDATED BALANCE SHEETS - USD ($) $ in Millions | Mar. 31, 2018 | Dec. 31, 2017 |
Assets | ||
Cash and cash equivalents | $ 241.9 | $ 346.6 |
Marketable securities | 437.8 | 473.4 |
Receivables | 638.8 | 592.7 |
Inventories | 287.1 | 297 |
Other current assets | 63.5 | 57.2 |
Total Current Assets | 1,669.1 | 1,766.9 |
Property, plant and equipment | 1,085.1 | 1,060.1 |
Less accumulated depreciation | (547) | (531.2) |
Net property, plant and equipment | 538.1 | 528.9 |
Goodwill | 515.7 | 516.7 |
Other intangibles | 304.7 | 308.7 |
Other assets | 79.3 | 76.2 |
Total Assets | 3,106.9 | 3,197.4 |
Liabilities | ||
Trade payables | 522.1 | 535 |
Accrued payroll and benefits | 56.8 | 90.8 |
Accrued liabilities | 136.6 | 116 |
Product warranties | 44 | 44.5 |
Debt due within one year | 7.4 | 7.5 |
Total Current Liabilities | 766.9 | 793.8 |
Long-term debt | 285.8 | 402.9 |
Pension liabilities | 41.2 | 48.1 |
Other liabilities | 304.6 | 307.7 |
Total Liabilities | 1,398.5 | 1,552.5 |
Stockholders' Equity | ||
Common Stock, value | 164.5 | 164.5 |
Capital in excess of par value | 491.6 | 486.5 |
Retained earnings | 1,856.5 | 1,788.7 |
Accumulated other comprehensive loss | (275.7) | (299.5) |
Treasury stock at cost | (659.5) | (626.5) |
Total Stockholders' Equity | 1,708.4 | 1,644.9 |
Total Liabilities and Stockholders' Equity | 3,106.9 | 3,197.4 |
Common Class A | ||
Stockholders' Equity | ||
Common Stock, value | $ 131 | $ 131.2 |
CONDENSED CONSOLIDATED BALANCE6
CONDENSED CONSOLIDATED BALANCE SHEETS (Parenthetical) - $ / shares | Mar. 31, 2018 | Dec. 31, 2017 |
Common Stock, par value | $ 1 | $ 1 |
Common Stock, shares authorized | 240,000,000 | 240,000,000 |
Common Stock, shares issued | 164,511,159 | 164,468,033 |
Common Class A | ||
Common Stock, par value | $ 5 | $ 5 |
Common Stock, shares authorized | 27,000,000 | 27,000,000 |
Common Stock, shares issued | 26,196,433 | 26,239,559 |
CONDENSED CONSOLIDATED STATEME7
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS - USD ($) $ in Millions | 3 Months Ended | |
Mar. 31, 2018 | Mar. 31, 2017 | |
Operating Activities | ||
Net earnings | $ 98.8 | $ 87.7 |
Adjustments to reconcile net earnings to cash provided by (used in) operating activities: | ||
Depreciation and amortization | 17.9 | 16.9 |
Stock based compensation expense | 6.5 | 5.9 |
Net changes in operating assets and liabilities: | ||
Current assets and liabilities | (70.4) | (119.3) |
Noncurrent assets and liabilities | (9.6) | (2.7) |
Cash Provided by (Used in) Operating Activities | 43.2 | (11.5) |
Investing Activities | ||
Capital expenditures | (17.3) | (16.8) |
Investments in marketable securities | (84.7) | (136) |
Net proceeds from sale of marketable securities | 136.9 | 134.9 |
Cash Provided by (Used in) Investing Activities | 34.9 | (17.9) |
Financing Activities | ||
Long-term debt (repaid) incurred | (117.3) | 45.7 |
Common stock repurchases | (33.1) | (30.1) |
Net (payments) proceeds from stock option activity | (1.4) | 1.2 |
Dividends paid | (31) | (24.4) |
Cash Used In Financing Activities | (182.8) | (7.6) |
Net decrease in cash and cash equivalents | (104.7) | (37) |
Cash and cash equivalents - beginning of period | 346.6 | 330.4 |
Cash and Cash Equivalents - End of Period | $ 241.9 | $ 293.4 |
Basis of Presentation
Basis of Presentation | 3 Months Ended |
Mar. 31, 2018 | |
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 month period ended March 31, 2018 are not necessarily indicative of the results expected for the full year. It is suggested that the accompanying condensed consolidated financial statements be read in conjunction with the audited consolidated financial statements and the notes thereto included in the Company’s Annual Report on Form 10-K Recent Accounting Pronouncements In August 2017, the Financial Accounting Standards Board (FASB) amended Accounting Standards Codification (ASC) 815, Derivatives and Hedging 2017-12, 2017-12 2017-12 In May 2017, the FASB amended ASC 718, Compensation - Stock Compensation 2017-09, 2017-09 In March 2017, the FASB amended ASC 715, Compensation - Retirement Benefits 2017-07, non-service In January 2017, the FASB amended ASC 350, Intangibles - Goodwill and Other 2017-04, 2017-04 In October 2016, the FASB amended ASC 740, Income Taxes 2016-16). 2016-16 In February 2016, the FASB amended ASC 842, Leases 2016-02). 2016-02 In May 2014, the FASB issued ASC 606-10, Revenue from Contracts with Customers 2014-09). 2014-09 2014-09 after-tax 2014-09. 2014-09 |
Revenue Recognition
Revenue Recognition | 3 Months Ended |
Mar. 31, 2018 | |
Revenue Recognition | 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 prior to the shipment of products resulting in a customer deposits liability of $57.4 million and $56.0 million at March 31, 2018 and December 31, 2017, respectively. The Company assesses collectability based on the creditworthiness of the customer as determined by credit checks and analysis, as well as the customer’s payment history. The Company’s allowance for doubtful accounts was $5.8 million and $5.3 million at March 31, 2018 and December 31, 2017, 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 is 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 and water treatment products. Both segments primarily manufacture and market in their respective regions of the world. The North America segment also manufactures and markets water system tanks. 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 2018 2017 North America Water heaters and related parts $ 446.8 $ 444.4 Boilers and related parts 36.9 32.6 Water treatment products 18.0 10.3 Total North America 501.7 487.3 Rest of World China 275.8 244.2 All other Rest of World 18.0 15.3 Total Rest of World 293.8 259.5 Inter-segment sales (7.5 ) (6.8 ) Total Net Sales $ 788.0 $ 740.0 |
Acquisitions
Acquisitions | 3 Months Ended |
Mar. 31, 2018 | |
