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Cover Page - shares	3 Months Ended
Cover Page - shares	Mar. 31, 2020	Apr. 30, 2020
Document Information [Line Items]
Document Type	10-Q
Amendment Flag	false
Entity Registrant Name	SMITH A O CORP
Entity Small Business	false
Entity Central Index Key	0000091142
Entity Emerging Growth Company	false
Entity Interactive Data Current	Yes
Entity Current Reporting Status	Yes
Entity Shell Company	false
Document Quarterly Report	true
Document Transition Report	false
Document Fiscal Period Focus	Q1
Current Fiscal Year End Date	--12-31
Document Period End Date	Mar. 31, 2020
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
Trading Symbol	AOS
Title of 12(b) Security	Common Stock
Entity Filer Category	Large Accelerated Filer
City Area Code	414
Local Phone Number	359-4000
Document Fiscal Year Focus	2020
Common Class A
Document Information [Line Items]
Entity Common Stock, Shares Outstanding		26,044,733
Common Stock
Document Information [Line Items]
Entity Common Stock, Shares Outstanding		135,095,634

CONDENSED CONSOLIDATED STATEMENTS OF EARNINGS - USD ($) $ in Millions	3 Months Ended
	Mar. 31, 2020	Mar. 31, 2019
Net sales	$ 636.9	$ 748.2
Cost of products sold	397.4	455.4
Gross profit	239.5	292.8
Selling, general and administrative expenses	173.8	184.7
Interest expense	2.2	2.0
Other income	(4.2)	(5.5)
Earnings before provision for income taxes	67.7	111.6
Provision for income taxes	16.0	22.3
Net Earnings	$ 51.7	$ 89.3
Net Earnings Per Share of Common Stock	$ 0.32	$ 0.53
Diluted Net Earnings Per Share of Common Stock	0.32	0.53
Dividends Per Share of Common Stock	$ 0.24	$ 0.22

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE EARNINGS - USD ($) $ in Millions	3 Months Ended
	Mar. 31, 2020	Mar. 31, 2019
Net earnings	$ 51.7	$ 89.3
Other comprehensive (loss) earnings
Foreign currency translation adjustments	(18.0)	15.9
Unrealized net gains (losses) on cash flow derivative instruments, less related income tax provision of $(0.1) in 2020 and $ - in 2019	0.3	(0.1)
Adjustment to pension liability, less related income tax provision of $(1.2) in 2020 and $(1.0) in 2019	3.6	2.9
Comprehensive Earnings	$ 37.6	$ 108.0

- 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 COMPREHENSIVE EARNINGS (Parenthetical) - USD ($) $ in Millions	3 Months Ended
	Mar. 31, 2020	Mar. 31, 2019
Unrealized net gains (losses) on cash flow derivative instruments, less related income tax provision	$ (0.1)	$ 0.0
Adjustment to pension liability, less related income tax provision	$ (1.2)	$ (1.0)

CONDENSED CONSOLIDATED BALANCE SHEETS - USD ($) $ in Millions	Mar. 31, 2020	Dec. 31, 2019
Assets
Cash and cash equivalents	$ 416.1	$ 374.0
Marketable securities	135.6	177.4
Receivables	524.0	589.5
Inventories	312.3	303.0
Other current assets	54.5	56.5
Total Current Assets	1,442.5	1,500.4
Property, plant and equipment	1,159.5	1,156.9
Less accumulated depreciation	(622.2)	(611.5)
Net property, plant and equipment	537.3	545.4
Goodwill	542.6	546.0
Other intangibles	333.1	338.4
Operating lease assets	44.9	46.9
Other assets	82.6	80.9
Total Assets	2,983.0	3,058.0
Liabilities
Trade payables	442.0	509.6
Accrued payroll and benefits	47.7	64.6
Accrued liabilities	159.7	143.7
Product warranties	42.9	41.8
Debt due within one year	6.8	6.8
Total Current Liabilities	699.1	766.5
Long-term debt	335.6	277.2
Pension liabilities	20.8	27.8
Long-term operating lease liabilities	37.3	38.7
Other liabilities	273.9	281.0
Total Liabilities	1,366.7	1,391.2
Stockholders' Equity
Common Stock, value	164.5	164.5
Capital in excess of par value	516.1	509.0
Retained earnings	2,336.1	2,323.4
Accumulated other comprehensive loss	(362.4)	(348.3)
Treasury stock at cost	(1,168.9)	(1,112.7)
Total Stockholders' Equity	1,616.3	1,666.8
Total Liabilities and Stockholders' Equity	2,983.0	3,058.0
Common Class A
Stockholders' Equity
Common Stock, value	130.9	130.9
Total Stockholders' Equity	$ 130.9	$ 130.9

CONDENSED CONSOLIDATED BALANCE SHEETS (Parenthetical) - $ / shares	Mar. 31, 2020	Dec. 31, 2019
Common Stock, Par or Stated Value Per Share	$ 1	$ 1
Common Stock, Shares Authorized	240,000,000	240,000,000
Common Stock, shares issued	164,532,481	164,526,709
Common Class A
Common Stock, Par or Stated Value Per Share	$ 5	$ 5
Common Stock, Shares Authorized	27,000,000	27,000,000
Common Stock, shares issued	26,175,113	26,180,885

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS - USD ($) $ in Millions	3 Months Ended
	Mar. 31, 2020	Mar. 31, 2019
Operating Activities
Net earnings	$ 51.7	$ 89.3
Adjustments to reconcile net earnings to cash provided by (used in) operating activities:
Depreciation and amortization	20.1	20.2
Stock based compensation expense	9.0	8.7
Net changes in operating assets and liabilities:
Current assets and liabilities	(15.1)	(86.3)
Noncurrent assets and liabilities	(11.6)	(10.3)
Cash Provided by Operating Activities	54.1	21.6
Investing Activities
Capital expenditures	(12.8)	(20.9)
Investments in marketable securities	(38.8)	(48.5)
Net proceeds from sale of marketable securities	78.0	147.2
Cash Provided by Investing Activities	26.4	77.8
Financing Activities
Long-term debt incurred	58.5	63.0
Common stock repurchases	(56.7)	(45.6)
Net payments from stock option activity	(1.2)	(1.6)
Dividends paid	(39.0)	(37.1)
Cash Used In Financing Activities	(38.4)	(21.3)
Net increase in cash and cash equivalents	42.1	78.1
Cash and cash equivalents - beginning of period	374.0	259.7
Cash and Cash Equivalents - End of Period	$ 416.1	$ 337.8

CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY - USD ($) $ in Millions	Total	Common Class A	Common Stock	Capital in Excess of Par Value	Retained Earnings	Accumulated Other Comprehensive Loss	Treasury Stock
Balance at Dec. 31, 2018		$ 131.0	$ 164.5	$ 496.7	$ 2,102.8		$ (827.2)
Net earnings	$ 89.3				89.3
Issuance of share units				(6.1)
Cash dividends on stock					(37.1)
Vesting of share units				(1.9)			2.0
Stock based compensation expense				8.6
Exercises of stock options				0.1			(1.9)
Stock incentives and directors' compensation				6.1
Shares repurchased							(45.6)
Balance at Mar. 31, 2019	1,749.2	131.0	164.5	503.5	2,155.0	$ (332.1)	(872.7)
Balance at Dec. 31, 2019	1,666.8	130.9	164.5	509.0	2,323.4		(1,112.7)
Net earnings	51.7				51.7
Issuance of share units				(6.5)
Cash dividends on stock					(39.0)
Vesting of share units				(1.6)			1.6
Stock based compensation expense				8.8
Exercises of stock options				(0.1)			(1.1)
Stock incentives and directors' compensation				6.5
Shares repurchased							(56.7)
Balance at Mar. 31, 2020	$ 1,616.3	$ 130.9	$ 164.5	$ 516.1	$ 2,336.1	$ (362.4)	$ (1,168.9)

- Definition

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

+ References + Details

Basis of Presentation

3 Months Ended

Mar. 31, 2020

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 months ended March 31, 2020 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, 2019 filed with the SEC on February 24, 2020.

