11-K
Table of Contents

 

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

 

FORM 11-K

 

 

(Mark One)

ANNUAL REPORT PURSUANT TO SECTION 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the fiscal year ended December 31, 2018

OR

 

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

For the transition period from                      to                     

Commission file number 1-475

 

 

 

A.

Full title of the plan and the address of the plan, if different from that of the issuer named below:

A. O. Smith Retirement Security Plan

 

B.

Name of issuer of the securities held pursuant to the plan and the address of its principal executive office:

A. O. Smith Corporation

11270 West Park Place

Milwaukee, WI 53224

 

 

 


Table of Contents

REQUIRED INFORMATION

 

1.

Not Applicable.

 

2.

Not Applicable.

 

3.

Not Applicable.

 

4.

The A. O. Smith Retirement Security Plan (the “Plan”) is subject to the requirements of the Employee Retirement Income Security Act of 1974 (“ERISA”). Attached hereto is a copy of the most recent financial statements and schedules of the Plan prepared in accordance with the financial reporting requirements of ERISA.

Signature

 

Exhibits

    
23.1    Consent of Independent Auditors


Table of Contents

A. O. SMITH

RETIREMENT SECURITY PLAN

Milwaukee, Wisconsin

AUDITED FINANCIAL STATEMENTS

Years Ended December 31, 2018 and 2017

TABLE OF CONTENTS

 

     Page (s)  

Report of Independent Registered Public Accounting Firm

     1-2  

Statements of Net Assets Available for Benefits

     3  

Statements of Changes in Net Assets Available for Benefits

     4  

Notes to Financial Statements

     5-14  

Schedule of Assets (Held at End of Year)

     15  


Table of Contents

Report of Independent Registered Public Accounting Firm

To the Plan Administrator and Plan Participants

A.O. Smith Retirement Security Plan

Milwaukee, Wisconsin

Opinion on the Financial Statements

We have audited the accompanying statements of net assets available for benefits of the A.O. Smith Retirement Security Plan (the Plan) as of December 31, 2018 and 2017, and the related statements of changes in net assets available for benefits for the years then ended, and the related notes to the financial statements (collectively referred to as the financial statements). In our opinion, the financial statements present fairly, in all materials respects, the net assets available for benefits of the Plan as of December 31, 2018 and 2017, and the changes in net assets available for benefits for the years then ended, in conformity with accounting principles generally accepted in the United States of America.

Basis of Opinion

These financial statements are the responsibility of the Plan’s management. Our responsibility is to express an opinion on the Plan’s financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Plan in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform our audits to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud.

Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe our audits provide a reasonable basis for our opinion.

 

1


Table of Contents

Supplemental Information

The Schedule of Assets (Held at End of Year) – December 31, 2018 has been subjected to audit procedures performed in conjunction with the audit of the Plan’s financial statements. The supplemental information is the responsibility of the Plan’s management. Our audit procedures included determining whether the information reconciles to the financial statements or the underlying accounting and other records, as applicable, and performing procedures to test the completeness and accuracy of the information presented in the supplemental information. In forming our opinion on the supplemental information, we evaluated whether the supplemental information, including its form and content, is presented in conformity with the Department of Labor’s Rules and Regulations for Reporting and Disclosure under the Employee Retirement Income Security Act of 1974. In our opinion, the supplemental information is fairly stated, in all material respects, in relation to the financial statements as a whole.

/s/ Reilly, Penner & Benton LLP

We have served as the Plan’s auditor since 1993

June 21, 2019

Milwaukee, Wisconsin

 

2


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A.O. SMITH RETIREMENT SECURITY PLAN

Milwaukee, Wisconsin

Statements of Net Assets Available for Benefits

December 31, 2018 and 2017

 

     2018      2017  

Assets:

     

Investment at Fair Value:

     

Plan interest in A.O. Smith Master Trust

   $ 376,538,250      $ 400,695,032  
  

 

 

    

 

 

 

Total investments

     376,538,250        400,695,032  
  

 

 

    

 

 

 

Receivables:

     

Notes receivable from participants

     9,324,267        8,737,215  

Company contributions

     5,882,276        6,012,576  

Due from (to) brokers for securities transactions (net)