Acquisitions | 3. Acquisitions On September 5, 2017, the Company acquired 100 percent of the shares of Hague Quality Water International (Hague), an Ohio-based water softener company. With the addition of Hague, the Company grew its North America water treatment product offerings. Hague is included in the Company’s North America segment for reporting purposes. The Company paid an aggregate cash purchase price of $43.1 million, net of $4.1 million of cash acquired. In addition, the Company established a $1.5 million holdback liability to satisfy any potential obligations of the former owners of Hague, should they arise; otherwise, the amount will be paid to the former owners of Hague on September 5, 2018. The Company also agreed to make a contingent payment of up to an additional $2.0 million based on the amount by which products manufactured by or branded Hague increase over the two-year As of the acquisition date and March 31, 2018, the Company estimated the fair value of the holdback liability and additional contingent consideration at $1.5 million and $2.0 million, respectively, and has recorded liabilities for those amounts. The following table summarizes the allocation of fair value of the assets acquired and liabilities assumed at the date of acquisition of Hague for purposes of allocating the purchase price. The $12.8 million of acquired intangible assets was comprised of $1.1 million of trade names that are not subject to amortization and $11.7 million of customer lists being amortized over 18 years. September 5, 2017 (dollars in millions) Current assets, net of cash acquired $ 7.8 Property, plant and equipment 6.9 Intangible assets 12.8 Goodwill 22.2 Total assets acquired 49.7 Current liabilities (5.6 ) Long-term liabilities (1.0 ) Total liabilities assumed (6.6 ) Net assets acquired $ 43.1 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 September 5, 2017, the date of acquisition. |
Restructuring and Impairment Ex
Restructuring and Impairment Expenses | 3 Months Ended |
Mar. 31, 2018 | |
Restructuring and Impairment Expenses | 4. Restructuring and Impairment Expenses On March 21, 2018, the Company announced a move of manufacturing operations from its Renton, Washington facility to other U.S. facilities. 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 majority of the consolidation of operations will occur in the first half of 2018. The following table presents an analysis of the Company’s restructuring reserve as of and for three months ended March 31, 2018: (dollars in millions) Severance Lease Exit Fixed Assets Total Balance at January 1, 2018 $ — $ — $ — $ — Restructuring expense recognized 4.0 2.1 0.6 6.7 Balance at March 31, 2018 $ 4.0 $ 2.1 $ 0.6 $ 6.7 |
Inventories
Inventories | 3 Months Ended |
Mar. 31, 2018 | |
Inventories | 5. Inventories (dollars in millions) March 31, 2018 December 31, 2017 Finished products $ 134.7 $ 140.4 Work in process 20.3 18.3 Raw materials 154.5 160.5 Inventories, at FIFO cost 309.5 319.2 LIFO reserve (22.4 ) (22.2 ) Net inventory $ 287.1 $ 297.0 |
Product Warranties
Product Warranties | 3 Months Ended |
Mar. 31, 2018 | |
Product Warranties | 6. 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. (dollars in millions) 2018 2017 Balance at January 1 $ 142.4 $ 140.9 Expense 11.6 12.4 Claims settled (11.1 ) (10.7 ) Balance at March 31 $ 142.9 $ 142.6 |
Long-Term Debt
Long-Term Debt | 3 Months Ended |
Mar. 31, 2018 | |
Long-Term Debt | 7. Long-Term Debt The Company has a $500 million multi-year multi-currency revolving credit agreement with a group of nine banks, which expires on December 15, 2021. The facility has an accordion provision which allows it to be increased up to $700 million if certain conditions (including lender approval) are satisfied. 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 March 31, 2018. 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 | 3 Months Ended |
Mar. 31, 2018 | |
Earnings per Share of Common Stock | 8. 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 March 31, 2018 2017 Denominator for basic earnings per share - weighted average shares 171,532,008 173,380,076 Effect of dilutive stock options, restricted stock and share units 1,818,656 2,039,843 Denominator for diluted earnings per share 173,350,664 175,419,919 |
Stock Based Compensation
Stock Based Compensation | 3 Months Ended |
Mar. 31, 2018 | |
Stock Based Compensation | 9. 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 March 31, 2018 was 2,501,851. 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 March 31, 2018 and 2017 was $6.5 million and $5.9 million, respectively. Stock Options The stock options granted in the three months ended March 31, 2018 and 2017 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 2018 and 2017 expire ten years after date of grant. The Company’s stock options are expensed ratably over the three year vesting period; however, included in stock option expense for the three months ended March 31, 2018 and 2017 was expense associated with the accelerated vesting of stock option awards for certain employees who either are retirement eligible or become retirement eligible during the vesting period. Stock based compensation expense attributable to stock options in the three months ended March 31, 2018 and 2017 was $3.2 million and $2.9 million, respectively. Changes in option shares, all of which relate to the Company’s Common Stock, were as follows for the three months ended March 31, 2018: Weighted-Avg. Number of Average Aggregate Outstanding at January 1, 2018 $ 27.73 2,263,126 Granted 61.80 348,870 Exercised 25.78 (73,775 ) Terminated 49.39 (11,600 ) Outstanding at March 31, 2018 32.39 2,526,621 7 years $ 78.8 Exercisable at March 31, 2018 24.29 1,766,015 6 years $ 69.4 The weighted-average fair value per option at the date of grant during the three months ended March 31, 2018 and 2017 using the Black-Scholes option-pricing model was $14.86 and $13.04, respectively. Assumptions were as follows: Three Months Ended March 31, 2018 2017 Expected life (years) 5.7 5.7 Risk-free interest rate 2.9 % 2.4 % Dividend yield 1.0 % 1.0 % Expected volatility 22.1 % 26.5 % 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) Certain non-U.S.-based Restricted Stock and Share Units Participants may also be awarded shares of restricted stock or share units under the Plan. The Company granted 96,841 and 107,755 share units under the plan in the three months ended March 31, 2018 and 2017, respectively. The share units were valued at $6.0 million and $5.4 million at the date of issuance in 2018 and 2017, respectively, based on the price of the Company’s Common Stock at the date of grant. The share units are recognized as compensation expense ratably over the three-year vesting period; however, included in share unit expense in the three months ended March 31, 2018 and 2017 was expense associated with accelerated vesting of share unit awards for certain employees who either are retirement eligible or will become retirement eligible during the vesting period. Stock based compensation expense attributable to share units of $3.3 million and $3.0 million was recognized in the three months ended March 31, 2018 and 2017, respectively. Certain non-U.S.-based A summary of share unit activity under the plan is as follows for the three months ended March 31, 2018: Number of Units Weighted-Average Issued and unvested at January 1, 2018 433,290 $ 34.96 Granted 96,841 61.73 Vested (144,345 ) 30.77 Forfeited (4,320 ) 41.57 Issued and unvested at March 31, 2018 381,466 42.53 |