Recent Accounting Pronouncements

In December 2019, the Financial Accounting Standards Board (FASB) amended Accounting Standards Codification (ASC) 740,

Income Taxes

(issued under Accounting Standards Update (ASU)

2019-12,

“Simplifying the Accounting for Income Taxes”). This amendment removes certain exceptions to the general principles of ASC 740, and clarifies and amends existing guidance to improve consistent application. The amendment requires adoption on January 1, 2021, with early adoption permitted. The Company does not expect that the adoption of ASU

2019-12

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

In January 2017, the FASB amended ASC 350,

Intangibles – Goodwill

and Other (issued under 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 Company adopted the amendment on January 1, 2020 and the adoption of ASU

2017-04

did not have an 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. The Company adopted

2016-13

on January 1, 2020 and the adoption did not have a material impact on its consolidated balance sheets, statements of earnings or statements of cash flows.

Revenue Recognition

3 Months Ended

Mar. 31, 2020

Revenue Recognition Disclosure [Text Block]

2.	Revenue Recognition

Substantially all of the Company’s sales are from contracts with customers for the purchase of its products. Contracts and customer purchase orders are used to determine the existence of a sales contract. Shipping documents are used to verify shipment. For substantially all of its products, the Company transfers control of products to the customer at the point in time when title and risk are passed to the customer, which generally occurs upon shipment of the product. Each unit sold is considered an independent, unbundled performance obligation. The Company’s sales arrangements do not include other performance obligations that are material in the context of the contract.

The nature, timing and amount of revenue for a respective performance obligation are

consistent

for each customer. The Company measures the sales transaction price based upon the payment terms associated with the transaction and whether the sales price is subject to refund or adjustment. Sales and value added taxes are excluded from the measurement of transaction price. The Company’s payment terms for the majority of its customers are 30 to 90 days from shipment.

Additionally, certain customers in China pay the Company prior to the shipment of products resulting in a customer deposits liability of $65.2 million and $49.6 million at March 31, 2020 and December 31, 2019, respectively. The Company assesses the collectability of customer receivables based on the creditworthiness of a customer as determined by credit checks and analysis, as well as the customer’s payment history. In determining the allowance for doubtful accounts, the Company also considers various factors including the aging of customer accounts and historical write-offs. In addition, the Company monitors other risk factors including forward-looking information when establishing adequate allowances for doubtful accounts, which reflects the current estimate of credit losses expected to be incurred over the life of the receivables. The Company’s allowance for doubtful accounts was $7.5 million and $6.7 million at March 31, 2020 and December 31, 2019, respectively.

Rebates and incentives are based on pricing agreements and are tied to sales volume. The amount of revenue is reduced for variable consideration related to customer rebates which are calculated using expected values and are based on program specific factors such as expected rebate percentages based on expected volumes. In situations where the customer has the right to return eligible products, the Company reduces revenue for its estimates of expected product returns, which are primarily based on an analysis of historical experience. Changes in such accruals may be required if actual sales volume differs from estimated sales volume or if future returns differ from historical experience. Shipping and handling costs billed to customers are included in net sales and the related costs are included in cost of products sold and are activities performed to fulfill the promise to transfer products.

Disaggregation of Net Sales

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

in-home

air purification products in China.

As each segment manufactures and markets products in its respective region of the world, the Company has determined that geography is the primary factor in reporting its sales. The Company further disaggregates its North America segment sales by major product line as each of North America’s major product lines is sold through distinct distribution channels and these product lines may be impacted differently by certain economic factors. Within the Rest of World segment, particularly in China and India, the Company’s major customers purchase across the Company’s product lines, utilizing the same distribution channel regardless of product type. In addition, the impact of economic factors is unlikely to be differentiated by product line in the Rest of World segment.

The North America segment major product lines are defined as the following:

Water heaters

The Company’s water heaters are open water heating systems that heat potable water. Typical applications for water heaters include residences, restaurants, hotels and motels, office buildings, laundries, car washes and small businesses. The Company sells residential and commercial water heater products and related parts through its wholesale distribution channel, which includes more than 1,300 independent wholesale plumbing distributors. The Company also sells residential water heaters and related parts through retail and maintenance, repair and operations (MRO) channels. A significant portion of the Company’s water heater sales in the North America segment is derived from the replacement of existing products.

Boilers

The Company’s boilers are closed loop water heating systems used primarily for space heating or hydronic heating. The Company’s boilers are primarily used in applications in commercial settings for hospitals, schools, hotels and other large commercial buildings while residential boilers are used in homes, apartments and condominiums. The Company’s boiler distribution channel is comprised primarily of manufacturer representative firms, with the remainder of our boilers distributed through wholesale channels. The Company’s boiler sales in the North America segment are derived from a combination of replacement of existing products and new construction.

Water treatment

products

The Company’s water treatment products range from

point-of-entry

water softeners, solutions for problem well water, and whole-home water filtration products to

on-the-go

filtration bottles and

point-of-use

carbon and reverse osmosis products. Typical applications for the Company’s water treatment products include residences, restaurants, hotels and offices. The Company sells water treatment products through its wholesale and retail distribution channels, similar to water heater products and related parts. The Company’s water treatment products are also sold through independent water quality

dealers

as well as directly to consumers including through internet sales channels. A portion of the Company’s sales of water treatment products in the North America

segment

is comprised of replacement filters.

The following table disaggregates the Company’s net sales by segment. As described above, the Company’s North America segment sales are further disaggregated by major product line. In addition, the Company’s Rest of World segment sales are disaggregated by China and all other Rest of World.

(dollars in millions)


	Three Months Ended March 31,
	2020			2019
North America
Water heaters and related parts	$	447.8		$	455.7
Boilers and related parts		41.5			42.6
Water treatment products (1)		43.6			23.5

Total North America		532.9			521.8

Rest of World
China	$	91.0		$	213.0
All other Rest of World		19.2			19.1

Total Rest of World		110.2			232.1

Inter-segment sales		(6.2	)		(5.7	)

Total Net Sales	$	636.9		$	748.2

(1)

Includes the results of Water-Right, Inc. and its affiliated entities (Water-Right) from April 8, 2019, the date of acquisition

Acquisitions

3 Months Ended

Mar. 31, 2020

Acquisitions

3.	Acquisitions

On April 8, 2019, the Company acquired 100 percent of the shares of 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 allocation 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. Significant assumptions used to estimate the fair value of intangible assets acquired include discount rates and certain assumptions that form the basis of the forecasted results, including revenue growth rates, attrition rates and royalty rates. The $60.4 million of acquired identifiable intangible assets was comprised of the following: $40.2 million of customer relationships being amortized over 20 years, $19.0 million of trademarks not subject to amortization, and $1.2 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		60.4
Goodwill		31.0

Total assets acquired		109.7

Current liabilities		(2.7	)

Net assets acquired	$	107.0

As required under ASC 805 Business Combinations, Water-Right’s

results

of operations have been included in the Company’s consolidated financial statements from April 8, 2019, the date of acquisition.

