0001193125-19-216951 | 10-Q | XBRL Viewer

$ 765.4

$ 833.3

$ 1,513.6

$ 1,621.3

Inter-segment

Operating Segments [Member] | North America

(7.7)

(9.0)

(13.4)

(16.5)

Operating Segments [Member] | North America | Water Heaters And Related Parts [Member]

524.0

534.2

1,045.8

1,035.9

Operating Segments [Member] | North America | Boilers And Related Parts [Member]

438.9

466.1

894.6

912.9

Operating Segments [Member] | North America | Water Treatment Products [Member]

48.0

47.5

90.6

84.4

Operating Segments [Member] | Rest of World [Member]

^[1]

37.1

20.6

60.6

38.6

Operating Segments [Member] | Rest of World [Member] | China

249.1

308.1

481.2

601.9

Operating Segments [Member] | Rest of World [Member] | All Other Rest Of World [Member]

224.2

284.4

437.2

560.2

Schedule of Summary by Currency of Foreign Currency Forward Contracts

$ 24.9

$ 23.7

$ 44.0

$ 41.7

[1]	Includes Water-Right, Inc. acquired on April 8, 2019

Document and Entity Information - shares	6 Months Ended
Document and Entity Information - shares	Jun. 30, 2019	Jul. 31, 2019
Document Information [Line Items]
Document Type	10-Q
Document Period End Date	Jun. 30, 2019
Entity Registrant Name	SMITH A O CORP
Entity Small Business	false
Trading Symbol	AOS
Entity Emerging Growth Company	false
Document Quarterly Report	true
Document Transition Report	false
Entity File Number	1-475
Entity Incorporation, State or Country Code	DE
Entity Tax Identification Number	39-0619790
Entity Address, Address Line One	11270 West Park Place
Entity Address, State or Province	WI
Entity Address, Postal Zip Code	53224-9508
Entity Address, City or Town	Milwaukee
Security Exchange Name	NYSE
Entity Current Reporting Status	Yes
Entity Interactive Data Current	Yes
Title of 12(b) Security	Common Stock
Entity Filer Category	Large Accelerated Filer
City Area Code	414
Local Phone Number	359-4000
Entity Shell Company	false
Amendment Flag	false
Document Fiscal Year Focus	2019
Document Fiscal Period Focus	Q2
Entity Central Index Key	0000091142
Current Fiscal Year End Date	--12-31
Common Class A
Document Information [Line Items]
Entity Common Stock, Shares Outstanding		26,052,985
Common Stock
Document Information [Line Items]
Entity Common Stock, Shares Outstanding		138,350,432

Inventories (Tables)

6 Months Ended

Jun. 30, 2019

Schedule of Inventories

The following table presents the components of the Company’s inventory balances:


(dollars in millions)	June 30, 2019			December 31, 2018
Finished products	$	154.5		$	137.6
Work in process		21.4			23.3
Raw materials		177.8			174.4

Inventories, at FIFO cost		353.7			335.3
LIFO reserve		(30.6	)		(30.6	)

Net inventory	$	323.1		$	304.7

Segment Results

6 Months Ended

Jun. 30, 2019

Segment Results

12.	Segment Results

The Company is comprised of two reporting segments: North America and Rest of World. The Rest of World segment is primarily comprised of China, Europe and India. Both segments manufacture and market comprehensive lines of residential and commercial gas and electric water heaters, boilers, tanks, and water treatment products. Both segments primarily manufacture and market in their respective regions of the world. The Rest of World segment also manufactures and markets

in-home

air purification products in China.

The following table presents the Company’s segment results:


	Three Months Ended June 30,						Six Months Ended June 30,
(dollars in millions)	2019			2018			2019			2018
Net sales
North America	$	524.0		$	534.2		$	1,045.8		$	1,035.9
Rest of World		249.1			308.1			481.2			601.9
Inter-segment		(7.7	)		(9.0	)		(13.4	)		(16.5	)

	$	765.4		$	833.3		$	1,513.6		$	1,621.3

Segment earnings
North America (1)	$	122.9		$	124.9		$	238.9		$	230.9
Rest of World		22.4			34.7			34.7			70.7
Inter-segment		(0.1	)		—			(0.1	)		—