Pensions
Pensions | 3 Months Ended |
Mar. 31, 2018 | |
Pensions | 10. Pensions The following table presents the components of the Company’s net pension income. (dollars in millions) Three Months Ended March 31, 2018 2017 Service cost $ 0.5 $ 0.4 Interest cost 7.2 7.5 Expected return on plan assets (14.5 ) (14.4 ) Amortization of unrecognized loss 4.7 4.5 Amortization of prior service cost (0.1 ) (0.1 ) Defined benefit plan income $ (2.2 ) $ (2.1 ) The Company was not required to make a contribution to its U.S. pension plan in 2017 but made a voluntary $30 million contribution. The Company is not required to make a contribution and does not anticipate making a contribution in 2018. As required under ASU 2017-07, |
Segment Results
Segment Results | 3 Months Ended |
Mar. 31, 2018 | |
Segment Results | 11. 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 and water treatment products. Both segments primarily manufacture and market in their respective regions of the world. The North America segment also manufactures and markets water system tanks. 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 March 31, 2018 2017 Net sales North America $ 501.7 $ 487.3 Rest of World 293.8 259.5 Inter-segment sales (7.5 ) (6.8 ) $ 788.0 $ 740.0 Segment earnings North America (1) $ 106.0 $ 104.2 Rest of World 36.1 32.5 Inter-segment earnings elimination (0.1 ) (0.1 ) 142.0 136.6 Corporate expenses (14.3 ) (14.0 ) Interest expense (2.3 ) (2.2 ) Earnings before income taxes 125.4 120.4 Provision for income taxes 26.6 32.7 Net earnings $ 98.8 $ 87.7 (1) $ 6.7 $ — |
Fair Value Measurements
Fair Value Measurements | 3 Months Ended |
Mar. 31, 2018 | |
Fair Value Measurements | 12. Fair Value Measurements ASC 820, Fair Value Measurements Assets and liabilities measured at fair value are based on the market approach which are prices and other relevant information generated by market transactions involving identical or comparable assets or liabilities. The following table presents assets measured at fair value on a recurring basis. (dollars in millions) Fair Value Measurement Using March 31, December 31, Quoted prices in active markets for identical assets (Level 1) $ 434.9 $ 475.1 There were no changes in the Company’s valuation techniques used to measure fair values on a recurring basis during the three months ended March 31, 2018. |
Derivative Instruments
Derivative Instruments | 3 Months Ended |
Mar. 31, 2018 | |
Derivative Instruments | 13. Derivative Instruments ASC 815 Derivatives and Hedging 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. The majority of the amounts in accumulated other comprehensive loss for cash flow hedges are expected to be reclassified into earnings within one year. 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) March 31, 2018 2017 Buy Sell Buy Sell British pound $ — $ 0.9 $ — $ 0.9 Canadian dollar — 36.6 — 58.8 Euro 23.0 2.5 19.1 1.4 Mexican peso 16.1 — 13.7 — Total $ 39.1 $ 40.0 $ 32.8 $ 61.1 Commodity Futures Contracts In addition to entering into supply arrangements in the normal course of business, the Company also enters into futures contracts to fix the cost of certain raw material purchases, principally steel, with the objective of minimizing changes in cost due to market price fluctuations. The hedging strategy for achieving this objective is to purchase steel futures contracts on the New York Metals Exchange (NYMEX) and copper futures contracts on the open market of the London Metals Exchange (LME) or over the counter contracts based on the LME. With NYMEX, the Company is required to make cash deposits on unrealized losses on steel derivative contracts. The after-tax after-tax 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. non-U.S. after-tax non-U.S. 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 Sheet Location March 31, December 31, Foreign currency contracts Other current assets $ 1.3 $ 0.2 Accrued liabilities (4.2 ) (1.8 ) Commodities contracts Other current assets 0.3 0.2 Accrued liabilities — — Total derivatives designated as hedging instruments $ (2.6 ) $ (1.4 ) The effect of derivatives instruments on the condensed consolidated statement of earnings: Three Months Ended March 31 (dollars in millions): Derivatives in ASC 815 cash flow hedging relationships Amount of gain (loss) Location of gain (loss) Amount of gain 2018 2017 2018 2017 Foreign currency contracts $ 2.8 $ 1.1 Cost of products sold $ — $ — Commodities contracts 0.1 — Cost of products sold — (0.5 ) $ 2.9 $ 1.1 $ — $ (0.5 ) |
Income Taxes
Income Taxes | 3 Months Ended |
Mar. 31, 2018 | |
Income Taxes | 14. Income Taxes The effective income tax rate for the three months ended March 31, 2018 was 21.2 percent compared to 27.2 percent for the three months ended March 31, 2017. The Company estimates that its annual effective income tax rate for the full year 2018 will be approximately 22 percent. The lower effective income tax rate for the three months ended March 31, 2018 compared to the effective income tax rate for the three months ended March 31, 2017 was primarily due to lower federal income taxes related to the U.S. Tax Cuts & Jobs Act (U.S. Tax Reform) which were partially offset by lower income tax benefits from settled stock based compensation awards. As of March 31, 2018, the Company had $6.2 million of unrecognized tax benefits of which $0.6 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 2015-2017 are subject to audit. The Company is subject to state and local income tax audits for tax years 2001-2017. The Company is subject to non-U.S. U.S. Tax Reform was enacted on December 22, 2017 and significantly changed U.S. corporate income tax laws. Among other things, U.S. Tax Reform reduced the U.S. corporate income tax rate to 21 percent commencing on January 1, 2018, implemented a territorial tax system and levied a one-time one-time For tax years beginning after December 31, 2017, U.S. Tax Reform subjects U.S. shareholders to tax on Global Intangible Low-Taxed Accounting for GILTI |