     74,689        (37,508

Accrued Interest

     30,518        25,344  

Other receivables

     11,400        —    
  

 

 

    

 

 

 

Total receivables

     15,323,150        14,737,627  
  

 

 

    

 

 

 

Net assets available for benefits

   $ 391,861,400      $ 415,432,659  
  

 

 

    

 

 

 

The accompanying notes to the financial statements

are an integral part of this statement

 

3


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A.O. SMITH RETIREMENT SECURITY PLAN

Milwaukee, Wisconsin

Statements of Changes in Net Assets Available for Benefits

Years Ended December 31, 2018 and 2017

 

     2018     2017  

Increases:

    

Change in plan interest in A.O. Smith Master Trust

     (23,201,935     49,570,959  

Interest income from participant loans

     368,035       285,528  
  

 

 

   

 

 

 

Net income (loss)

     (22,833,900     49,856,487  

Contributions:

    

Company

     12,581,424       12,313,195  

Participants

     15,959,907       14,990,574  

Rollovers

     681,899       1,044,362  
  

 

 

   

 

 

 

Total contributions

     29,223,230       28,348,131  
  

 

 

   

 

 

 

Total increases

     6,389,329       78,204,618  

Decreases:

    

Benefit and withdrawal payments

     29,960,588       26,500,889  
  

 

 

   

 

 

 

Change in net assets available for benefits

     (23,571,259     51,703,729  

Net assets available for benefits:

    

Beginning of year

     415,432,659       363,728,930  
  

 

 

   

 

 

 

End of year

     391,861,400       415,432,659  
  

 

 

   

 

 

 

The accompanying notes to the financial statements

are an integral part of this statement.

 

4


Table of Contents

A.O. SMITH RETIREMENT SECURITY PLAN

Milwaukee, Wisconsin

Notes to Financial Statements

December 31, 2018 and 2017

1. Description of Plan and Significant Accounting Policies

The A. O. Smith Retirement Security Plan (the Plan) was originally established as the A.O. Smith Profit Sharing Retirement Plan (Plan) in 1956. Effective January 1, 2010, the Plan was renamed the A. O. Smith Retirement Security Plan and the accounts of all non-union participants maintained under the A. O. Smith Corporation Savings Plan were transferred into the Plan. As of January 1, 2010, the Plan generally covers salaried or commissioned employees of the A. O. Smith Corporation (the Company), its subsidiaries and affiliates and the non-union hourly employees of the Company’s facilities in Ashland City, TN; Charlotte, NC; Cookeville, TN; El Paso, TX; Florence, SC; Franklin, TN; Johnson City, TN; Lebanon, TN; McBee, SC; and Milwaukee, WI; providing a convenient means of savings with the assistance of the Company. To be eligible, certain employees must either be employed at a rate expected to work 1,000 hours of service in a plan year or actually complete 1,000 hours of service during their first 12 months of employment or any plan year thereafter. Employees are eligible to participate in the Plan on the first day of the month after the individual qualifies as an eligible employee. Employees elect to participate by designating a portion of their earnings to be contributed to an account maintained on behalf of the participant. Participants direct the investment of their contributions into various investment options offered by the Plan.

Effective January 1, 2010, the Plan was revised to satisfy the safe harbor requirements of Internal Revenue Code 401(k)(13) as follows:

 

  a.

An automatic enrollment feature was instituted, along with an annual automatic increase in employee pre-tax contributions;

 

  b.

Plan participants have the ability to contribute up to 100% of eligible compensation on a pre-tax basis; the company will make a matching contribution equal to 100% of the first 1% of a participant’s compensation and 50% on the next 5% of a participant’s compensation contributed to the Plan, for a maximum annual matching contribution of 3.5%; and

 

  c.

All matching contributions vest after two years of vesting service.

The Plan was also revised to permit the Company to make an additional discretionary matching contribution to be allocated as of the last day of the plan year for those participants who are employed on such date or who terminated during the year on or after attainment of age 65, death, total and permanent disability, or termination resulting directly from job abolishment.