Leases

3 Months Ended

Mar. 31, 2020

Leases [Abstract]

Leases

The Company’s lease portfolio consists of operating leases for

buildings

and equipment, such as forklifts and copiers, primarily in the United States and China. The Company defines a lease as a contract that gives the Company the right to control the use of a physical asset for a stated term. The Company pays the lessor for that right, with a series of payments defined in the contract and a corresponding right of use operating lease asset and liability are recorded. The Company has elected not to record leases with an initial term of 12 months or less on its condensed consolidated balance sheet. To determine balance sheet amounts, required legal payments are discounted using the Company’s incremental borrowing rate as of the inception of the lease. The incremental borrowing rate is the rate of interest that the Company would incur if it were to borrow, on a collateralized basis, an amount equal to the value of the leased item over a similar term, in a similar economic environment. Variable lease components not based on an index or rate are excluded from the measurement of the lease asset and liability and expensed as incurred for all asset classes.

Certain leases include one or more options to renew or terminate. Renewal terms can extend the lease term from one to five years and options to terminate can be effective within one year. The exercise of lease renewal or termination is at the Company’s discretion and when it is determined to be reasonably certain to renew or terminate, the option is reflected in the measurement of lease asset and liability. The Company’s lease agreements do not contain any material residual value guarantees or material restrictive covenants or material subleases. Cash flows associated with leases are materially consistent with the expense recorded in the condensed consolidated statement of earnings.

Supplemental balance sheet information related to leases was as follows:

(dollars in millions)


	March 31, 2020			December 31, 2019
Liabilities
Short term: Accrued liabilities	$	11.5		$	12.0
Long term: Operating lease liabilities		37.3			38.7

Total operating lease liabilities	$	48.8		$	50.7

Less: Rent incentives and deferrals		(3.9	)		(3.8	)

Assets
Operating lease assets	$	44.9		$	46.9


Lease Term and Discount Rate	March 31, 2020
Weighted-average remaining lease term		10 years
Weighted-average discount rate		3.95 %

The components of lease expense were as follows:


(dollars in millions)
		Three months ended March 31,
Lease Expense	Classification	2020 (1)		2019 (2)
Operating lease expense	Cost of products sold	$	0.7	$	0.7
	Selling, general and administrative expenses		4.0		4.9

(1)

2020 includes short-term and variable lease expenses of $0.4 million and $0.4 million, respectively.

(2)

2019 includes short-term and variable lease expenses of $0.4 million and $0.8 million, respectively.

Maturities of lease liabilities were as follows:


(dollars in millions)
	March 31, 2020
2020	$	10.2
2021		10.7
2022		9.2
2023		4.9
2024		3.8
After 2024		22.7

Total lease payments		61.5
Less: imputed interest		(12.7	)

Present value of operating lease liabilities	$	48.8

Inventories

3 Months Ended

Mar. 31, 2020

Inventories

5.	Inventories

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


(dollars in millions)
	March 31, 2020			December 31, 2019
Finished products	$	142.8		$	136.8
Work in process		21.6			21.7
Raw materials		171.7			168.3

Inventories, at FIFO cost		336.1			326.8
LIFO reserve		(23.8	)		(23.8	)

Net inventory	$	312.3		$	303.0

Product Warranties

3 Months Ended

Mar. 31, 2020

Product Warranties Disclosures [Abstract]

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)
	Three Months Ended March 31,
	2020			2019
Balance at January 1	$	134.3		$	139.4
Expense		13.5			9.4
Claims settled		(12.5	)		(12.6	)

Balance at March 31	$	135.3		$	136.2

Long-Term Debt

3 Months Ended

Mar. 31, 2020

Debt Disclosure [Abstract]

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, 2020. At its option, the Company either maintains cash balances or pays fees for bank credit and services.

Earnings per Share of Common Stock

3 Months Ended

Mar. 31, 2020

Earnings Per Share [Abstract]

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,
	2020		2019
Denominator for basic earnings per share - weighted average shares		161,871,788		167,803,794
Effect of dilutive stock options and share units		1,025,817		1,292,348

Denominator for diluted earnings per share		162,897,605		169,096,142

Stock Based Compensation

3 Months Ended

Mar. 31, 2020

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, 2020 was 951,461. 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, 2020 and 2019 was $9.0 million and $8.7 million, respectively.

Stock Options

The stock options granted in the three months ended March 31, 2020 and 2019 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 2020 and 2019 expire ten years after the 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, 2020 and 2019 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, 2020 and 2019 was $4.5 million and $4.3 million, respectively.

Changes in options, all of which relate to the Company’s Common Stock, were as follows for the three months ended March 31, 2020:


	Weighted- Avg. Per Share Exercise Price		Number of Options			Average Remaining Contractual Life		Aggregate Intrinsic Value (dollars in millions)
Outstanding at January 1, 2020	$	37.64		2,728,350
Granted		42.39		784,300
Exercised		15.04		(25,147	)
Forfeited		48.95		(56,261	)

Outstanding at March 31, 2020		38.71		3,431,242			7 years	$	19.1

Exercisable at March 31, 2020		34.25		2,162,932			5 years	$	19.1

The weighted-average fair value per option at the date of grant during the three months ended March 31, 2020 and 2019 using the Black-Scholes option-pricing model was $8.15 and $10.83, respectively. Assumptions were as follows:


	Three Months Ended March 31,
	2020			2019
Expected life (years)		5.7			5.6
Risk-free interest rate		1.6	%		2.7	%
Dividend yield		2.1	%		1.6	%
Expected volatility		23.6	%		22.8	%

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.

Restricted Stock and Share Units

Participants may also be awarded shares of restricted stock or share units under the Plan. Share units vest three years after the date of grant. The Company granted 169,407 and 136,647 share units under the plan in the three months ended March 31, 2020 and 2019, respectively. The share units were valued at $7.2 million and $6.8 million at the date of issuance in 2020 and 2019, 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, 2020 and 2019 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 $4.5 million and $4.4 million was recognized in the three months ended March 31, 2020 and 2019, respectively. Certain

non-U.S.-based

employees receive the cash value of the share price at the vesting date in lieu of shares. Unvested cash-settled awards are remeasured at each reporting period.

A summary of share unit activity under the plan is as follows for the three months ended March 31, 2020:


	Number of Units			Weighted-Average Grant Date Value
Issued and unvested at January 1, 2020		366,102		$	49.92
Granted		169,407			42.39
Vested		(100,735	)		49.21
Forfeited		(7,557	)		53.96

Issued and unvested at March 31, 2020		427,217			46.94

Pensions

3 Months Ended

Mar. 31, 2020

Pensions

10.

Pensions

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


	Three Months Ended March 31,
	2020			2019
Service cost	$	0.4		$	0.4
Interest cost		5.7			7.9
Expected return on plan assets		(13.0	)		(14.3	)
Amortization of unrecognized loss		4.9			4.0
Amortization of prior service cost		(0.1	)		(0.1	)

Defined benefit plan income	$	(2.1	)	$	(2.1	)

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 2019. The Company is not required to make a contribution in 2020.