Changes in Accumulated Other Co
Changes in Accumulated Other Comprehensive Loss by Component | 3 Months Ended |
Mar. 31, 2018 | |
Changes in Accumulated Other Comprehensive Loss by Component | 15. Changes in Accumulated Other Comprehensive Loss by Component Changes to accumulated other comprehensive loss by component are as follows: (dollars in millions) Three Months Ended March 31, 2018 2017 Cumulative foreign currency translation Balance at beginning of period $ (26.5 ) $ (79.2 ) Other comprehensive income before reclassifications 18.4 7.3 Balance at end of period (8.1 ) (71.9 ) Unrealized net gain on cash flow derivatives Balance at beginning of period (0.9 ) 0.2 Other comprehensive income before reclassifications 2.0 0.8 Realized gains on derivatives reclassified to cost of products sold (net of income tax provision of $- and $(0.2) in 2018 and 2017, respectively) — 0.3 Balance at end of period 1.1 1.3 Pension liability Balance at beginning of period (272.1 ) (284.2 ) Amounts reclassified from accumulated other comprehensive loss: (1) 3.4 2.6 Balance at end of period (268.7 ) (281.6 ) Accumulated other comprehensive loss, end of period $ (275.7 ) $ (352.2 ) (1) Amortization of pension items: Actuarial losses $ 4.7 (2) $ 4.5 (2) Prior year service cost (0.1 ) (2) (0.1 ) (2) 4.6 4.4 Income tax benefit (1.2 ) (1.8 ) Reclassification net of income tax benefit $ 3.4 $ 2.6 (2) These accumulated other comprehensive loss components are included in the computation of net periodic pension cost. See Note 10 - Pensions for additional details |
Basis of Presentation (Policies
Basis of Presentation (Policies) | 3 Months Ended |
Mar. 31, 2018 | |
Recent Accounting Pronouncements | Recent Accounting Pronouncements In August 2017, the Financial Accounting Standards Board (FASB) amended Accounting Standards Codification (ASC) 815, Derivatives and Hedging 2017-12, 2017-12 2017-12 In May 2017, the FASB amended ASC 718, Compensation - Stock Compensation 2017-09, 2017-09 In March 2017, the FASB amended ASC 715, Compensation - Retirement Benefits 2017-07, non-service In January 2017, the FASB amended ASC 350, Intangibles - Goodwill and Other 2017-04, 2017-04 In October 2016, the FASB amended ASC 740, Income Taxes 2016-16). 2016-16 In February 2016, the FASB amended ASC 842, Leases 2016-02). 2016-02 In May 2014, the FASB issued ASC 606-10, Revenue from Contracts with Customers 2014-09). 2014-09 2014-09 after-tax 2014-09. 2014-09 |
Revenue Recognition (Tables)
Revenue Recognition (Tables) | 3 Months Ended |
Mar. 31, 2018 | |
Segment Sales 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 2018 2017 North America Water heaters and related parts $ 446.8 $ 444.4 Boilers and related parts 36.9 32.6 Water treatment products 18.0 10.3 Total North America 501.7 487.3 Rest of World China 275.8 244.2 All other Rest of World 18.0 15.3 Total Rest of World 293.8 259.5 Inter-segment sales (7.5 ) (6.8 ) Total Net Sales $ 788.0 $ 740.0 |
Acquisitions (Tables)
Acquisitions (Tables) | 3 Months Ended |
Mar. 31, 2018 | |
Hague | |
Summary of Preliminary Allocation of Fair Value of Assets Acquired and Liabilities Assumed at Date of Acquisition | The following table summarizes the allocation of fair value of the assets acquired and liabilities assumed at the date of acquisition of Hague for purposes of allocating the purchase price. The $12.8 million of acquired intangible assets was comprised of $1.1 million of trade names that are not subject to amortization and $11.7 million of customer lists being amortized over 18 years. September 5, 2017 (dollars in millions) Current assets, net of cash acquired $ 7.8 Property, plant and equipment 6.9 Intangible assets 12.8 Goodwill 22.2 Total assets acquired 49.7 Current liabilities (5.6 ) Long-term liabilities (1.0 ) Total liabilities assumed (6.6 ) Net assets acquired $ 43.1 |
Restructuring and Impairment 26
Restructuring and Impairment Expenses (Tables) | 3 Months Ended |
Mar. 31, 2018 | |
Analysis of Company's Restructuring Reserve | The following table presents an analysis of the Company’s restructuring reserve as of and for three months ended March 31, 2018: (dollars in millions) Severance Lease Exit Fixed Assets Total Balance at January 1, 2018 $ — $ — $ — $ — Restructuring expense recognized 4.0 2.1 0.6 6.7 Balance at March 31, 2018 $ 4.0 $ 2.1 $ 0.6 $ 6.7 |
Inventories (Tables)
Inventories (Tables) | 3 Months Ended |
Mar. 31, 2018 | |
Schedule of Inventories | (dollars in millions) March 31, 2018 December 31, 2017 Finished products $ 134.7 $ 140.4 Work in process 20.3 18.3 Raw materials 154.5 160.5 Inventories, at FIFO cost 309.5 319.2 LIFO reserve (22.4 ) (22.2 ) Net inventory $ 287.1 $ 297.0 |
Product Warranties (Tables)
Product Warranties (Tables) | 3 Months Ended |
Mar. 31, 2018 | |
Schedule of Product Warranty Liability Activity | The following table presents the Company’s warranty liability activity. (dollars in millions) 2018 2017 Balance at January 1 $ 142.4 $ 140.9 Expense 11.6 12.4 Claims settled (11.1 ) (10.7 ) Balance at March 31 $ 142.9 $ 142.6 |
Earnings per Share of Common 29
Earnings per Share of Common Stock (Tables) | 3 Months Ended |
Mar. 31, 2018 | |
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 March 31, 2018 2017 Denominator for basic earnings per share - weighted average shares 171,532,008 173,380,076 Effect of dilutive stock options, restricted stock and share units 1,818,656 2,039,843 Denominator for diluted earnings per share 173,350,664 175,419,919 |
Stock Based Compensation (Table
Stock Based Compensation (Tables) | 3 Months Ended |
Mar. 31, 2018 | |
Schedule of Changes in Option Shares | Changes in option shares, all of which relate to the Company’s Common Stock, were as follows for the three months ended March 31, 2018: Weighted-Avg. Number of Average Aggregate Outstanding at January 1, 2018 $ 27.73 2,263,126 Granted 61.80 348,870 Exercised 25.78 (73,775 ) Terminated 49.39 (11,600 ) Outstanding at March 31, 2018 32.39 2,526,621 7 years $ 78.8 Exercisable at March 31, 2018 24.29 1,766,015 6 years $ 69.4 |