Also, effective January 1, 2010, all participants who are not eligible to accrue a benefit under any of the Company’s qualified defined benefit pension plans will be eligible for an annual non-elective employer contribution equal to 3% of the participant’s total compensation for the plan year, and will be eligible for a discretionary annual non-elective employer contribution in an amount determined by the Company, if any. In order to receive a non-elective employer contribution for a plan year, an eligible participant must be employed in a full-time equivalent position for the plan year or complete 1,000 hours of service during a plan year and be employed on the last day of the plan year or terminate employment during the plan year as a result of death, disability, retirement, or termination resulting from job abolishment. This non-elective contribution will vest after three years of vesting service.

Effective December 31, 2012, the American Water Heater Company 401(k) Retirement Savings Plan for Tennessee Division Manufacturing Bargaining Unit and A. O. Smith Savings Plan were merged with and into this Plan.

Effective as of midnight, December 31, 2014, the A. O. Smith Retirement Security Plan – Lochinvar and the A. O. Smith Retirement and Savings Plan for APCOM Employees were merged with and into the A. O. Smith Retirement Security Plan (Plan) to form a single plan within the meaning of Internal Revenue Code Section 414(I).

 

5


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A.O. SMITH RETIREMENT SECURITY PLAN

Milwaukee, Wisconsin

Notes to Financial Statements

December 31, 2018 and 2017

(Continued)

 

1. Description of Plan and Significant Accounting Policies (Continued)

 

Union employees of American Water Heater Company may participate on first day of the month after 45 days of eligible service. Union participants receive a matching contribution of 50% of their contributions up to 4% of the participant’s pay period compensation.

Contributions

The Plan is a defined contribution plan to which participants may make contributions of not less than 1% and up to 100% of their earnings. The Plan provides for all participant contributions to be made with tax-deferred dollars under Section 401(k) of the Internal Revenue Code. These contributions are excluded from the participant’s current wages for federal income tax purposes. The Internal Revenue Code has set a maximum of $18,500 for tax-deferred contributions that may be excluded for any individual participant in 2018 and $18,000 in 2017.

The Internal Revenue Code also allows additional catch-up contributions for participants age fifty or older. The maximum additional contribution allowed was $6,000 in 2018 and 2017. The Plan also provides for Company contributions in the form of matching contributions and non-elective contributions.

No federal income tax is paid on the participant and Company contributions and growth thereon until the participant withdraws them from the Plan.

Contributions from participants are recorded when the Company makes payroll deductions from Plan participants. Contributions from the Company are accrued in the period in which they become obligations of the Company in accordance with terms of the Plan.

For non-union employees, the Company makes a matching contribution equal to 100% on the first 1% of a participant’s compensation and 50% on the next 5% of a participant’s compensation that is contributed to the Plan, for a maximum annual matching contribution of 3.5%. In addition to the matching contribution, the Company also makes a non-elective contribution of 3% of pay for certain participants. The Company will make a non-elective contribution for a participant for a plan year if the participant was not eligible to accrue a benefit under any defined benefit pension plan or money purchase pension plan sponsored or contributed to by the Company for such plan year, the participant was either employed as a full-time equivalent employee for the plan year or is credited with 1,000 hours of service for the plan year, and the participant was employed by the Company on December 31 of the plan year or terminated during the plan year after having attained age 65 or as a result of death, disability or job elimination.

Union employees receive a Company matching contribution equal to 50% of their contribution up to 4% of payroll period compensation.

Participant Account Provisions

A separate account is maintained for each participant. The separate account balances are adjusted periodically as follows:

 

  a.

Weekly for hourly participant contributions; semimonthly for salaried participant contributions

 

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A.O. SMITH RETIREMENT SECURITY PLAN

Milwaukee, Wisconsin

Notes to Financial Statements

December 31, 2018 and 2017

(Continued)

 

1. Description of Plan and Significant Accounting Policies (Continued)

 

Participant Account Provisions (Continued)

 

b.

Weekly for Company matching contributions for hourly participants; semimonthly for Company matching contributions for salaried participants

 

c.

Annually for non-elective company contributions

 

d.

Daily for a proportionate share of increases and decreases in the fair value of Plan assets

 

e.