		145.2			159.6			273.5			301.6
Corporate expense		(9.6	)		(11.2	)		(24.3	)		(25.5	)
Interest expense		(3.4	)		(2.3	)		(5.4	)		(4.6	)

Earnings before income taxes		132.2			146.1			243.8			271.5
Provision for income taxes		30.1			31.6			52.4			58.2

Net earnings	$	102.1		$	114.5		$	191.4		$	213.3

(1) includes restructuring and impairment expenses of:	$	—		$	—		$	—		$	6.7

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE EARNINGS - USD ($) $ in Millions	3 Months Ended		6 Months Ended
	Jun. 30, 2019	Jun. 30, 2018	Jun. 30, 2019	Jun. 30, 2018
Net earnings	$ 102.1	$ 114.5	$ 191.4	$ 213.3
Other comprehensive (loss) earnings
Foreign currency translation adjustments	(10.1)	(31.0)	5.8	(12.6)
Unrealized net gains (losses) on cash flow derivative instruments, less related income tax (provision) benefit of ($0.2) and ($0.1) in 2019, $0.3 and ($0.2) in 2018	0.7	(1.2)	0.6	0.8
Adjustment to pension liability, less related income tax benefit of $0.8 and $1.8 in 2019 and $1.0 and $2.2 in 2018	3.1	3.5	6.0	6.9
Comprehensive Earnings	$ 95.8	$ 85.8	$ 203.8	$ 208.4

- Definition

The portion of profit or loss for the period, net of income taxes, which is attributable to the parent.

+ References + Details

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS - USD ($) $ in Millions	6 Months Ended
	Jun. 30, 2019	Jun. 30, 2018
Operating Activities
Net earnings	$ 191.4	$ 213.3
Adjustments to reconcile net earnings to cash provided by (used in) operating activities:
Depreciation and amortization	38.4	35.4
Stock based compensation expense	10.8	7.9
Net changes in operating assets and liabilities:
Current assets and liabilities	(75.9)	(62.6)
Noncurrent assets and liabilities	(21.0)	(20.8)
Cash Provided by Operating Activities	143.7	173.2
Investing Activities
Capital expenditures	(36.5)	(39.5)
Investments in marketable securities	(202.3)	(248.5)
Net proceeds from sale of marketable securities	293.8	322.1
Acquisition	(107.0)
Cash (Used in) Provided by Investing Activities	(52.0)	34.1
Financing Activities
Long-term debt incurred (repaid)	137.3	(162.3)
Common stock repurchases	(132.6)	(69.7)
Net payments from stock option activity	(0.5)	(0.1)
Dividends paid	(74.0)	(61.8)
Cash Used In Financing Activities	(69.8)	(293.9)
Net increase (decrease) in cash and cash equivalents	21.9	(86.6)
Cash and cash equivalents - beginning of period	259.7	346.6
Cash and Cash Equivalents - End of Period	$ 281.6	$ 260.0

Derivative Instruments (Tables)

6 Months Ended

Jun. 30, 2019

The following table summarizes, by currency, the contractual amounts of the Company’s foreign currency forward contracts that are designated as cash flow hedges.


	June 30, 2019				December 31, 2018
(dollars in millions)	Buy		Sell		Buy		Sell
British pound	$	—	$	0.5	$	—	$	1.0
Canadian dollar		—		15.1		—		—
Euro		37.8		—		32.0		—
Mexican peso		19.2		—		27.8		—

Total	$	57.0	$	15.6	$	59.8	$	1.0

Schedule of Impact of Cash Flow Hedges on Company's Financial Statements

The following tables present the impact of derivative contracts on the Company’s financial statements.

Fair value of derivatives designated as hedging instruments under ASC 815:



(dollars in millions)	Balance Sheet Location	June 30, 2019			December 31, 2018
Foreign currency contracts	Other current assets	$	6.9		$	3.9
	Other non-current assets		—			5.1
	Accrued liabilities		(0.9	)		(0.6	)
Commodities contracts	Accrued liabilities		—			(0.9	)

Total derivatives designated as hedging instruments		$	6.0		$	7.5

Schedule of Effect of Derivatives Instruments on Condensed Consolidated Statement of Earnings

The effect of cash flow hedges on the condensed consolidated statement of earnings:

Three Months Ended June 30 (dollars in millions):