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 three months ended March 31, 2018 and 2017 using the Black-Scholes option-pricing model was $14.86 and $13.04, respectively. Assumptions were as follows: Three Months Ended March 31, 2018 2017 Expected life (years) 5.7 5.7 Risk-free interest rate 2.9 % 2.4 % Dividend yield 1.0 % 1.0 % Expected volatility 22.1 % 26.5 % |
Schedule of Share Unit Activity Under Plan | A summary of share unit activity under the plan is as follows for the three months ended March 31, 2018: Number of Units Weighted-Average Issued and unvested at January 1, 2018 433,290 $ 34.96 Granted 96,841 61.73 Vested (144,345 ) 30.77 Forfeited (4,320 ) 41.57 Issued and unvested at March 31, 2018 381,466 42.53 |
Pensions (Tables)
Pensions (Tables) | 3 Months Ended |
Mar. 31, 2018 | |
Schedule of Components of Net Pension Income | The following table presents the components of the Company’s net pension income. (dollars in millions) Three Months Ended March 31, 2018 2017 Service cost $ 0.5 $ 0.4 Interest cost 7.2 7.5 Expected return on plan assets (14.5 ) (14.4 ) Amortization of unrecognized loss 4.7 4.5 Amortization of prior service cost (0.1 ) (0.1 ) Defined benefit plan income $ (2.2 ) $ (2.1 ) |
Segment Results (Tables)
Segment Results (Tables) | 3 Months Ended |
Mar. 31, 2018 | |
Schedule of Earnings | The following table presents the Company’s segment results: (dollars in millions) Three Months Ended March 31, 2018 2017 Net sales North America $ 501.7 $ 487.3 Rest of World 293.8 259.5 Inter-segment sales (7.5 ) (6.8 ) $ 788.0 $ 740.0 Segment earnings North America (1) $ 106.0 $ 104.2 Rest of World 36.1 32.5 Inter-segment earnings elimination (0.1 ) (0.1 ) 142.0 136.6 Corporate expenses (14.3 ) (14.0 ) Interest expense (2.3 ) (2.2 ) Earnings before income taxes 125.4 120.4 Provision for income taxes 26.6 32.7 Net earnings $ 98.8 $ 87.7 (1) $ 6.7 $ — |
Fair Value Measurements (Tables
Fair Value Measurements (Tables) | 3 Months Ended |
Mar. 31, 2018 | |
Schedule of Assets 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 March 31, December 31, Quoted prices in active markets for identical assets (Level 1) $ 434.9 $ 475.1 |
Derivative Instruments (Tables)
Derivative Instruments (Tables) | 3 Months Ended |
Mar. 31, 2018 | |
Schedule of Effect of Derivatives Instruments on Condensed Consolidated Statement of Earnings | The effect of derivatives instruments on the condensed consolidated statement of earnings: Three Months Ended March 31 (dollars in millions): Derivatives in ASC 815 cash flow hedging relationships Amount of gain (loss) Location of gain (loss) Amount of gain 2018 2017 2018 2017 Foreign currency contracts $ 2.8 $ 1.1 Cost of products sold $ — $ — Commodities contracts 0.1 — Cost of products sold — (0.5 ) $ 2.9 $ 1.1 $ — $ (0.5 ) |
Designated as Hedging Instrument | |
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) March 31, 2018 2017 Buy Sell Buy Sell British pound $ — $ 0.9 $ — $ 0.9 Canadian dollar — 36.6 — 58.8 Euro 23.0 2.5 19.1 1.4 Mexican peso 16.1 — 13.7 — Total $ 39.1 $ 40.0 $ 32.8 $ 61.1 |
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 Sheet Location March 31, December 31, Foreign currency contracts Other current assets $ 1.3 $ 0.2 Accrued liabilities (4.2 ) (1.8 ) Commodities contracts Other current assets 0.3 0.2 Accrued liabilities — — Total derivatives designated as hedging instruments $ (2.6 ) $ (1.4 ) |
Changes in Accumulated Other 35
Changes in Accumulated Other Comprehensive Loss by Component (Tables) | 3 Months Ended |
Mar. 31, 2018 | |
Changes to Accumulated Other Comprehensive Loss by Component | Changes to accumulated other comprehensive loss by component are as follows: (dollars in millions) Three Months Ended March 31, 2018 2017 Cumulative foreign currency translation Balance at beginning of period $ (26.5 ) $ (79.2 ) Other comprehensive income before reclassifications 18.4 7.3 Balance at end of period (8.1 ) (71.9 ) Unrealized net gain on cash flow derivatives Balance at beginning of period (0.9 ) 0.2 Other comprehensive income before reclassifications 2.0 0.8 Realized gains on derivatives reclassified to cost of products sold (net of income tax provision of $- and $(0.2) in 2018 and 2017, respectively) — 0.3 Balance at end of period 1.1 1.3 Pension liability Balance at beginning of period (272.1 ) (284.2 ) Amounts reclassified from accumulated other comprehensive loss: (1) 3.4 2.6 Balance at end of period (268.7 ) (281.6 ) Accumulated other comprehensive loss, end of period $ (275.7 ) $ (352.2 ) (1) Amortization of pension items: Actuarial losses $ 4.7 (2) $ 4.5 (2) Prior year service cost (0.1 ) (2) (0.1 ) (2) 4.6 4.4 Income tax benefit (1.2 ) (1.8 ) Reclassification net of income tax benefit $ 3.4 $ 2.6 (2) These accumulated other comprehensive loss components are included in the computation of net periodic pension cost. See Note 10 - Pensions for additional details |
Basis of Presentation - Additio
Basis of Presentation - Additional Information (Detail) $ in Millions | Jan. 01, 2018USD ($) |
Retained Earnings | Accounting Standards Update 2014-09 | |
Net after tax reduction to opening retained earnings | $ 3.9 |
Cost of Products Sold | Accounting Standards Update 2017-07 | |
Reclassified amounts of non-service cost pension income on adoption of amendment | 1.4 |
Selling, General and Administrative Expenses | Accounting Standards Update 2017-07 | |
Reclassified amounts of non-service cost pension income on adoption of amendment | $ 1.1 |
Revenue Recognition - Additiona
Revenue Recognition - Additional Information (Detail) $ in Millions | 3 Months Ended | |
Mar. 31, 2018USD ($)SegmentDistributor | Dec. 31, 2017USD ($) | |
Customer deposits liability | $ 57.4 | $ 56 |
Allowance for doubtful accounts | $ 5.8 | $ 5.3 |
Number of reportable segments | Segment | 2 | |
Water Heaters | North America | ||
Number of wholesale distributors | Distributor | 1,200 |
Segment Sales Disaggregated by
Segment Sales Disaggregated by Major Product Line (Detail) - USD ($) $ in Millions | 3 Months Ended | |
Mar. 31, 2018 | Mar. 31, 2017 | |
Net sales | $ 788 | $ 740 |
Inter-segment | ||
Net sales | (7.5) | (6.8) |
North America | Operating Segments | ||
Net sales | 501.7 | 487.3 |
North America | Operating Segments | Water Heaters and Related Parts | ||
Net sales | 446.8 | 444.4 |
North America | Operating Segments | Boilers and Related Parts | ||
Net sales | 36.9 | 32.6 |