At the time of benefit distribution or withdrawal, which consist of the following:

 

  i.

Upon retirement, death, disability, or termination of employment resulting from permanent reduction of personnel, an employee may withdraw any amount or the entire account balance for any reason. At age 70 1/2, an account distribution election must be made.

 

  ii.

Upon termination of employment for other reasons, the balance in the separate account (reduced for non-vested Company contributions and growth thereon based on years of service) may be paid in a lump sum.

 

  iii.

An active participant age 59 1/2 or older may withdraw a lump sum of any amount up to the balance in the separate account, other than the employer non-elective contributions and earnings thereon.

 

  iv.

A non-union participant may withdraw all or any portion of the separate account attributable to after-tax contributions and earnings and rollover contributions and earnings. All or any portion of the balance attributable to Company contributions made prior to January 1, 2010, discretionary matching contributions, and earnings on these contributions may also be withdrawn if the participant has been employed by the Company for five full years of employment with the Company.

 

  v.

A non-union participant may withdraw at any time any amount attributable to participant contributions and earnings, to prevent eviction from or foreclosure on, a principal residence or to pay certain expenses (namely post-secondary education, unreimbursed medical expenses, funeral costs, and repairs to principal residence). Withdrawals may not include earnings on 401(k) contributions posted to a participant’s account after 1988.

 

  vi.

A non-union participant may withdraw in a lump sum all participant contributions made as a result of the participant’s initial automatic enrollment in the Plan within the first 90 days of the commencement of the contributions.

 

  vii.

No lump sum cash distribution in excess of $5,000 will be made without the consent of the participant.

 

f.

Daily for investment allocation changes made by participants.

 

7


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A.O. SMITH RETIREMENT SECURITY PLAN

Milwaukee, Wisconsin

Notes to Financial Statements

December 31, 2018 and 2017

(Continued)

 

1. Description of Plan and Significant Accounting Policies (Continued)

 

Participant Account Provisions (Continued)

 

Forfeitures arising from participant accounts are allocated to a Plan forfeiture account, which is reduced periodically to reduce future employer contributions or pay Plan expenses. Participants should refer to the Plan document for a complete description of the Plan’s provisions.

Vesting

Participants of the Plan are immediately 100% vested in their own contributions to the Plan. Company matching contributions are 100% vested after two years of vesting service. Non-elective company contributions to the plan are 100% vested after three years of vesting service.

Notes Receivable from Participants

Participants may borrow from their Plan accounts (excluding employer non-elective contributions and earnings thereon) a minimum of $1,000 up to a maximum of $50,000 or 50 percent of their account balance, whichever is less. The loans are secured by the balance in the participant’s account and bear interest at rates which are commensurate with local prevailing rates as determined by the Plan’s Trustee.

Forfeited Accounts

At December 31, 2018 and 2017, forfeited non-vested accounts totaled $248,407 and $83,904, respectively. These accounts will be used to reduce future employer contributions or future administrative expenses of the Plan.

Use of Estimates

The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America (U.S. GAAP) requires management to make estimates and assumptions that affect the reported amounts in the financial statements. Actual results could differ from those estimates.

Investment Valuation

At December 31, 2018 and 2017, all of the Plan’s assets are held in the A.O. Smith Corporation (Master Trust). The financial statements of the Master Trust are presented separately and are incorporated by reference to the financial statements of the Plan.

U.S. GAAP provides the framework for measuring fair value. That framework provides a fair value hierarchy that prioritizes the inputs to valuation techniques used to measure fair value. The hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (level 1 measurements) and the lowest priority to unobservable inputs (level 3 measurements). The three levels of the fair value hierarchy under U.S. GAAP are described as follows:

Level 1 – Inputs to the valuation methodology are unadjusted quoted prices for identical assets or liabilities in active markets that the Plan has the ability to access.