	Amount of gain (loss) recognized in other comprehensive loss on derivative						Location of gain (loss) reclassified from accumulated other comprehensive loss into earnings	Amount of gain (loss) reclassified from accumulated other comprehensive loss into earnings
Derivatives in ASC 815 cash flow hedging relationships	2019			2018				2019			2018
Foreign currency contracts	$	0.5		$	(1.3	)	Cost of products sold	$	—		$	0.1
Commodities contracts		(0.3	)		—		Cost of products sold		(0.8	)		0.3

	$	0.2		$	(1.3	)		$	(0.8	)	$	0.4

Six Months Ended June 30 (dollars in millions):


	Amount of gain (loss) recognized in other comprehensive loss on derivative					Location of gain (loss) reclassified from accumulated other comprehensive loss into earnings	Amount of gain (loss) reclassified from accumulated other comprehensive loss into earnings
Derivatives in ASC 815 cash flow hedging relationships	2019			2018			2019			2018
Foreign currency contracts	$	0.6		$	1.4	Cost of products sold	$	—		$	0.1
Commodities contracts		(0.5	)		—	Cost of products sold		(0.8	)		0.3

	$	0.1		$	1.4		$	(0.8	)	$	0.4

Changes in Accumulated Other Comprehensive Loss by Component

6 Months Ended

Jun. 30, 2019

Changes in Accumulated Other Comprehensive Loss by Component

17.	Changes in Accumulated Other Comprehensive Loss by Component

Changes to accumulated other comprehensive loss by component are as follows:


(dollars in millions)
	Three Months Ended June 30,
	2019			2018
Cumulative foreign currency translation
Balance at beginning of period	$	(49.0	)	$	(8.1	)
Other comprehensive ( loss) income before reclassifications		(10.1	)		(31.0	)

Balance at end of period		(59.1	)		(39.1	)

Unrealized net gain on cash flow derivatives
Balance at beginning of period		(0.8	)		1.1
Other comprehensive gain (loss) before reclassifications		0.1			(0.9	)
Realized losses (gains) on derivatives reclassified to cost of products sold (net of income tax (benefit) provision of ($ 0.2 ) and $ 0.1 in 2019 and 2018, respectively)		0.6			(0.3	)

Balance at end of period		(0.1	)		(0.1	)

Pension liability
Balance at beginning of period		(282.3	)		(268.7	)
Other comprehensive loss before reclassifications		—			—
Amounts reclassified from accumulated other comprehensive loss: (1)		3.1			3.5

Balance at end of period		(279.2	)		(265.2	)

Accumulated other comprehensive loss, end of period	$	(338.4	)	$	(304.4	)

(1) Amortization of pension items:
Actuarial losses	$	4.0	(2)	$	4.6	(2)
Prior year service cost		(0.1	) (2)		(0.1	) (2)

		3.9			4.5
Income tax benefit		(0.8	)		(1.0	)

Reclassification net of income tax benefit	$	3.1		$	3.5

(2)	These accumulated other comprehensive loss components are included in the computation of net periodic pension cost. See Note 11—Pensions for additional details

Changes to accumulated other comprehensive loss by component are as follows:


(dollars in millions)
	Six Months Ended June 30,
	2019			2018
Cumulative foreign currency translation
Balance at beginning of period	$	(64.9	)	$	(26.5	)
Other comprehensive income ( loss) before reclassifications		5.8			(12.6	)

Balance at end of period		(59.1	)		(39.1	)

Unrealized net gain on cash flow derivatives
Balance at beginning of period		(0.7	)		(0.9	)
Other comprehensive gain before reclassifications		—			1.1
Realized losses (gains) on derivatives reclassified to cost of products sold (net of income tax (benefit) provision of ($ 0.2 ) and $ 0.1 in 2019 and 2018, respectively)		0.6			(0.3	)

Balance at end of period		(0.1	)		(0.1	)

Pension liability
Balance at beginning of period		(285.2	)		(272.1	)
Other comprehensive loss before reclassifications		—			—
Amounts reclassified from accumulated other comprehensive loss: (1)		6.0			6.9
Balance at end of period		(279.2	)		(265.2	)

Accumulated other comprehensive loss, end of period	$	(338.4	)	$	(304.4	)

(1) Amortization of pension items:
Actuarial losses	$	8.0	(2)	$	9.3	(2)
Prior year service cost		(0.2	) (2)		(0.2	) (2)