North America | Operating Segments | Water Treatment Products | ||
Net sales | 18 | 10.3 |
Rest of World | Operating Segments | ||
Net sales | 293.8 | 259.5 |
Rest of World | Operating Segments | China | ||
Net sales | 275.8 | 244.2 |
Rest of World | Operating Segments | All Other Rest of World | ||
Net sales | $ 18 | $ 15.3 |
Acquisitions - Additional Infor
Acquisitions - Additional Information (Detail) - Hague - USD ($) $ in Millions | Sep. 05, 2017 | Mar. 31, 2018 |
Business Acquisition [Line Items] | ||
Percentage of ownership interest acquired | 100.00% | |
Aggregate cash purchase price, net of cash acquired | $ 43.1 | |
Cash acquired from business acquisition | 4.1 | |
Contingent consideration and holdback | $ 1.5 | $ 2 |
Contingent consideration, conditions measurement period | 2 years | |
Acquisition-related costs | $ 0.2 | |
Acquired intangible assets | 12.8 | |
Maximum | ||
Business Acquisition [Line Items] | ||
Contingent consideration and holdback | 2 | |
Trade Names | ||
Business Acquisition [Line Items] | ||
Acquired intangible assets, not subject to amortization | 1.1 | |
Customer Lists | ||
Business Acquisition [Line Items] | ||
Acquired intangible assets, subject to amortization | $ 11.7 | |
Acquired intangible assets, amortization period, in years | 18 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 | Mar. 31, 2018 | Dec. 31, 2017 | Sep. 05, 2017 |
Business Acquisition [Line Items] | |||
Goodwill | $ 515.7 | $ 516.7 | |
Hague | |||
Business Acquisition [Line Items] | |||
Current assets, net of cash acquired | $ 7.8 | ||
Property, plant and equipment | 6.9 | ||
Intangible assets | 12.8 | ||
Goodwill | 22.2 | ||
Total assets acquired | 49.7 | ||
Current liabilities | (5.6) | ||
Long-term liabilities | (1) | ||
Total liabilities assumed | (6.6) | ||
Net assets acquired | $ 43.1 |
Restructuring and Impairment 41
Restructuring and Impairment Expenses - Additional Information (Detail) - USD ($) $ in Millions | Mar. 21, 2018 | Mar. 31, 2018 | Mar. 31, 2017 |
Restructuring expense recognized | $ 6.7 | $ 6.7 | |
Severance costs | 4 | ||
Lease exit cost | 2.1 | ||
Impairment of long-lived assets | 0.6 | ||
Income tax expense (benefit) | $ 26.6 | $ 32.7 | |
Restructuring and Impairment Charges | |||
Income tax expense (benefit) | $ 1.7 |
Analysis of Company's Restructu
Analysis of Company's Restructuring Reserve (Detail) - USD ($) $ in Millions | Mar. 21, 2018 | Mar. 31, 2018 |
Restructuring expense recognized | $ 6.7 | $ 6.7 |
Ending balance | 6.7 | |
Severance Costs | ||
Restructuring expense recognized | 4 | |
Ending balance | 4 | |
Lease Exit Costs | ||
Restructuring expense recognized | 2.1 | |
Ending balance | 2.1 | |
Fixed Assets Impairment | ||
Restructuring expense recognized | 0.6 | |
Ending balance | $ 0.6 |
Schedule of Inventories (Detail
Schedule of Inventories (Detail) - USD ($) $ in Millions | Mar. 31, 2018 | Dec. 31, 2017 |
Inventories | ||
Finished products | $ 134.7 | $ 140.4 |
Work in process | 20.3 | 18.3 |
Raw materials | 154.5 | 160.5 |
Inventories, at FIFO cost | 309.5 | 319.2 |
LIFO reserve | (22.4) | (22.2) |
Net inventory | $ 287.1 | $ 297 |
Company's Warranty Liability Ac
Company's Warranty Liability Activity (Detail) - USD ($) $ in Millions | 3 Months Ended | |
Mar. 31, 2018 | Mar. 31, 2017 | |
Product Warranties | ||
Balance at beginning of year | $ 142.4 | $ 140.9 |
Expense | 11.6 | 12.4 |
Claims settled | (11.1) | (10.7) |
Balance at end of year | $ 142.9 | $ 142.6 |
Long-Term Debt - Additional Inf
Long-Term Debt - Additional Information (Detail) | 3 Months Ended |
Mar. 31, 2018USD ($)lender | |
Debt Instrument [Line Items] | |
Multi-currency revolving credit agreement | $ 500,000,000 |
Number of banks involved in multi-year multi-currency revolving credit agreement | lender | 9 |
Revolving credit facility, expiration date | Dec. 15, 2021 |
Multi-currency revolving credit agreement, maximum amount | $ 700,000,000 |
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 | |
Mar. 31, 2018 | Mar. 31, 2017 | |
Earnings Per Share Of Common Stock | ||
Denominator for basic earnings per share - weighted average shares | 171,532,008 | 173,380,076 |
Effect of dilutive stock options, restricted stock and share units | 1,818,656 | 2,039,843 |
Denominator for diluted earnings per share | 173,350,664 | 175,419,919 |
Stock Based Compensation - Addi
Stock Based Compensation - Additional Information (Detail) - USD ($) $ / shares in Units, $ in Millions | 3 Months Ended | ||
Mar. 31, 2018 | Mar. 31, 2017 | Dec. 31, 2017 | |
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | |||
Total stock based compensation cost recognized | $ 6.5 | $ 5.9 | |
Stock option compensation expense recognized | $ 3.2 | $ 2.9 | |
Weighted-average fair value per option at the date of grant | $ 14.86 | $ 13.04 | |
Number of Options, outstanding | 2,526,621 | 2,263,126 | |
Number of options, exercisable at end of period | 1,766,015 | ||
Number of options, exercised | 73,775 | ||
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 | 18,420 | ||
Number of options, exercisable at end of period | 17,464 | ||
Number of Options, granted | 0 | 0 | |
Number of options, exercised | 5,240 | ||
Restricted Stock And Share Units | |||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | |||
Award vesting period | 3 years | 3 years | |
Number of Units - Granted | 96,841 | 107,755 | |
Value of share units at the date of issuance | $ 6 | $ 5.4 | |
Share based compensation expense attributable to share units | $ 3.3 | $ 3 | |
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 | 2,501,851 |
Changes in Option Awards All of
Changes in Option Awards All of Which Related to Common Stock (Detail) $ / shares in Units, $ in Millions | 3 Months Ended |
Mar. 31, 2018USD ($)$ / sharesshares | |
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | |
Weighted-Average Per Share Exercise Price, beginning period | $ / shares | $ 27.73 |
Weighted-Average Per Share Exercise Price - Granted | $ / shares | 61.80 |
Weighted-Average Per Share Exercise Price - Exercised | $ / shares | 25.78 |
Weighted-Average Per Share Exercise Price - Terminated | $ / shares | 49.39 |
Weighted-Average Per Share Exercise Price, ending period | $ / shares | 32.39 |
Weighted-Average Per Share Exercise Price, Exercisable | $ / shares | $ 24.29 |
Number of Options Outstanding, Beginning Balance | shares | 2,263,126 |