 

8


Table of Contents

A.O. SMITH RETIREMENT SECURITY PLAN

Milwaukee, Wisconsin

Notes to Financial Statements

December 31, 2018 and 2017

(Continued)

 

1. Description of Plan and Significant Accounting Policies (Continued)

 

Investment Valuation (Continued)

 

Level 2 – Inputs to the valuation methodology include quoted prices for similar assets or liabilities in active markets; quoted prices for identical or similar assets or liabilities in inactive markets; inputs other than quoted prices that are observable for the asset or liability; inputs that are derived principally from or corroborated by observable market data by correlation or other means.

If the asset or liability has a specified (contractual) term, the level 2 input must be observable for substantially the full term of the asset or liability.

Level 3 – Inputs to the valuation methodology are unobservable and significant to the fair value measurement.

The asset or liability’s fair value measurement level within the fair value hierarchy is based on the lowest level of any input that is significant to the fair value measurement.

Valuation techniques used need to maximize the use of observable inputs and minimize the use of unobservable inputs.

Purchases and sales of investments are recorded on a trade-date basis. Dividend income is recorded on the ex-dividend date. Interest income is recorded on the accrual basis. Realized gains and losses and unrealized appreciation and depreciation of plan assets are reported in the statements of changes in net assets available for benefits as net appreciation (depreciation) in fair value of investments.

Following is a description of the valuation methodologies used by the Master Trust for assets measured at fair value. There have been no changes in the methodologies used at December 31, 2018 and 2017.

Mutual funds: Shares held in mutual funds are valued at active market prices that represent the Net Asset Value (“NAV”) of shares held by the Master Trust at year end and are classified as Level 1. The NAV is based on the value of the underlying assets owned by the fund, minus its liabilities, then divided by the number of shares outstanding. Mutual funds held by the Master Trust are open-end mutual funds that are registered with the U.S. Securities and Exchange Commission (“SEC”). These funds are required to publish their daily NAV and to transact at that price. The mutual funds held by the Plan are therefore deemed to be actively traded.

Common/collective trusts: Valued at the NAV of shares of a bank collective trust held by the Master Trust at year-end. The NAV is based on the fair value of the underlying investments held by the fund. Participant transactions (issuances and redemptions) may occur daily. Were the Master Trust to initiate a full redemption of the collective trust, the investment advisor reserves the right to temporarily delay withdrawal from the trust in order to ensure that securities liquidations will be carried out in an orderly business manner.

The preceding methods described may produce a fair value calculation that may not be indicative of net realizable value or reflective of future fair values. Furthermore, although the Master Trust believes its valuation methods are appropriate and consistent with other market participants, the use of different methodologies or assumptions to determine the fair value of certain financial instruments could result in a different fair value measurement at the reporting date.

 

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Table of Contents

A.O. SMITH RETIREMENT SECURITY PLAN

Milwaukee, Wisconsin

Notes to Financial Statements

December 31, 2018 and 2017

(Continued)

 

1. Description of Plan and Significant Accounting Policies (Continued)

 

Administrative Expenses

Expenses related to the administration of the Plan are paid out of the principal or income of the Plan. These amounts are netted with investment income on the Statements of Changes in Net Assets Available for Benefits. Administrative expenses totaled $347,390 and $332,999 for the years ended December 31, 2018 and 2017, respectively.

Payment of Benefits

Benefits are recorded when paid. As of December 31, 2018 and December 31, 2017, $22,854 and $294,518 respectively, were requested by participants but had not yet been paid from the Plan.

Subsequent Events

Management has evaluated subsequent events for possible recognition or disclosure through the date of financial statement issuance June 27, 2017. There were no subsequent events that required recognition or disclosure.

 

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A.O. SMITH RETIREMENT SECURITY PLAN

Milwaukee, Wisconsin

Notes to Financial Statements

December 31, 2018 and 2017

(Continued)

 

2. A. O. Smith Corporation Master Trust

The Plan assets are held in the A. O. Smith Corporation Master Trust at BMO Harris Bank, N.A. The Plan offers twenty—three investment vehicles in which participants may invest their account balances. If available, quoted market prices are used to value investments. Shares of mutual funds and common collective trusts are valued at the net asset value of shares held by the plan at year end.