		7.8			9.1
Income tax benefit		(1.8	)		(2.2	)

Reclassification net of income tax benefit	$	6.0		$	6.9

(2)	These accumulated other comprehensive loss components are included in the computation of net periodic pension cost. See Note 11—Pensions for additional details

Earnings per Share of Common Stock (Tables)

6 Months Ended

Jun. 30, 2019

Schedule of Computation of Basic and Diluted Weighted Average Shares Used in EPS Calculations

The following table sets forth the computation of basic and diluted weighted-average shares used in the earnings per share calculations:


	Three Months Ended June 30,				Six Months Ended June 30,
	2019		2018		2019		2018
Denominator for basic earnings per share—weighted average shares		166,825,601		171,063,565		167,311,995		171,296,492
Effect of dilutive stock options and share units		1,260,667		1,666,601		1,276,451		1,742,515

Denominator for diluted earnings per share		168,086,268		172,730,166		168,588,446		173,039,007

Earnings per Share of Common Stock

6 Months Ended

Jun. 30, 2019

Earnings Per Share [Abstract]

Earnings per Share of Common Stock

9.	Earnings per Share of Common Stock

The numerator for the calculation of basic and diluted earnings per share is net earnings. The following table sets forth the computation of basic and diluted weighted-average shares used in the earnings per share calculations:


	Three Months Ended June 30,				Six Months Ended June 30,
	2019		2018		2019		2018
Denominator for basic earnings per share—weighted average shares		166,825,601		171,063,565		167,311,995		171,296,492
Effect of dilutive stock options and share units		1,260,667		1,666,601		1,276,451		1,742,515

Denominator for diluted earnings per share		168,086,268		172,730,166		168,588,446		173,039,007

Basis of Presentation (Policies)

6 Months Ended

Jun. 30, 2019

Recent Accounting Pronouncements

In January 2017, the Financial Accounting Standards Board (FASB) amended Accounting Standards Codification (ASC) 350,

Intangibles – Goodwill and Other

(issued under Accounting Standards Update (ASU)

2017-04,

“Simplifying the Test for Goodwill Impairment”). This amendment simplifies the test for goodwill impairment by only requiring an entity to perform an annual or interim goodwill impairment test by comparing the fair value of a reporting unit with its carrying amount and recognize an impairment charge for the amount that the carrying amount exceeds the reporting unit’s fair value. Any loss recognized should not exceed the total amount of goodwill allocated to that reporting unit. The amendment requires adoption on January 1, 2020. The Company does not expect that the adoption of ASU

2017-04

will have a material impact on its consolidated balance sheets, statements of earnings or statements of cash flows.

In June 2016, the FASB issued ASC 326,

Financial Instruments – Credit Losses

(issued under ASU

2016-13)

which modifies the measurement of expected credit losses on certain financial instruments. ASU

2016-13

requires adoption on January 1, 2020. The Company does not expect that the adoption of ASU

2016-13

will have a material impact on its consolidated balance sheets, statements of earnings or statements of cash flows.

In February 2016, the FASB amended ASC 842,

Leases

(issued under ASU

2016-02).

This amendment requires the recognition of lease assets and lease liabilities on the balance sheet for most leasing arrangements classified as operating leases. The Company applied the modified retrospective transition method and elected the transition option to use the effective date of January 1, 2019, as the date of the initial application. The Company elected the package of practical expedients as well as a separate practical expedient not to separate lease and

non-lease

components. The Company did not elect the hindsight practical expedient. The adoption of ASU 2016-02 did not have a material impact on the Company’s consolidated balance sheets, statements of earnings or statements of cash flows. Refer to Note 4, Leases, for additional information.

Long-Term Debt

6 Months Ended

Jun. 30, 2019

Debt Disclosure [Abstract]

Long-Term Debt

8.	Long-Term Debt

The Company has a $500 million multi-year multi-currency revolving credit agreement with a group of

nine

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 June 30, 2019. At its option, the Company either maintains cash balances or pays fees for bank credit and services.

Derivative Instruments

6 Months Ended

Jun. 30, 2019

Derivative Instruments

14.	Derivative Instruments

The Company utilizes certain derivative instruments to enhance its ability to manage currency exposure as well as raw materials price risk. Derivative instruments are entered into for periods consistent with the related underlying exposures and do not constitute positions independent of those exposures. The Company does not enter into contracts for speculative purposes. The contracts are executed with major financial institutions with no credit loss anticipated for failure of the counterparties to perform.