Segment Results

3 Months Ended

Mar. 31, 2020

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, 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:


(dollars in millions)
	Three Months Ended March 31,
	2020			2019
Net sales
North America	$	532.9		$	521.8
Rest of World		110.2			232.1
Inter-segment		(6.2	)		(5.7	)

	$	636.9		$	748.2

Segment earnings ( losses )
North America	$	127.1		$	116.0
Rest of World		(42.2	)		12.3

		84.9			128.3

Corporate expense		(15.0	)		(14.7	)
Interest expense		(2.2	)		(2.0	)

Earnings before income taxes		67.7			111.6
Provision for income taxes		16.0			22.3

Net earnings	$	51.7		$	89.3

Fair Value Measurements

3 Months Ended

Mar. 31, 2020

Fair Value Measurements

12.	Fair Value Measurements

ASC 820,

Fair Value Measurements

, among other things, defines fair value, establishes a consistent framework for measuring fair value and expands disclosure for each major asset and liability category measured at fair value on either a recurring basis or nonrecurring basis. ASC 820 clarifies that fair value is an exit price, representing the amount that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants. As such, fair value is a market-based measurement that should be determined based on assumptions that market participants would use in pricing an asset or liability. As a basis for considering such assumptions, ASC 820 establishes a three-tier fair value hierarchy, which prioritizes the inputs used in measuring fair value as follows: (Level 1) observable inputs such as quoted prices in active markets; (Level 2) inputs, other than the quoted prices in active markets, that are observable either directly or indirectly; and (Level 3) unobservable inputs in which there is little or no market data, which require the reporting entity to develop its own assumptions. 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, 2020		December 31, 2019
Quoted prices in active markets for identical assets (Level 1)	$	135.6	$	177.4
Significant other observable inputs (Level 2)		1.0		6.9

Items measured at fair value were comprised of the Company’s marketable securities (Level 1) and derivative instruments (Level 2). There were no changes in the Company’s valuation techniques used to measure fair values on a recurring basis during the three months ended March 31, 2020.

- Definition

The entire disclosure for the fair value of financial instruments (as defined), including financial assets and financial liabilities (collectively, as defined), and the measurements of those instruments as well as disclosures related to the fair value of non-financial assets and liabilities. Such disclosures about the financial instruments, assets, and liabilities would include: (1) the fair value of the required items together with their carrying amounts (as appropriate); (2) for items for which it is not practicable to estimate fair value, disclosure would include: (a) information pertinent to estimating fair value (including, carrying amount, effective interest rate, and maturity, and (b) the reasons why it is not practicable to estimate fair value; (3) significant concentrations of credit risk including: (a) information about the activity, region, or economic characteristics identifying a concentration, (b) the maximum amount of loss the entity is exposed to based on the gross fair value of the related item, (c) policy for requiring collateral or other security and information as to accessing such collateral or security, and (d) the nature and brief description of such collateral or security; (4) quantitative information about market risks and how such risks are managed; (5) for items measured on both a recurring and nonrecurring basis information regarding the inputs used to develop the fair value measurement; and (6) for items presented in the financial statement for which fair value measurement is elected: (a) information necessary to understand the reasons for the election, (b) discussion of the effect of fair value changes on earnings, (c) a description of [similar groups] items for which the election is made and the relation thereof to the balance sheet, the aggregate carrying value of items included in the balance sheet that are not eligible for the election; (7) all other required (as defined) and desired information.

+ References + Details

Derivative Instruments

3 Months Ended

Mar. 31, 2020

Derivative Instruments

13.	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.

(dollars in millions)


	March 31, 2020				December 31, 2019
	Buy		Sell		Buy		Sell
British pound	$	—	$	0.9	$	—	$	1.3
Canadian dollar		—		59.8		—		49.7
Euro		27.1		—		36.0		—
Mexican peso		23.4		—		18.6		—

Total	$	50.5	$	60.7	$	54.6	$	51.0

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

gains and losses of the contracts as of March 31, 2020 were recorded in accumulated other comprehensive loss and will be reclassified into cost of products sold in the period in which the underlying transaction is recorded in earnings. The

after-tax

gains and losses on the contracts will be reclassified within one year.

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 $0.8 million and $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 three months ended March 31, 2020 and 2019, respectively. The contractual amount of the Company’s foreign currency forward contracts that are designated as net investment hedges is $50.0 million as of March 31, 2020.

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, 2020			December 31, 2019
Foreign currency contracts	Other current assets	$	4.8		$	8.4
	Accrued liabilities		(3.6	)		(1.5	)
Commodities contracts	Accrued liabilities		(0.2	)		—

Total derivatives designated as hedging instruments		$	1.0		$	6.9

The effect of cash flow hedges 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) recognized in other comprehensive loss on derivatives						Location of gain (loss) reclassified from accumulated other comprehensive loss into earnings	Amount of gain (loss) reclassified from accumulated other comprehensive loss into earnings
	2020			2019				2020		2019
Foreign currency contracts	$	1.4		$	0.1		Cost of products sold	$	0.8	$	—
Commodities contracts		(0.2	)		(0.2	)	Cost of products sold		—		—

	$	1.2		$	(0.1	)		$	0.8	$	—

Income Taxes

3 Months Ended

Mar. 31, 2020

Income Taxes

14.	Income Taxes

The effective income tax rate for the three months ended March 31, 2020 was 23.6 percent compared to 20.0 percent for the three months ended March 31, 2019. The higher effective income tax rate for the three months ended March 31, 2020 compared to the effective income tax rate for the three months ended March 31, 2019 was primarily due to

a change in geographic

earnings mix.

As of March 31, 2020, the Company had $9.7 million of unrecognized tax benefits of which $0.8 million would affect its effective income tax rate if recognized. The Company recognizes potential interest and penalties related to unrecognized tax benefits as a component of income tax expense.

The Company’s U.S. federal income tax returns for 2016-2020 are subject to audit. The Company is subject to state and local income tax audits for tax years 2002-2020. The Company is subject to

non-U.S.

income tax examinations for years 2014-2020.

Changes in Accumulated Other Comprehensive Loss by Component

3 Months Ended

Mar. 31, 2020

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,
	2020			2019
Cumulative foreign currency translation
Balance at beginning of period	$	(66.2	)	$	(64.9	)
Other comprehensive ( loss ) income before reclassifications		(18.0	)		15.9

Balance at end of period		(84.2	)		(49.0	)

Unrealized net gain (loss) on cash flow derivatives
Balance at beginning of period		0.2			(0.7	)
Other comprehensive loss before reclassifications		0.9			(0.1	)
Realized gains on derivatives reclassified to cost of products sold (net of income tax provision of $ 0.2 and $ - in 2020 and 2019, respectively)		(0.6	)		—

Balance at end of period		0.5			(0.8	)

Pension liability
Balance at beginning of period		(282.3	)		(285.2	)
Amounts reclassified from accumulated other comprehensive loss: (1)		3.6			2.9

Balance at end of period		(278.7	)		(282.3	)

Accumulated other comprehensive loss, end of period	$	(362.4	)	$	(332.1	)
(1) Amortization of pension items:

Actuarial losses	$	4.9	(2)	$	4.0	(2)
Prior year service cost		(0.1	) (2)		(0.1	) (2)
		4.8			3.9
Income tax benefit		(1.2	)		(1.0	)
Reclassification net of income tax benefit	$	3.6		$	2.9

(2)	These accumulated other comprehensive loss components are included in the computation of net periodic pension cost. See Note 10 - Pensions for additional details

Commitments and Contingencies

3 Months Ended

Mar. 31, 2020

Commitments and Contingencies

16.	Commitments and Contingencies

The Company maintains a commercial relationship with a supply-chain service provider (the Provider) in connection with the Company’s business in China. In this capacity, the Provider offers order-entry, warehousing and logistics support. The Provider also offers asset-backed financing to certain of the Company’s distributors in China to facilitate their working capital needs. To facilitate its financing support business, the Provider has collateralized lending facilities in place with multiple Chinese banks under which the Company has agreed to repurchase inventory if both requested by the banks and certain defined conditions are met, primarily related to the aging of the distributors’ notes.