The amount of Master Trust assets, income and change in value which is allocated to the Plan is determined by the ratio of participant account balances in the Plan to the total participant account balances of all participating plans. The A. O. Smith Retirement Security Plan is the only plan participating in the Master Trust as of December 31, 2018 and 2017, respectively. As a result, the Plan’s interest in the net assets of Master Trust is 100%.

Significant information related to the investments in the Master Trust as of and for the year ended December 31, 2018, is as follows:

 

     December 31, 2018
Master Trust Balances
     December 31, 2018
Plan’s Interest in Master Trust
 

a. Registered Investment Company Mutual Funds:

 

  

American EuroPacific Growth Fund

   $ 19,010,478      $ 19,010,478  

Vanguard Institutional Index Trust Fund

     47,467,541        47,467,541  

Vanguard Total Bond Market Index Fund

     2,785,232        2,785,232  

Vanguard S&P Midcap 400 Index Fund

     18,923,946        18,923,946  

Wells Fargo Advantage Core Bond Fund

     9,962,404        9,962,404  

American Balanced Fund

     22,118,588        22,118,588  

BMO Target Retirement - 2010

     4,333,819        4,333,819  

BMO Target Retirement - 2015

     1,046,764        1,046,764  

BMO Target Retirement - 2020

     17,072,469        17,072,469  

BMO Target Retirement - 2025

     12,456,414        12,456,414  

BMO Target Retirement - 2030

     21,911,910        21,911,910  

BMO Target Retirement - 2035

     4,693,272        4,693,272  

BMO Target Retirement - 2040

     11,758,392        11,758,392  

BMO Target Retirement - 2045

     2,069,958        2,069,958  

BMO Target Retirement - 2050

     6,832,305        6,832,305  

BMO Target Retirement - 2055

     2,733,446        2,733,446  

Ishares Russell 2000 Small-Cap Index Fd

     1,179,402        1,179,402  

Vanguard Total Intl Stock Index Fd

     652,164        652,164  
  

 

 

    

 

 

 

Subtotal

     207,008,504        207,008,504  

b. Common/Collective Trusts:

     

A.O. Smith Stock Fund

     16,930,661        16,930,661  

A.O. Smith Fiduciary Fund

     9,305,719        9,305,719  

A.O. Smith Munder Midcap Fund

     —          —    

A.O. Smith BMO Midcap Fund

     —          —    

A.O. Smith Nuveen Equity Income Fund

     —          —    

A.O. Smith Stable Asset Income Fund

     93,717,562        93,717,562  

A.O. Smith Delaware Investment Advisors Fund

     20,902,234        20,902,234  

A.O. Smith Congress Asset Management Fund

     28,656,971        28,656,971  

TCW Concentrated Core Fund Cl I

     —          —    
  

 

 

    

 

 

 

Subtotal

     169,513,147        169,513,147  

d. Cash

     16,599        16,599  
  

 

 

    

 

 

 

Total

   $ 376,538,250      $ 376,538,250  
  

 

 

    

 

 

 

 

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A.O. SMITH RETIREMENT SECURITY PLAN

Milwaukee, Wisconsin

Notes to Financial Statements

December 31, 2018 and 2017

(Continued)

 

2. A. O. Smith Corporation Master Trust (Continued)

 

The following are net appreciation (depreciation) in the fair value of investments and investment income for the Master Trust for the year ended December 31, 2018.

 

Net depreciation in fair value of investments

     (27,776,474

Investment Income

     4,574,539  
  

 

 

 

Total

     (23,201,935
  

 

 

 

The following summarizes the classification of investments by classification and method of valuation in accordance with U.S. GAAP:

 

Description

   Total      Level 1      Level 2      Level 3  

Cash

   $ 16,599      $ 16,599      $ —        $ —    

Mutual Funds

     207,008,504        207,008,504        —           
  

 

 

    

 

 

    

 

 

    

 

 

 

Total assets in the fair value hierarchy

     207,025,103        207,025,103        

Investments measured at NAV (a)

     169,513,147        —          —          —    
  

 

 

    

 

 

    

 

 

    

 

 

 

Total investments, at fair value

   $ 376,538,250      $ 207,025,103      $ —        $ —    
  

 

 

    

 

 

    

 

 

    

 

 