Number of Options, Granted | shares | 348,870 |
Number of Options, Exercised | shares | (73,775) |
Number of options, Terminated | shares | (11,600) |
Number of Options Outstanding, Ending Balance | shares | 2,526,621 |
Number of options, exercisable at end of period | shares | 1,766,015 |
Average Remaining Contractual Life, Outstanding at End of Period, Years | 7 years |
Average Remaining Contractual Life, Exercisable at End of Period, Years | 6 years |
Aggregate Intrinsic Value, Outstanding at End of Period | $ | $ 78.8 |
Aggregate Intrinsic Value, Exercisable at End of Period | $ | $ 69.4 |
Schedule of Weighted-Average Fa
Schedule of Weighted-Average Fair Value per Option at Date of Grant (Detail) | 3 Months Ended | |
Mar. 31, 2018 | Mar. 31, 2017 | |
Stock Based Compensation [Abstract] | ||
Expected life (years) | 5 years 8 months 12 days | 5 years 8 months 12 days |
Risk-free interest rate | 2.90% | 2.40% |
Dividend yield | 1.00% | 1.00% |
Expected volatility | 22.10% | 26.50% |
Summary of Share Unit Activity
Summary of Share Unit Activity Under Plan (Detail) - Restricted Stock And Share Units - $ / shares | 3 Months Ended | |
Mar. 31, 2018 | Mar. 31, 2017 | |
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | ||
Number of Units Issued and unvested, Beginning of Period | 433,290 | |
Number of Units - Granted | 96,841 | 107,755 |
Number of Units - Vested | (144,345) | |
Number of Units - Forfeited | (4,320) | |
Number of Units Issued and unvested, End of Period | 381,466 | |
Weighted-Average Grant Date Value, Beginning of Period | $ 34.96 | |
Weighted-Average Grant Date Value - Granted | 61.73 | |
Weighted-Average Grant Date Value - Vested | 30.77 | |
Weighted-Average Grant Date Value - Forfeited | 41.57 | |
Weighted-Average Grant Date Value, End of Period | $ 42.53 |
Components of Company's Net Pen
Components of Company's Net Pension Income (Detail) - USD ($) $ in Millions | 3 Months Ended | |
Mar. 31, 2018 | Mar. 31, 2017 | |
Pensions [Abstract] | ||
Service cost | $ 0.5 | $ 0.4 |
Interest cost | 7.2 | 7.5 |
Expected return on plan assets | (14.5) | (14.4) |
Amortization of unrecognized loss | 4.7 | 4.5 |
Amortization of prior service cost | (0.1) | (0.1) |
Defined benefit plan income | $ (2.2) | $ (2.1) |
Pensions - Additional Informati
Pensions - Additional Information (Detail) $ in Millions | 3 Months Ended |
Mar. 31, 2018USD ($) | |
Pension and Other Postretirement Benefits Disclosure [Line Items] | |
Voluntary pension contribution | $ 30 |
Segment Results - Additional In
Segment Results - Additional Information (Detail) | 3 Months Ended |
Mar. 31, 2018Segment | |
Segment Reporting Information [Line Items] | |
Number of reporting segments | 2 |
Schedule of Earnings (Detail)
Schedule of Earnings (Detail) - USD ($) $ in Millions | 3 Months Ended | ||
Mar. 31, 2018 | Mar. 31, 2017 | ||
Segment Reporting Information [Line Items] | |||
Net sales | $ 788 | $ 740 | |
Segment earnings | 142 | 136.6 | |
Other income (expense) | 5.8 | 4.9 | |
Interest expense | (2.3) | (2.2) | |
Earnings before provision for income taxes | 125.4 | 120.4 | |
Provision for income taxes | 26.6 | 32.7 | |
Net earnings | 98.8 | 87.7 | |
Inter-segment | |||
Segment Reporting Information [Line Items] | |||
Net sales | (7.5) | (6.8) | |
Segment earnings | (0.1) | (0.1) | |
Corporate | |||
Segment Reporting Information [Line Items] | |||
Other income (expense) | (14.3) | (14) | |
North America | Operating Segments | |||
Segment Reporting Information [Line Items] | |||
Net sales | 501.7 | 487.3 | |
Segment earnings | [1] | 106 | 104.2 |
Rest of World | Operating Segments | |||
Segment Reporting Information [Line Items] | |||
Net sales | 293.8 | 259.5 | |
Segment earnings | $ 36.1 | $ 32.5 | |
[1] | includes restructuring and impairment expenses of: $ 6.7 $ - |
Schedule of Earnings (Parenthet
Schedule of Earnings (Parenthetical) (Detail) - USD ($) $ in Millions | Mar. 21, 2018 | Mar. 31, 2018 |
Segment Reporting Information [Line Items] | ||
Restructuring expense recognized | $ 6.7 | $ 6.7 |
Assets Measured at Fair Value o
Assets Measured at Fair Value on Recurring Basis (Detail) - USD ($) $ in Millions | Mar. 31, 2018 | Dec. 31, 2017 |
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 | $ 434.9 | $ 475.1 |
Schedule of Summary by Currency
Schedule of Summary by Currency of Foreign Currency Forward Contracts (Detail) - Foreign currency forward contracts - USD ($) | Mar. 31, 2018 | Mar. 31, 2017 |
Buy | ||
Derivative Instruments and Hedging Activities Disclosures [Line Items] | ||
Contractual amounts of foreign currency forward contracts | $ 39,100,000 | $ 32,800,000 |
Buy | Euro | ||
Derivative Instruments and Hedging Activities Disclosures [Line Items] | ||
Contractual amounts of foreign currency forward contracts | 23,000,000 | 19,100,000 |
Buy | Mexican peso | ||
Derivative Instruments and Hedging Activities Disclosures [Line Items] | ||
Contractual amounts of foreign currency forward contracts | 16,100,000 | 13,700,000 |
Sell | ||
Derivative Instruments and Hedging Activities Disclosures [Line Items] | ||
Contractual amounts of foreign currency forward contracts | 40,000,000 | 61,100,000 |
Sell | British pound | ||
Derivative Instruments and Hedging Activities Disclosures [Line Items] | ||
Contractual amounts of foreign currency forward contracts | 900,000 | 900,000 |
Sell | Canadian dollar | ||
Derivative Instruments and Hedging Activities Disclosures [Line Items] | ||
Contractual amounts of foreign currency forward contracts | 36,600,000 | 58,800,000 |
Sell | Euro | ||
Derivative Instruments and Hedging Activities Disclosures [Line Items] | ||
Contractual amounts of foreign currency forward contracts | $ 2,500,000 | $ 1,400,000 |
Derivative Instruments - Additi
Derivative Instruments - Additional Information (Detail) - USD ($) | 3 Months Ended | |
Mar. 31, 2018 | Mar. 31, 2017 | |
Trading Activity, Gains and Losses, Net [Line Items] | ||
Derivative instruments, loss recognized in other comprehensive income (loss) | $ 18,400,000 | $ 7,300,000 |
Net Investment Hedging | Non-US | ||
Trading Activity, Gains and Losses, Net [Line Items] | ||
Contractual amounts of foreign currency forward contracts | 237,500,000 | |
Derivative instruments, loss recognized in other comprehensive income (loss) | $ 4,200,000 | |
Commodity Futures Contracts | ||
Trading Activity, Gains and Losses, Net [Line Items] | ||