The Provider is required to indemnify the Company for any losses the Company would incur in the event of an inventory repurchase under these arrangements. Potential losses under the repurchase arrangements represent the difference between the repurchase price and net proceeds from the resale of product plus costs incurred in the process, less related distributor rebates.

Before considering any reduction of distributor rebate accruals of $9.1

million

and $14.1 million as of March 31, 2020 and December 31, 2019, respectively, and from the resale of the related inventory, the gross amount the Company would be obligated to repurchase, which would be contingent on the default of all of the outstanding loans, was approximately $17.0 million and $23.1 million as of March 31, 2020 and December 31, 2019, respectively. The Company’s reserves for estimated losses under repurchase arrangements were immaterial as of March 31, 2020 and December 31, 2019.

Basis of Presentation (Policies)

3 Months Ended

Mar. 31, 2020

Recent Accounting Pronouncements

In December 2019, the Financial Accounting Standards Board (FASB) amended Accounting Standards Codification (ASC) 740,

Income Taxes

(issued under Accounting Standards Update (ASU)

2019-12,

2019-12

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

In January 2017, the FASB amended ASC 350,

Intangibles – Goodwill

and Other (issued under ASU

2017-04,

2017-04

did not have an 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. The Company adopted

2016-13

on January 1, 2020 and the adoption did not have a material impact on its consolidated balance sheets, statements of earnings or statements of cash flows.

Revenue Recognition (Tables)

3 Months Ended

Mar. 31, 2020

Revenue Recognition [Abstract]

Segment Sales Disaggregated by Major Product Line

(dollars in millions)


	Three Months Ended March 31,
	2020			2019
North America
Water heaters and related parts	$	447.8		$	455.7
Boilers and related parts		41.5			42.6
Water treatment products (1)		43.6			23.5

Total North America		532.9			521.8

Rest of World
China	$	91.0		$	213.0
All other Rest of World		19.2			19.1

Total Rest of World		110.2			232.1

Inter-segment sales		(6.2	)		(5.7	)

Total Net Sales	$	636.9		$	748.2

(1)

Includes the results of Water-Right, Inc. and its affiliated entities (Water-Right) from April 8, 2019, the date of acquisition

Acquisitions (Tables)

3 Months Ended

Mar. 31, 2020

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		60.4
Goodwill		31.0

Total assets acquired		109.7

Current liabilities		(2.7	)

Net assets acquired	$	107.0

Leases (Tables)

3 Months Ended

Mar. 31, 2020

Leases [Abstract]

Schedule of Leases Supplemental Balance Sheet

Supplemental balance sheet information related to leases was as follows:

(dollars in millions)


	March 31, 2020			December 31, 2019
Liabilities
Short term: Accrued liabilities	$	11.5		$	12.0
Long term: Operating lease liabilities		37.3			38.7

Total operating lease liabilities	$	48.8		$	50.7

Less: Rent incentives and deferrals		(3.9	)		(3.8	)

Assets
Operating lease assets	$	44.9		$	46.9


Lease Term and Discount Rate	March 31, 2020
Weighted-average remaining lease term		10 years
Weighted-average discount rate		3.95 %

Schedule of Components of Lease Expense

The components of lease expense were as follows:


(dollars in millions)
		Three months ended March 31,
Lease Expense	Classification	2020 (1)		2019 (2)
Operating lease expense	Cost of products sold	$	0.7	$	0.7
	Selling, general and administrative expenses		4.0		4.9

(1)

2020 includes short-term and variable lease expenses of $0.4 million and $0.4 million, respectively.

(2)

2019 includes short-term and variable lease expenses of $0.4 million and $0.8 million, respectively.

Schedule of Maturities of Lease Liabilities

Maturities of lease liabilities were as follows:


(dollars in millions)
	March 31, 2020
2020	$	10.2
2021		10.7
2022		9.2
2023		4.9
2024		3.8
After 2024		22.7

Total lease payments		61.5
Less: imputed interest		(12.7	)

Present value of operating lease liabilities	$	48.8

Inventories (Tables)

3 Months Ended

Mar. 31, 2020

Schedule of Inventories

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


(dollars in millions)
	March 31, 2020			December 31, 2019
Finished products	$	142.8		$	136.8
Work in process		21.6			21.7
Raw materials		171.7			168.3

Inventories, at FIFO cost		336.1			326.8
LIFO reserve		(23.8	)		(23.8	)

Net inventory	$	312.3		$	303.0

Product Warranties (Tables)

3 Months Ended

Mar. 31, 2020

Schedule of Product Warranty Liability Activity

The following table presents the Company’s warranty liability activity.


(dollars in millions)
	Three Months Ended March 31,
	2020			2019
Balance at January 1	$	134.3		$	139.4
Expense		13.5			9.4
Claims settled		(12.5	)		(12.6	)

Balance at March 31	$	135.3		$	136.2

Earnings per Share of Common Stock (Tables)

3 Months Ended

Mar. 31, 2020

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,
	2020		2019
Denominator for basic earnings per share - weighted average shares		161,871,788		167,803,794
Effect of dilutive stock options and share units		1,025,817		1,292,348

Denominator for diluted earnings per share		162,897,605		169,096,142

Stock Based Compensation (Tables)

3 Months Ended

Mar. 31, 2020

Schedule of Changes in Option Shares

Changes in options, all of which relate to the Company’s Common Stock, were as follows for the three months ended March 31, 2020:


	Weighted- Avg. Per Share Exercise Price		Number of Options			Average Remaining Contractual Life		Aggregate Intrinsic Value (dollars in millions)
Outstanding at January 1, 2020	$	37.64		2,728,350
Granted		42.39		784,300
Exercised		15.04		(25,147	)
Forfeited		48.95		(56,261	)

Outstanding at March 31, 2020		38.71		3,431,242			7 years	$	19.1

Exercisable at March 31, 2020		34.25		2,162,932			5 years	$	19.1

Schedule of Weighted Average Fair Value per Option at Date of Grant


	Three Months Ended March 31,
	2020			2019
Expected life (years)		5.7			5.6
Risk-free interest rate		1.6	%		2.7	%
Dividend yield		2.1	%		1.6	%
Expected volatility		23.6	%		22.8	%

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, 2020:


	Number of Units			Weighted-Average Grant Date Value
Issued and unvested at January 1, 2020		366,102		$	49.92
Granted		169,407			42.39
Vested		(100,735	)		49.21
Forfeited		(7,557	)		53.96

Issued and unvested at March 31, 2020		427,217			46.94

Pensions (Tables)

3 Months Ended

Mar. 31, 2020

Schedule of Components of Net Pension Income

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


	Three Months Ended March 31,
	2020			2019
Service cost	$	0.4		$	0.4
Interest cost		5.7			7.9
Expected return on plan assets		(13.0	)		(14.3	)
Amortization of unrecognized loss		4.9			4.0
Amortization of prior service cost		(0.1	)		(0.1	)

Defined benefit plan income	$	(2.1	)	$	(2.1	)

Segment Results (Tables)

3 Months Ended

Mar. 31, 2020

Schedule of Segment Earnings

The following table presents the Company’s segment results:


(dollars in millions)
	Three Months Ended March 31,
	2020			2019
Net sales
North America	$	532.9		$	521.8
Rest of World		110.2			232.1
Inter-segment		(6.2	)		(5.7	)

	$	636.9		$	748.2

Segment earnings ( losses )
North America	$	127.1		$	116.0
Rest of World		(42.2	)		12.3

		84.9			128.3

Corporate expense		(15.0	)		(14.7	)
Interest expense		(2.2	)		(2.0	)

Earnings before income taxes		67.7			111.6
Provision for income taxes		16.0			22.3

Net earnings	$	51.7		$	89.3

Fair Value Measurements (Tables)

3 Months Ended

Mar. 31, 2020

Schedule of Assets and Liabilities Measured at Fair Value on Recurring Basis

The following table presents assets measured at fair value on a recurring basis.