Cash Flow Hedges

With the exception of its net investment hedges, the Company designates that all of its hedging instruments are cash flow hedges. For derivative instruments that are designated and qualify as a cash flow hedge (i.e., hedging the exposure to variability in expected future cash flows that is attributable to a particular risk), gains or losses on the derivative instrument are reported as a component of other comprehensive loss, net of tax, and are reclassified into earnings in the same line item associated with the forecasted transaction and in the same period or periods during which the hedged transaction affects earnings.

Foreign Currency Forward Contracts

The Company is exposed to foreign currency exchange risk as a result of transactions in currencies other than the functional currency of certain subsidiaries. The Company utilizes foreign currency forward purchase and sale contracts to manage the volatility associated with foreign currency purchases, sales and certain intercompany transactions in the normal course of business. Principal currencies for which the Company utilizes foreign currency forward contracts include the British pound, Canadian dollar, Euro and Mexican peso.

Gains and losses on these instruments are recorded in accumulated other comprehensive loss, net of tax, until the underlying transaction is recorded in earnings. When the hedged item is realized, gains or losses are reclassified from accumulated other comprehensive loss to the consolidated statement of earnings. The assessment of effectiveness for forward contracts is based on changes in the forward rates. These hedges have been determined to be effective.

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.


	June 30, 2019				December 31, 2018
(dollars in millions)	Buy		Sell		Buy		Sell
British pound	$	—	$	0.5	$	—	$	1.0
Canadian dollar		—		15.1		—		—
Euro		37.8		—		32.0		—
Mexican peso		19.2		—		27.8		—

Total	$	57.0	$	15.6	$	59.8	$	1.0

Net Investment Hedges

The Company enters into certain foreign currency forward contracts to hedge the exposure to a portion of the Company’s net investments in certain

non-U.S.

subsidiaries against the effect of exchange rate fluctuations on the translation of foreign currency balances to the U.S. dollar. For the derivative instruments that are designated and qualify as net investment hedges, gains and losses are reported in other comprehensive loss where they offset gains and losses recorded on the Company’s net investments in its

non-U.S.

subsidiaries. These hedges are determined to be effective. The Company recognized $1.3 million of

after-tax

gains associated with hedges of a net investment in

non-U.S.

subsidiaries in currency translation adjustment in other comprehensive income in the six months ended June 30, 2019. The Company recognized $7.4 million and $3.2 million of after-tax gains associated with hedges of a net investment in non-U.S. subsidiaries in currency translation adjustment in other comprehensive income in the three and six months ended June 30, 2018, respectively. The contractual amount of the Company’s foreign currency forward contracts that are designated as net investment hedges is $100.0 million as of June 30, 2019.

The following tables present the impact of derivative contracts on the Company’s financial statements.

Fair value of derivatives designated as hedging instruments under ASC 815:



(dollars in millions)	Balance Sheet Location	June 30, 2019			December 31, 2018
Foreign currency contracts	Other current assets	$	6.9		$	3.9
	Other non-current assets		—			5.1
	Accrued liabilities		(0.9	)		(0.6	)
Commodities contracts	Accrued liabilities		—			(0.9	)

Total derivatives designated as hedging instruments		$	6.0		$	7.5

The effect of cash flow hedges on the condensed consolidated statement of earnings:

Three Months Ended June 30 (dollars in millions):


	Amount of gain (loss) recognized in other comprehensive loss on derivative						Location of gain (loss) reclassified from accumulated other comprehensive loss into earnings	Amount of gain (loss) reclassified from accumulated other comprehensive loss into earnings
Derivatives in ASC 815 cash flow hedging relationships	2019			2018				2019			2018
Foreign currency contracts	$	0.5		$	(1.3	)	Cost of products sold	$	—		$	0.1
Commodities contracts		(0.3	)		—		Cost of products sold		(0.8	)		0.3

	$	0.2		$	(1.3	)		$	(0.8	)	$	0.4

Six Months Ended June 30 (dollars in millions):