 
     Assets at Fair Value as of December 31, 2017  

Description

   Total      Level 1      Level 2      Level 3  

Cash

   $ 88,805      $ 88,805      $ —        $ —    

Mutual Funds

     214,366,876        214,366,876        —          —    
  

 

 

    

 

 

    

 

 

    

 

 

 

Total assets in the fair value hierarchy

     214,455,681        214,455,681        

Investments measured at NAV (a)

     186,239,351        —          —          —    
  

 

 

    

 

 

    

 

 

    

 

 

 

Total investments, at fair value

   $ 400,695,032      $ 214,455,681      $  —        $  —    
  

 

 

    

 

 

    

 

 

    

 

 

 

 

(a)

In accordance with Subtopic 820-10, certain investments that were measured at net asset value per share (or its equivalent) have not been classified in the fair value hierarchy. The fair value amounts presented in this table are intended to permit reconciliation of the fair value hierarchy to the line items presented in the statement of net assets available for benefits.

 

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A.O. SMITH RETIREMENT SECURITY PLAN

Milwaukee, Wisconsin

Notes to Financial Statements

December 31, 2018 and 2017

(Continued)

 

2. A. O. Smith Corporation Master Trust (Continued)

 

Significant information related to the investments in the Master Trust as of and for the year ended December 31, 2017, is as follows:

 

     December 31, 2017      December 31, 2017  
     Master Trust Balances      Plan’s Interest in Master Trust  

a. Registered Investment Company Mutual Funds:

 

  

American EuroPacific Growth Fund

   $ 22,284,926      $ 22,284,926  

Vanguard Institutional Index Trust Fund

     48,600,469        48,600,469  

Vanguard Total Bond Market Index Fund

     2,508,316        2,508,316  

Vanguard S&P Midcap 400 Index Fund

     21,187,652        21,187,652  

Wells Fargo Advantage Core Bond Fund

     11,039,807        11,039,807  

American Balanced Fund

     23,966,278        23,966,278  

BMO Target Retirement - 2010

     4,528,846        4,528,846  

BMO Target Retirement - 2015

     1,504,150        1,504,150  

BMO Target Retirement - 2020

     17,767,699        17,767,699  

BMO Target Retirement - 2025

     11,705,386        11,705,386  

BMO Target Retirement - 2030

     22,800,096        22,800,096  

BMO Target Retirement - 2035

     4,496,379        4,496,379  

BMO Target Retirement - 2040

     11,699,288        11,699,288  

BMO Target Retirement - 2045

     1,633,944        1,633,944  

BMO Target Retirement - 2050

     6,634,768        6,634,768  

BMO Target Retirement - 2055

     1,830,223        1,830,223  

Ishares Russell 2000 Small-Cap Index Fd

     81,713        81,713  

Vanguard Total Intl Stock Index Fd

     96,936        96,936  
  

 

 

    

 

 

 

Subtotal

     214,366,876        214,366,876  

b. Common/Collective Trusts:

     

A.O. Smith Stock Fund

     25,774,882        25,774,882  

A.O. Smith Fiduciary Fund

     10,977,980        10,977,980  

A.O. Smith Munder Midcap Fund

     —          —    

A.O. Smith BMO Midcap Fund

     —          —    

A.O. Smith Nuveen Equity Income Fund

     —          —    

A.O. Smith Stable Asset Income Fund

     92,952,025        92,952,025  

A.O. Smith Delaware Investment Advisors Fund

     22,157,698        22,157,698  

A.O. Smith Congress Asset Management Fund

     34,376,766        34,376,766  

TCW Concentrated Core Fund Cl I

     —          —    
  

 

 

    

 

 

 

Subtotal

     186,239,351        186,239,351  

d. Cash

     88,805        88,805  
  

 

 

    

 

 

 

Total

   $ 400,695,032      $ 400,695,032  
  

 

 

    

 

 

 

The following are net appreciation in the fair value of investments and investment income for the Master Trust for the year ended December 31, 2018.