Reclassification period for effective portion of contract, in years | 1 year | |
Contractual amounts of foreign currency forward contracts | $ 0 |
Impact of Derivative Contracts
Impact of Derivative Contracts on Company's Financial Statements (Detail) - Designated as Hedging Instrument - USD ($) $ in Millions | Mar. 31, 2018 | Dec. 31, 2017 |
Derivatives, Fair Value [Line Items] | ||
Fair value of derivative instruments, total | $ (2.6) | $ (1.4) |
Foreign Currency Contracts | Other Current Assets | ||
Derivatives, Fair Value [Line Items] | ||
Fair value of derivative instruments, assets | 1.3 | 0.2 |
Foreign Currency Contracts | Accrued Liabilities | ||
Derivatives, Fair Value [Line Items] | ||
Fair value of derivative instruments, liabilities | (4.2) | (1.8) |
Commodities Contracts | Other Current Assets | ||
Derivatives, Fair Value [Line Items] | ||
Fair value of derivative instruments, assets | $ 0.3 | $ 0.2 |
Schedule of Effect of Derivativ
Schedule of Effect of Derivatives Instruments on Consolidated Statement of Earnings (Detail) - USD ($) $ in Millions | 3 Months Ended | |
Mar. 31, 2018 | Mar. 31, 2017 | |
Derivative [Line Items] | ||
Amount of gain (loss) recognized in other comprehensive loss on derivative | $ 2.9 | $ 1.1 |
Amount of gain (loss) reclassified from accumulated other comprehensive loss into earnings | (0.5) | |
Foreign Currency Contracts | ||
Derivative [Line Items] | ||
Amount of gain (loss) recognized in other comprehensive loss on derivative | 2.8 | 1.1 |
Commodities Contracts | ||
Derivative [Line Items] | ||
Amount of gain (loss) recognized in other comprehensive loss on derivative | $ 0.1 | |
Commodities Contracts | Cost Of Products Sold | ||
Derivative [Line Items] | ||
Amount of gain (loss) reclassified from accumulated other comprehensive loss into earnings | $ (0.5) |
Income Taxes - Additional Infor
Income Taxes - Additional Information (Detail) - USD ($) $ in Millions | 3 Months Ended | 12 Months Ended | ||
Mar. 31, 2018 | Mar. 31, 2017 | Dec. 31, 2018 | Dec. 31, 2017 | |
Income Tax Contingency [Line Items] | ||||
Effective tax rates | 21.20% | 27.20% | ||
Unrecognized tax benefits | $ 6.2 | |||
Unrecognized tax benefits that would affect the effective tax rate, if recognized | $ 0.6 | |||
Effective income tax rate reconciliation, tax cuts and jobs act, percent | 21.00% | |||
Tax cuts and jobs act, transition tax for accumulated foreign earnings, income tax expense | $ 81.8 | |||
Scenario, Forecast | ||||
Income Tax Contingency [Line Items] | ||||
Effective tax rates | 22.00% | |||
Earliest Tax Year | U.S. federal | ||||
Income Tax Contingency [Line Items] | ||||
Income tax examinations, years under examination | 2,015 | |||
Latest Tax Year | U.S. federal | ||||
Income Tax Contingency [Line Items] | ||||
Income tax examinations, years under examination | 2,017 | |||
State and local | Earliest Tax Year | ||||
Income Tax Contingency [Line Items] | ||||
Income tax examinations, years under examination | 2,001 | |||
State and local | Latest Tax Year | ||||
Income Tax Contingency [Line Items] | ||||
Income tax examinations, years under examination | 2,017 | |||
Non-U.S. | Earliest Tax Year | ||||
Income Tax Contingency [Line Items] | ||||
Income tax examinations, years under examination | 2,009 | |||
Non-U.S. | Latest Tax Year | ||||
Income Tax Contingency [Line Items] | ||||
Income tax examinations, years under examination | 2,017 |
Changes in Accumulated Other 62
Changes in Accumulated Other Comprehensive Loss by Component (Detail) - USD ($) $ in Millions | 3 Months Ended | ||
Mar. 31, 2018 | Mar. 31, 2017 | ||
Accumulated Other Comprehensive Income (Loss) [Line Items] | |||
Beginning balance | $ 1,644.9 | ||
Ending balance | 1,708.4 | ||
Cumulative foreign currency translation | |||
Accumulated Other Comprehensive Income (Loss) [Line Items] | |||
Beginning balance | (26.5) | $ (79.2) | |
Other comprehensive income before reclassifications | 18.4 | 7.3 | |
Ending balance | (8.1) | (71.9) | |
Unrealized net gain on cash flow derivatives | |||
Accumulated Other Comprehensive Income (Loss) [Line Items] | |||
Beginning balance | (0.9) | 0.2 | |
Other comprehensive income before reclassifications | 2 | 0.8 | |
Realized gains on derivatives reclassified to cost of products sold (net of income tax provision of $- and $(0.2) in 2018 and 2017, respectively) | 0.3 | ||
Ending balance | 1.1 | 1.3 | |
Pension liability | |||
Accumulated Other Comprehensive Income (Loss) [Line Items] | |||
Beginning balance | (272.1) | (284.2) | |
Amounts reclassified from accumulated other comprehensive loss | [1] | 3.4 | 2.6 |
Ending balance | (268.7) | (281.6) | |
Accumulated Other Comprehensive Loss | |||
Accumulated Other Comprehensive Income (Loss) [Line Items] | |||
Ending balance | $ (275.7) | $ (352.2) | |
[1] | Amortization of pension items: Actuarial losses $ 4.7 (2) $ 4.5 (2) Prior year service cost (0.1 )(2) (0.1 )(2) 4.6 4.4 Income tax benefit (1.2 ) (1.8 ) Reclassification net of income tax benefit $ 3.4 $ 2.6 |
Changes in Accumulated Other 63
Changes in Accumulated Other Comprehensive Loss by Component (Parenthetical) (Detail) - USD ($) $ in Millions | 3 Months Ended | ||
Mar. 31, 2018 | Mar. 31, 2017 | ||
Unrealized net gain on cash flow derivatives | |||
Accumulated Other Comprehensive Income (Loss) [Line Items] | |||
Realized (gains) losses on derivatives reclassified to cost of products sold, tax provision | $ (0.2) | ||
Pension liability | |||
Accumulated Other Comprehensive Income (Loss) [Line Items] | |||
Reclassification, before income tax benefit | $ 4.6 | 4.4 | |
Income tax benefit | (1.2) | (1.8) | |
Reclassification net of income tax benefit | [1] | 3.4 | 2.6 |
Actuarial losses | |||
Accumulated Other Comprehensive Income (Loss) [Line Items] | |||
Reclassification, before income tax benefit | [2] | 4.7 | 4.5 |
Prior year service cost | |||
Accumulated Other Comprehensive Income (Loss) [Line Items] | |||
Reclassification, before income tax benefit | [2] | $ (0.1) | $ (0.1) |
[1] | Amortization of pension items: Actuarial losses $ 4.7 (2) $ 4.5 (2) Prior year service cost (0.1 )(2) (0.1 )(2) 4.6 4.4 Income tax benefit (1.2 ) (1.8 ) Reclassification net of income tax benefit $ 3.4 $ 2.6 | ||
[2] | These accumulated other comprehensive loss components are included in the computation of net periodic pension cost. See Note 10 - Pensions for additional details |