(dollars in millions)
Fair Value Measurement Using	March 31, 2020		December 31, 2019
Quoted prices in active markets for identical assets (Level 1)	$	135.6	$	177.4
Significant other observable inputs (Level 2)		1.0		6.9

Derivative Instruments (Tables)

3 Months Ended

Mar. 31, 2020

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, 2020				December 31, 2019
	Buy		Sell		Buy		Sell
British pound	$	—	$	0.9	$	—	$	1.3
Canadian dollar		—		59.8		—		49.7
Euro		27.1		—		36.0		—
Mexican peso		23.4		—		18.6		—

Total	$	50.5	$	60.7	$	54.6	$	51.0

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	March 31, 2020			December 31, 2019
Foreign currency contracts	Other current assets	$	4.8		$	8.4
	Accrued liabilities		(3.6	)		(1.5	)
Commodities contracts	Accrued liabilities		(0.2	)		—

Total derivatives designated as hedging instruments		$	1.0		$	6.9

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 March 31 (dollars in millions):


Derivatives in ASC 815 cash flow hedging relationships	Amount of gain (loss) recognized in other comprehensive loss on derivatives						Location of gain (loss) reclassified from accumulated other comprehensive loss into earnings	Amount of gain (loss) reclassified from accumulated other comprehensive loss into earnings
	2020			2019				2020		2019
Foreign currency contracts	$	1.4		$	0.1		Cost of products sold	$	0.8	$	—
Commodities contracts		(0.2	)		(0.2	)	Cost of products sold		—		—

	$	1.2		$	(0.1	)		$	0.8	$	—

Changes in Accumulated Other Comprehensive Loss by Component (Tables)

3 Months Ended

Mar. 31, 2020

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,
	2020			2019
Cumulative foreign currency translation
Balance at beginning of period	$	(66.2	)	$	(64.9	)
Other comprehensive ( loss ) income before reclassifications		(18.0	)		15.9

Balance at end of period		(84.2	)		(49.0	)

Unrealized net gain (loss) on cash flow derivatives
Balance at beginning of period		0.2			(0.7	)
Other comprehensive loss before reclassifications		0.9			(0.1	)
Realized gains on derivatives reclassified to cost of products sold (net of income tax provision of $ 0.2 and $ - in 2020 and 2019, respectively)		(0.6	)		—

Balance at end of period		0.5			(0.8	)

Pension liability
Balance at beginning of period		(282.3	)		(285.2	)
Amounts reclassified from accumulated other comprehensive loss: (1)		3.6			2.9

Balance at end of period		(278.7	)		(282.3	)

Accumulated other comprehensive loss, end of period	$	(362.4	)	$	(332.1	)
(1) Amortization of pension items:

Actuarial losses	$	4.9	(2)	$	4.0	(2)
Prior year service cost		(0.1	) (2)		(0.1	) (2)
		4.8			3.9
Income tax benefit		(1.2	)		(1.0	)
Reclassification net of income tax benefit	$	3.6		$	2.9

(2)	These accumulated other comprehensive loss components are included in the computation of net periodic pension cost. See Note 10 - Pensions for additional details

Revenue Recognition - Additional Information (Detail) $ in Millions	3 Months Ended
	Mar. 31, 2020 USD ($) Segment Distributor	Dec. 31, 2019 USD ($)
Customer deposits liability	$ 65.2	$ 49.6
Allowance for doubtful accounts	$ 7.5	$ 6.7
Number of reporting segments \| Segment	2
Water Heaters \| North America
Number of wholesale distributors \| Distributor	1,300

Segment Sales Disaggregated by Major Product Line (Detail) - USD ($)
$ in Millions

3 Months Ended

Mar. 31, 2020

Mar. 31, 2019

Net sales

$ 636.9

$ 748.2

Inter-segment

Net sales

(6.2)

(5.7)

Operating Segments [Member] | North America

Net sales

532.9

521.8

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

Net sales

447.8

455.7

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

Net sales

41.5

42.6

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

Net sales

^[1]

43.6

23.5

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

Net sales

110.2

232.1

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

Net sales

91.0

213.0

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

Net sales

$ 19.2

$ 19.1

[1]	Includes the results of Water-Right, Inc. from April 8, 2019, the date of acquisition

Acquisitions - Additional Information (Detail) - Water-Right, Inc - USD ($) $ in Millions		3 Months Ended
	Apr. 08, 2019	Mar. 31, 2020
Business Acquisition [Line Items]
Percentage of ownership interest acquired	100.00%
Aggregate cash purchase price, net of cash acquired	$ 107.0
Acquired intangible assets	60.4
Effective Date Of Acquisition		Apr. 08, 2019
Escrow Deposit [Member]
Business Acquisition [Line Items]
consideration to former owners		$ 4.0
Trademarks [Member]
Business Acquisition [Line Items]
Acquired intangible assets, not subject to amortization	19.0
Noncompete agreements
Business Acquisition [Line Items]
Acquired intangible assets, subject to amortization	$ 1.2
Acquired intangible assets, amortization period, in years	7 years 6 months
Customer relationships
Business Acquisition [Line Items]
Acquired intangible assets, subject to amortization	$ 40.2
Acquired intangible assets, amortization period, in years	20 years

Summary of Preliminary Allocation of Fair Value of Assets Acquired and Liabilities Assumed at Date of Acquisition (Detail) - USD ($) $ in Millions	Mar. 31, 2020	Dec. 31, 2019	Apr. 08, 2019
Business Acquisition [Line Items]
Goodwill	$ 542.6	$ 546.0
Water-Right, Inc
Business Acquisition [Line Items]
Current assets, net of cash acquired			$ 9.7
Property, plant and equipment			8.6
Intangible assets			60.4
Goodwill			31.0
Total assets acquired			109.7
Current liabilities			(2.7)
Net assets acquired			$ 107.0

Leases - Additional Information (Detail)	3 Months Ended
Leases - Additional Information (Detail)	Mar. 31, 2020
Operating lease termination option	options to terminate can be effective within one year
Minimum [Member]
Operating lease term of extension	1 year
Maximum [Member]
Operating lease term of extension	5 years

Leases supplemental balance sheet (Detail) - USD ($) $ in Millions	3 Months Ended	12 Months Ended
	Mar. 31, 2020	Dec. 31, 2019
Liabilities
Short term: Accrued liabilities	$ 11.5	$ 12.0
Long term: Operating lease liabilities	37.3	38.7
Total Operating Lease Liabilities	48.8	50.7
Less:Rent incentives and deferrals	(3.9)	(3.8)
Assets
Operating lease assets	$ 44.9	$ 46.9
Lease Term and Discount Rate
Weighted-average remaining lease term	10 years
Weighted-average discount rate	3.95%

Components of lease expense (Detail) - USD ($)
$ in Millions

3 Months Ended

Mar. 31, 2020

Mar. 31, 2019

Short term lease expense

$ 0.4

Variable lease expenses

0.4

0.8

Cost of products sold [Member]

Operating lease expense

0.7

^[1]

0.7

^[2]

Selling, general and administrative expenses [Member]

Operating lease expense

$ 4.0

^[1]

$ 4.9

^[2]

[1]	2020 includes short-term and variable lease expenses of $0.4 million and $0.4 million, respectively.
[2]	2019 includes short-term and variable lease expenses of $0.4 million and $0.8 million, respectively.