	Amount of gain (loss) recognized in other comprehensive loss on derivative					Location of gain (loss) reclassified from accumulated other comprehensive loss into earnings	Amount of gain (loss) reclassified from accumulated other comprehensive loss into earnings
Derivatives in ASC 815 cash flow hedging relationships	2019			2018			2019			2018
Foreign currency contracts	$	0.6		$	1.4	Cost of products sold	$	—		$	0.1
Commodities contracts		(0.5	)		—	Cost of products sold		(0.8	)		0.3

	$	0.1		$	1.4		$	(0.8	)	$	0.4

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE EARNINGS (Parenthetical) - USD ($) $ in Millions	3 Months Ended		6 Months Ended
	Jun. 30, 2019	Jun. 30, 2018	Jun. 30, 2019	Jun. 30, 2018
Unrealized net gains (losses) on cash flow derivative instruments, related income tax (provision) benefit	$ (0.2)	$ 0.3	$ (0.1)	$ (0.2)
Adjustment to pension liability, related income tax provision	$ 0.8	$ 1.0	$ 1.8	$ 2.2

Components of Company's Net Pension Income (Detail) - USD ($) $ in Millions	3 Months Ended		6 Months Ended
	Jun. 30, 2019	Jun. 30, 2018	Jun. 30, 2019	Jun. 30, 2018
Defined Benefit Plan [Abstract]
Service cost	$ 0.5	$ 0.5	$ 0.9	$ 1.0
Interest cost	7.8	7.3	15.7	14.5
Expected return on plan assets	(14.4)	(14.6)	(28.7)	(29.1)
Amortization of unrecognized loss	4.0	4.6	8.0	9.3
Amortization of prior service cost	(0.1)	(0.1)	(0.2)	(0.2)
Defined benefit plan income	$ (2.2)	$ (2.3)	$ (4.3)	$ (4.5)

Pensions

6 Months Ended

Jun. 30, 2019

Pensions

11.

Pensions

The following table presents the components of the Company’s net pension income.


	Three Months Ended June 30,						Six Months Ended June 30,
	2019			2018			2019			2018
Service cost	$	0.5		$	0.5		$	0.9		$	1.0
Interest cost		7.8			7.3			15.7			14.5
Expected return on plan assets		(14.4	)		(14.6	)		(28.7	)		(29.1	)
Amortization of unrecognized loss		4.0			4.6			8.0			9.3
Amortization of prior service cost		(0.1	)		(0.1	)		(0.2	)		(0.2	)

Defined benefit plan income	$	(2.2	)	$	(2.3	)	$	(4.3	)	$	(4.5	)

The service cost component of net periodic benefit cost is presented within cost of products sold and selling, general and administrative expenses within the condensed consolidated statements of earnings while the other components of pension income are reflected in other income. The Company was not required to and did not make a contribution to its U.S. pension plan in 2018. The Company is not required to make a contribution in 2019.

Schedule of Segment Earnings (Parenthetical) (Detail) - USD ($) $ in Millions	3 Months Ended			6 Months Ended
	Jun. 30, 2019	Jun. 30, 2018	Mar. 31, 2018	Jun. 30, 2019	Jun. 30, 2018
Segment Reporting Information [Line Items]
Restructuring expense recognized	$ 0.0	$ 0.0	$ 6.7	$ 0.0	$ 6.7

Acquisitions (Tables)

6 Months Ended

Jun. 30, 2019

Summary of Preliminary Allocation of Fair Value of Assets Acquired and Liabilities Assumed at Date of Acquisition


April 8, 2019 (dollars in millions)
Current assets, net of cash acquired	$	9.7
Property, plant and equipment		8.6
Intangible assets		57.6
Goodwill		33.7

Total assets acquired		109.6
Current liabilities		(2.6	)

Total liabilities assumed		(2.6	)

Net assets acquired	$	107.0

Water-Right, Inc

Summary of Preliminary Allocation of Fair Value of Assets Acquired and Liabilities Assumed at Date of Acquisition


April 8, 2019 (dollars in millions)
Current assets, net of cash acquired	$	9.7
Property, plant and equipment		8.6
Intangible assets		57.6
Goodwill		33.7

Total assets acquired		109.6
Current liabilities		(2.6	)

Total liabilities assumed		(2.6	)

Net assets acquired	$	107.0

Basis of Presentation

6 Months Ended

Jun. 30, 2019

Organization, Consolidation and Presentation of Financial Statements [Abstract]

Basis of Presentation

1.	Basis of Presentation

The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States (GAAP) for interim financial information and pursuant to the rules and regulations of the Securities and Exchange Commission (SEC). Accordingly, they do not include all of the information and footnotes required for complete financial statements. In the opinion of management, all adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation have been included. Operating results for the three and six months ended June 30, 2019 are not necessarily indicative of the results expected for the full year. It is suggested the accompanying condensed consolidated financial statements be read in conjunction with the audited consolidated financial statements and the notes thereto included in the Company’s Annual Report on Form

10-K

for the year ended December 31, 2018 filed with the SEC on February 15, 2019.