 

Net appreciation in fair value of investments

     45,704,106  

Investment Income

     3,866,853  
  

 

 

 

Total

     49,570,959  
  

 

 

 

 

13


Table of Contents

A.O. SMITH RETIREMENT SECURITY PLAN

Milwaukee, Wisconsin

Notes to Financial Statements

December 31, 2018 and 2017

(Continued)

 

2. A. O. Smith Corporation Master Trust (Continued)

 

The following table summarizes investments measured at fair value based on NAV per share as of December 31, 2018 and 2017, respectively:

 

December 31, 2018

   Fair
Value
     Unfunded
Commitments
   Redemption
Frequency

(if currently
eligible)
   Redemption
Notice

Period

Common/Collective trusts

   $ 169,513,147      n/a    Daily    None

December 31, 2017

   Fair
Value
     Unfunded
Commitments
   Redemption
Frequency

(if currently
eligible)
   Redemption
Notice

Period

Common/Collective trusts

   $ 186,239,351      n/a    Daily    None

 

3.

Income Tax Status

The Plan obtained its latest determination letter on July 23, 2012, in which the Internal Revenue Service stated the Plan as then designed, was in compliance with the applicable requirements of the Internal Revenue Code. The Plan administrator and the Plan’s tax counsel believe that the Plan is currently designed and being operated in compliance with the applicable requirements of the Internal Revenue Code. Therefore, no provision for income taxes has been included in the Plan’s financial statements.

U.S. GAAP requires plan management to evaluate tax positions taken by the Plan and recognize a tax liability (or asset) if the Plan has taken an uncertain position that, more likely than not, would not be sustained upon examination by the Department of Labor or Internal Revenue Service. Plan management has analyzed the tax positions taken by the Plan, and has concluded that as of December 31, 2018, there are no uncertain positions taken or expected to be taken that would require recognition of a liability (or asset) or disclosure in the financial statements. The Plan is subject to routine audits by taxing jurisdictions; however, there are currently no audits for any tax periods in progress.

 

4.

Plan Termination

While the Company has not expressed any intent to terminate the Plan, it is free to do so at any time. In the event of termination, each participant automatically becomes vested to the extent of the balance in their separate account.

 

5.

Risks and Uncertainties

The Plan invests in various investment securities. Investment securities are exposed to various risks of loss such as interest rate, market, and credit risks. Due to the level of risk associated with certain investment securities, it is at least reasonably possible that changes in the values of investment securities will occur in the near term and that such changes could materially affect participants’ account balances and the amounts reported in the statements of net assets available for benefits.

 

6.

Reported Financial Information

As discussed in Note 2, all of the Plan’s investments are held in a Master Trust. Assets held for investment purposes and 5% reportable transactions are reported at the Master Trust level and not at the Plan level. These schedules have been included in the Master Trust filing.

 

14


Table of Contents

A.O. SMITH RETIREMENT SECURITY PLAN

Milwaukee, Wisconsin

EIN 39-0619790, Plan 018

Schedule H, line 4i—Schedule of Assets Held (at End of Year)

December 31, 2018

 

(a)   (b)   (c)   (d)   (e)
   

Identity of Issue

 

Description of

Investment

 

Cost

 

Current

Value

*

  Participant Loans   2.75% -5.88%   $—     $9,324,267

* -Denotes a party-in-interest

See Report of Independent Registered Public Accounting Firm

 

15


Table of Contents

Pursuant to the requirements of the Securities Exchange Act of 1934, the persons who administer the employee benefit plan have duly cause this annual report to be signed on its behalf by the undersigned hereunto duly authorized.

 

      A. O. Smith Retirement Security Plan
     

            /s/ Tracey Seymour

Dated: June 21, 2019       Tracey Seymour
      Retirement and Payroll Manager

 

 

16

EX-23.1

EXHIBIT 23.1

Consent of Independent Registered Public Accounting Firm

We consent to the incorporation by reference in the Registration Statement (Form S-8 No. 333-05799) of A.O. Smith Corporation of our report dated June 21, 2019 relating the financial statements and schedule of the A.O. Smith Retirement Security Plan included in this Annual Report (Form 11-K).

 

/s/ Reilly, Penner & Benton LLP

Reilly Penner & Benton LLP

Milwaukee, Wisconsin

June 21, 2019