Maturities of lease liabilities (Detail) - USD ($) $ in Millions	Mar. 31, 2020	Dec. 31, 2019
Leases [Abstract]
2020	$ 10.2
2021	10.7
2022	9.2
2023	4.9
2024	3.8
After 2024	22.7
Total lease payments	61.5
Less: imputed interest	(12.7)
Present value of operating lease liabilities	$ 48.8	$ 50.7

Schedule of Inventories (Detail) - USD ($) $ in Millions	Mar. 31, 2020	Dec. 31, 2019
Inventories
Finished products	$ 142.8	$ 136.8
Work in process	21.6	21.7
Raw materials	171.7	168.3
Inventories, at FIFO cost	336.1	326.8
LIFO reserve	(23.8)	(23.8)
Net inventory	$ 312.3	$ 303.0

Company's Warranty Liability Activity (Detail) - USD ($) $ in Millions	3 Months Ended
	Mar. 31, 2020	Mar. 31, 2019
Product Warranties Disclosures [Abstract]
Balance at beginning of year	$ 134.3	$ 139.4
Expense	13.5	9.4
Claims settled	(12.5)	(12.6)
Balance at end of year	$ 135.3	$ 136.2

Long-Term Debt - Additional Information (Detail) $ in Millions	3 Months Ended
	Mar. 31, 2020 USD ($) Banks
Debt Disclosure [Abstract]
Multi-currency revolving credit agreement	$ 500
Number of banks involved in multi-year multi-currency revolving credit agreement \| Banks	9
Revolving credit facility, expiration date	Dec. 15, 2021
Multi-currency revolving credit agreement, maximum amount	$ 700

Schedule of Computation of Basic and Diluted Weighted-Average Shares Used in Earnings per Share Calculations (Detail) - shares	3 Months Ended
	Mar. 31, 2020	Mar. 31, 2019
Earnings Per Share [Abstract]
Denominator for basic earnings per share - weighted average shares	161,871,788	167,803,794
Effect of dilutive stock options and share units	1,025,817	1,292,348
Denominator for diluted earnings per share	162,897,605	169,096,142

Stock Based Compensation - Additional Information (Detail) - USD ($) $ / shares in Units, $ in Millions	3 Months Ended
	Mar. 31, 2020	Mar. 31, 2019
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Total stock based compensation cost recognized	$ 9.0	$ 8.7
Stock option compensation expense recognized	$ 4.5	$ 4.3
Weighted-average fair value per option at the date of grant	$ 8.15	$ 10.83
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
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	169,407	136,647
Value of share units at the date of issuance	$ 7.2	$ 6.8
Share based compensation expense attributable to share units	$ 4.5	$ 4.4
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	951,461

Changes in Option Awards All of Which Related to Common Stock (Detail) $ / shares in Units, $ in Millions	3 Months Ended
	Mar. 31, 2020 USD ($) $ / shares shares
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Weighted-Avg. Per Share Exercise Price, beginning period \| $ / shares	$ 37.64
Weighted-Avg. Per Share Exercise Price - Granted \| $ / shares	42.39
Weighted-Avg. Per Share Exercise Price - Exercised \| $ / shares	15.04
Weighted-Avg. Per Share Exercise Price - Forfeited \| $ / shares	48.95
Weighted-Avg. Per Share Exercise Price, ending period \| $ / shares	38.71
Weighted-Average Per Share Exercise Price, Exercisable \| $ / shares	$ 34.25
Number of Options Outstanding, Beginning Balance \| shares	2,728,350
Number of Options, Granted \| shares	784,300
Number of Options, Exercised \| shares	(25,147)
Number of Options, Forfeited \| shares	(56,261)
Number of Options Outstanding, Ending Balance \| shares	3,431,242
Number of Options, Exercisable at End of Period \| shares	2,162,932
Average remaining contractual life for outstanding options, in years	7 years
Average Remaining Contractual Life, Exercisable at End of Period, Years	5 years
Aggregate Intrinsic Value, Outstanding at End of Period \| $	$ 19.1
Aggregate Intrinsic Value, Exercisable at End of Period \| $	$ 19.1

Schedule of Weighted-Average Fair Value per Option at Date of Grant (Detail)	3 Months Ended
	Mar. 31, 2020	Mar. 31, 2019
Stock Based Compensation [Abstract]
Expected life (years)	5 years 8 months 12 days	5 years 7 months 6 days
Risk-free interest rate	1.60%	2.70%
Dividend yield	2.10%	1.60%
Expected volatility	23.60%	22.80%

Summary of Share Unit Activity Under Plan (Detail) - Restricted Stock And Share Units - $ / shares	3 Months Ended
	Mar. 31, 2020	Mar. 31, 2019
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Number of Units Issued and unvested, Beginning of Period	366,102
Number of Units - Granted	169,407	136,647
Number of Units - Vested	(100,735)
Number of Units - Forfeited/cancelled	(7,557)
Number of Units Issued and unvested, End of Period	427,217
Weighted-Average Grant Date Value, Beginning of Period	$ 49.92
Weighted-Average Grant Date Value - Granted	42.39
Weighted-Average Grant Date Value - Vested	49.21
Weighted-Average Grant Date Value - Forfeited/cancelled	53.96
Weighted-Average Grant Date Value, End of Period	$ 46.94

Components of Company's Net Pension Income (Detail) - USD ($) $ in Millions	3 Months Ended
	Mar. 31, 2020	Mar. 31, 2019
Defined Benefit Plan [Abstract]
Service cost	$ 0.4	$ 0.4
Interest cost	5.7	7.9
Expected return on plan assets	(13.0)	(14.3)
Amortization of unrecognized loss	4.9	4.0
Amortization of prior service cost	(0.1)	(0.1)
Defined benefit plan income	$ (2.1)	$ (2.1)

Schedule of Segment Earnings (Detail) - USD ($) $ in Millions	3 Months Ended
	Mar. 31, 2020	Mar. 31, 2019
Segment Reporting Information [Line Items]
Net sales	$ 636.9	$ 748.2
Segment earnings (losses)	84.9	128.3
Other income (expense)	4.2	5.5
Interest expense	(2.2)	(2.0)
Earnings before provision for income taxes	67.7	111.6
Provision for income taxes	16.0	22.3
Net Earnings	51.7	89.3
Inter-segment
Segment Reporting Information [Line Items]
Net sales	(6.2)	(5.7)
Corporate
Segment Reporting Information [Line Items]
Other income (expense)	(15.0)	(14.7)
North America \| Operating Segments
Segment Reporting Information [Line Items]
Net sales	532.9	521.8
Segment earnings (losses)	127.1	116.0
Rest of World \| Operating Segments
Segment Reporting Information [Line Items]
Net sales	110.2	232.1
Segment earnings (losses)	$ (42.2)	$ 12.3

Schedule of Segment Earnings - Additional Information (Detail)	3 Months Ended
	Mar. 31, 2020 Segment
Segment Reporting Information [Line Items]
Number of reporting segments	2

Assets and Liabilities Measured at Fair Value on Recurring Basis (Detail) - USD ($) $ in Millions	Mar. 31, 2020	Dec. 31, 2019
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	$ 135.6	$ 177.4
Significant other observable inputs (Level 2) [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Liabilities measured at fair value on recurring basis	$ 1.0	$ 6.9