Recent Accounting Pronouncements

In January 2017, the Financial Accounting Standards Board (FASB) amended Accounting Standards Codification (ASC) 350,

Intangibles – Goodwill and Other

(issued under Accounting Standards Update (ASU)

2017-04,

2017-04

will have a material impact on its consolidated balance sheets, statements of earnings or statements of cash flows.

In June 2016, the FASB issued ASC 326,

Financial Instruments – Credit Losses

(issued under ASU

2016-13)

which modifies the measurement of expected credit losses on certain financial instruments. ASU

2016-13

requires adoption on January 1, 2020. The Company does not expect that the adoption of ASU

2016-13

will have a material impact on its consolidated balance sheets, statements of earnings or statements of cash flows.

In February 2016, the FASB amended ASC 842,

Leases

(issued under ASU

2016-02).

non-lease

Acquisitions

6 Months Ended

Jun. 30, 2019

Acquisitions

3.	Acquisitions

April 8, 2019

, the Company acquired 100 percent of the shares of Water-Right, Inc

. and its affiliated entities (Water-Right),

a Wisconsin-based water treatment company. With the addition of Water-Right, the Company grew its North America water treatment platform. Water-Right is included in the Company’s North America segment for reporting purposes.

The Company paid an aggregate cash purchase price of $107.0 million, net of cash acquired. In addition, the Company established a $4.0 million escrow to satisfy any potential obligations of the former owners of Water-Right, should they arise.

The following table summarizes the preliminary estimate of the fair value of the assets acquired and liabilities assumed at the date of acquisition of Water-Right for purposes of allocating the purchase price. The Company is in the process of finalizing the fair value estimates; therefore, the allocation of the purchase price is subject to refinement. The preliminary $57.6 million of acquired identifiable intangible assets was comprised of the following: $

38.3

million of customer relationships being amortized over 20 years, $18.2 million of trademarks not subject to amortization, and $1.1 million of non-compete agreements being amortized over 7.5 years.


April 8, 2019 (dollars in millions)
Current assets, net of cash acquired	$	9.7
Property, plant and equipment		8.6
Intangible assets		57.6
Goodwill		33.7

Total assets acquired		109.6
Current liabilities		(2.6	)

Total liabilities assumed		(2.6	)

Net assets acquired	$	107.0

The acquisition was accounted for using the purchase method of accounting, and accordingly, the results of operations have been included in the Company’s consolidated financial statements from April 8, 2019, the date of acquisition. Revenues and

pre-tax

earnings associated with Water-Right included in the consolidated statement of earnings totaled $13.8 million and $2.0 million, respectively, which included $2.4 million of operating earnings less $0.4 million of acquisition-related costs incurred by the Company resulting from the acquisition.

Schedule of Segment Earnings (Detail) - USD ($)
$ in Millions

3 Months Ended

6 Months Ended

Jun. 30, 2019

Jun. 30, 2018

Jun. 30, 2019

Jun. 30, 2018

$ 765.4

$ 833.3

$ 1,513.6

$ 1,621.3

Earnings before provision for income taxes

145.2

159.6

273.5

301.6

Other income (expense)

5.6

4.6

11.1

10.4

Interest expense

(3.4)

(2.3)

(5.4)

(4.6)

132.2

146.1

243.8

271.5

Provision for income taxes

30.1

31.6

52.4

58.2

Net earnings

102.1

114.5

191.4

213.3

Inter-segment

(7.7)

(9.0)

(13.4)

(16.5)

(0.1)

Corporate

North America | Operating Segments

Other income (expense)

(9.6)

(11.2)

(24.3)

(25.5)

524.0

534.2

1,045.8

1,035.9

Rest of World | Operating Segments

^[1]

122.9

124.9

238.9

230.9

249.1

308.1

481.2

601.9