Schedule of Summary by Currency of Foreign Currency Forward Contracts (Detail) - Foreign currency forward contracts - USD ($) $ in Millions	Mar. 31, 2020	Dec. 31, 2019
Buy
Derivative Instruments and Hedging Activities Disclosures [Line Items]
Contractual amounts of foreign currency forward contracts	$ 50.5	$ 54.6
Buy \| Euro
Derivative Instruments and Hedging Activities Disclosures [Line Items]
Contractual amounts of foreign currency forward contracts	27.1	36.0
Buy \| Mexican peso
Derivative Instruments and Hedging Activities Disclosures [Line Items]
Contractual amounts of foreign currency forward contracts	23.4	18.6
Sell
Derivative Instruments and Hedging Activities Disclosures [Line Items]
Contractual amounts of foreign currency forward contracts	60.7	51.0
Sell \| British pound
Derivative Instruments and Hedging Activities Disclosures [Line Items]
Contractual amounts of foreign currency forward contracts	0.9	1.3
Sell \| Canadian dollar
Derivative Instruments and Hedging Activities Disclosures [Line Items]
Contractual amounts of foreign currency forward contracts	$ 59.8	$ 49.7

Derivative Instruments - Additional Information (Detail) - USD ($) $ in Millions	3 Months Ended
	Mar. 31, 2020	Mar. 31, 2019
Trading Activity, Gains and Losses, Net [Line Items]
Other Comprehensive Income (Loss), Foreign Currency Transaction and Translation Adjustment, Net of Tax	$ (18.0)	$ 15.9
Net Investment Hedging [Member] \| Non-US [Member]
Trading Activity, Gains and Losses, Net [Line Items]
Other Comprehensive Income (Loss), Foreign Currency Transaction and Translation Adjustment, Net of Tax	0.8	$ 1.3
Derivative, Notional Amount	$ 50.0
Commodity Futures Contracts
Trading Activity, Gains and Losses, Net [Line Items]
Reclassification period for effective portion of contract, in years	1 year

Impact of Derivative Contracts on Company's Financial Statements (Detail) - USD ($) $ in Millions	Mar. 31, 2020	Dec. 31, 2019
Derivatives, Fair Value [Line Items]
Fair value of derivative instruments, total	$ 1.0	$ 6.9
Designated as Hedging Instrument \| Foreign Currency Contracts \| Other Current Assets
Derivatives, Fair Value [Line Items]
Fair value of derivative instruments, assets	4.8	8.4
Designated as Hedging Instrument \| Foreign Currency Contracts \| Accrued Liabilities
Derivatives, Fair Value [Line Items]
Fair value of derivative instruments, liabilities	(3.6)	$ (1.5)
Designated as Hedging Instrument \| Commodities Contracts \| Accrued Liabilities
Derivatives, Fair Value [Line Items]
Fair value of derivative instruments, liabilities	$ (0.2)

Schedule of Effect of Derivatives Instruments on Consolidated Statement of Earnings (Detail) - USD ($) $ in Millions	3 Months Ended
	Mar. 31, 2020	Mar. 31, 2019
Derivative [Line Items]
Amount of gain (loss) recognized in other comprehensive loss on derivative	$ 1.2	$ (0.1)
Amount of gain (loss) reclassified from accumulated other comprehensive loss into earnings	0.8
Foreign Currency Contracts
Derivative [Line Items]
Amount of gain (loss) recognized in other comprehensive loss on derivative	1.4	0.1
Foreign Currency Contracts \| Cost Of Products Sold
Derivative [Line Items]
Amount of gain (loss) reclassified from accumulated other comprehensive loss into earnings	0.8
Commodities Contracts
Derivative [Line Items]
Amount of gain (loss) recognized in other comprehensive loss on derivative	$ (0.2)	$ (0.2)

Income Taxes - Additional Information (Detail) - USD ($) $ in Millions	3 Months Ended
	Mar. 31, 2020	Mar. 31, 2019
Income Tax Contingency [Line Items]
Effective tax rates	23.60%	20.00%
Unrecognized tax benefits	$ 9.7
Unrecognized tax benefits that would affect the effective tax rate, if recognized	$ 0.8
State and local \| Earliest Tax Year
Income Tax Contingency [Line Items]
Income tax examinations, years under examination	2002
State and local \| Latest Tax Year
Income Tax Contingency [Line Items]
Income tax examinations, years under examination	2020
Non-U.S. \| Earliest Tax Year
Income Tax Contingency [Line Items]
Income tax examinations, years under examination	2014
Non-U.S. \| Latest Tax Year
Income Tax Contingency [Line Items]
Income tax examinations, years under examination	2020
U.S. federal \| Earliest Tax Year
Income Tax Contingency [Line Items]
Income tax examinations, years under examination	2016
U.S. federal \| Latest Tax Year
Income Tax Contingency [Line Items]
Income tax examinations, years under examination	2020

Changes in Accumulated Other Comprehensive Loss by Component (Detail) - USD ($)
$ in Millions

3 Months Ended

Mar. 31, 2020

Mar. 31, 2019

Accumulated Other Comprehensive Income (Loss) [Line Items]

Balance

$ 1,666.8

Balance

1,616.3

$ 1,749.2

Cumulative foreign currency translation

Accumulated Other Comprehensive Income (Loss) [Line Items]

Balance

(66.2)

(64.9)

Other comprehensive (loss) income before reclassifications

(18.0)

15.9

Balance

(84.2)

(49.0)

Unrealized net gain on cash flow derivatives

Accumulated Other Comprehensive Income (Loss) [Line Items]

Balance

0.2

(0.7)

Other comprehensive (loss) income before reclassifications

0.9

(0.1)

Realized gains on derivatives reclassified to cost of products sold (net of income tax provision of $0.2 and $- in 2020 and 2019, respectively)

(0.6)

Balance

0.5

(0.8)

Pension liability

Accumulated Other Comprehensive Income (Loss) [Line Items]

Balance

(282.3)

(285.2)

Amounts reclassified from accumulated other comprehensive loss

^[1]

3.6

2.9

Balance

(278.7)

(282.3)

Accumulated Other Comprehensive Loss

Accumulated Other Comprehensive Income (Loss) [Line Items]

Balance

$ (362.4)

$ (332.1)

[1]	Amortization of pension items:

Changes in Accumulated Other Comprehensive Loss by Component (Parenthetical) (Detail) - USD ($)
$ in Millions

3 Months Ended

Mar. 31, 2020

Mar. 31, 2019

Unrealized net gain on cash flow derivatives

Accumulated Other Comprehensive Income (Loss) [Line Items]

Realized gains on derivatives reclassified to cost of products sold, tax provision

$ 0.2

$ 0.0

Pension liability

Accumulated Other Comprehensive Income (Loss) [Line Items]

Reclassification, before income tax benefit

4.8

3.9

Income tax benefit

(1.2)

(1.0)

Reclassification net of income tax benefit

^[1]

3.6

2.9

Actuarial losses

Accumulated Other Comprehensive Income (Loss) [Line Items]

Reclassification, before income tax benefit

^[2]

4.9

4.0

Prior year service cost

Accumulated Other Comprehensive Income (Loss) [Line Items]

Reclassification, before income tax benefit

^[2]

$ (0.1)

[1]	Amortization of pension items:
[2]	These accumulated other comprehensive loss components are included in the computation of net periodic pension cost. See Note 10 - Pensions for additional details

Commitment and Contingencies - Additional Information (Detail) - USD ($) $ in Millions	Mar. 31, 2020	Dec. 31, 2019
Commitments and Contingencies [Line Items]
Distributor Rebate Accruals	$ 9.1	$ 14.1
Repurchase Of Inventory [Member]
Commitments and Contingencies [Line Items]
Default In outstanding loans	$ 17.0	$ 23.1