10-Q

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

______________________________________________________

FORM 10-Q

______________________________________________________

☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended June 30, 2022.

or

☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from __________ to __________

Commission File Number 1-475

________________________________

A. O. Smith Corporation

(Exact name of registrant as specified in its charter)

________________________________

Delaware

(State of Incorporation)

11270 West Park Place, Milwaukee, Wisconsin

(Address of Principal Executive Office)

39-0619790

(I.R.S. Employer

Identification No.)

53224-9508

(Zip Code)

(414) 359-4000

(Registrant’s telephone number, including area code)

_________________________________________________

Securities registered pursuant to Section 12(b) of the Act:

Title of Each Class	Trading Symbol	Name of Each Exchange on Which Registered
Common Stock (par value $1.00 per share)	AOS	New York Stock Exchange

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. ☒ Yes o No

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). ☒ Yes o No

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer	☒	Accelerated Filer	☐
Non-accelerated filer	☐	Smaller reporting company	☐
		Emerging growth company	☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. o

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act.) ☐ Yes ☒ No

Class A Common Stock Outstanding as of July 27, 2022 - 25,970,688 shares

Common Stock Outstanding as of July 27, 2022 - 128,477,403 shares

Index

A. O. Smith Corporation

		Page
Part I.	FINANCIAL INFORMATION
	Condensed Consolidated Statements of Earnings - Three and Six Months Ended June 30, 2022 and 2021	3
	Condensed Consolidated Statements of Comprehensive Earnings - Three and Six Months Ended June 30, 2022 and 2021	3
	Condensed Consolidated Balance Sheets - June 30, 2022 and December 31, 2021	4
	Condensed Consolidated Statements of Cash Flows - Six Months Ended June 30, 2022 and 2021	5
	Condensed Consolidated Statements of Stockholders’ Equity - Three and Six Months Ended June 30, 2022 and 2021	6
	Notes to Condensed Consolidated Financial Statements - June 30, 2022	7-19
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	20-27
Item 3.	Quantitative and Qualitative Disclosures about Market Risk	27
Item 4.	Controls and Procedures	27-28
Part II.	OTHER INFORMATION
Item 1.	Legal Proceedings	28
Item 1A.	Risk Factors	28-29
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	29
Item 6.	Exhibits	29
Index to Exhibits		30
Signatures		31

2

PART I - FINANCIAL INFORMATION

ITEM 1 - FINANCIAL STATEMENTS

A. O. SMITH CORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF EARNINGS

(dollars in millions, except for per share data)

(unaudited)

	Three Months Ended June 30,				Six Months Ended June 30,
	2022		2021		2022		2021
Net sales	$	965.9	$	859.8	$	1,943.6	$	1,628.8
Cost of products sold	631.5		538.4		1,267.6		1,018.8
Gross profit	334.4		321.4		676.0		610.0
Selling, general and administrative expenses	166.7		173.1		346.5		339.6
Interest expense	2.1		0.9		3.6		1.9
Other expense (income), net	0.3		(3.9)		4.0		(8.9)
Earnings before provision for income taxes	165.3		151.3		321.9		277.4
Provision for income taxes	39.1		33.1		75.9		61.5
Net Earnings	$	126.2	$	118.2	$	246.0	$	215.9
Net Earnings Per Share of Common Stock(1)	$	0.81	$	0.74	$	1.57	$	1.34
Diluted Net Earnings Per Share of Common Stock(1)	$	0.81	$	0.73	$	1.56	$	1.33
Dividends Per Share of Common Stock	$	0.28	$	0.26	$	0.56	$	0.52

(1) Earning per share amounts are calculated discretely and, therefore, may not add up to the total due to rounding.

A. O. SMITH CORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE EARNINGS

(dollars in millions)

(unaudited)

	Three Months Ended June 30,				Six Months Ended June 30,
	2022		2021		2022		2021
Net earnings	$	126.2	$	118.2	$	246.0	$	215.9
Other comprehensive (loss) earnings
Foreign currency translation adjustments	(24.6)		4.9		(24.0)		3.5
Unrealized gains (losses) on cash flow derivative instruments, less related income tax (provision) benefit of $(0.7) and $(0.5) in 2022, $(0.3) and $0.4 in 2021	2.1		0.9		1.5		(1.1)
Adjustment to pension liability, less related income tax provision of $(1.3) and $(2.5) in 2022, $(1.3) and $(2.6) in 2021	3.7		3.8		7.5		7.6
Comprehensive Earnings	$	107.4	$	127.8	$	231.0	$	225.9

See accompanying notes to unaudited condensed consolidated financial statements.

3

A. O. SMITH CORPORATION

CONDENSED CONSOLIDATED BALANCE SHEETS

(dollars in millions)

	(unaudited) June 30, 2022		December 31, 2021
Assets
Current Assets
Cash and cash equivalents	$	359.4	$	443.3
Marketable securities	100.0		188.1
Receivables	621.5		634.4
Inventories	493.0		447.7
Other current assets	57.3		39.1
Total Current Assets	1,631.2		1,752.6
Property, plant and equipment	1,346.3		1,343.2
Less accumulated depreciation	(753.6)		(736.5)
Net property, plant and equipment	592.7		606.7
Goodwill	627.4		627.8
Other intangibles	357.5		364.8
Operating lease assets	31.1		32.5
Other assets	81.5		90.0
Total Assets	$	3,321.4	$	3,474.4
Liabilities
Current Liabilities
Trade payables	$	624.5	$	745.9
Accrued payroll and benefits	66.6		113.4
Accrued liabilities	165.3		181.8
Product warranties	65.1		70.9
Debt due within one year	6.8		6.8
Total Current Liabilities	928.3		1,118.8
Long-term debt	291.6		189.9
Product warranties	114.9		113.5
Long-term operating lease liabilities	23.0		22.3
Other liabilities	171.1		197.7
Total Liabilities	1,528.9		1,642.2
Stockholders’ Equity
Class A Common Stock, $5 par value: authorized 27,000,000 shares; issued, 26,101,181 and 26,104,441	130.5		130.5
Common Stock, $1 par value: authorized 240,000,000 shares; issued 164,606,413 and 164,603,153	164.7		164.7
Capital in excess of par value	553.1		545.2
Retained earnings	2,984.6		2,826.6
Accumulated other comprehensive loss	(346.4)		(331.4)
Treasury stock at cost	(1,694.0)		(1,503.4)
Total Stockholders’ Equity	1,792.5		1,832.2
Total Liabilities and Stockholders’ Equity	$	3,321.4	$	3,474.4

See accompanying notes to unaudited condensed consolidated financial statements.

4

A. O. SMITH CORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(dollars in millions)

(unaudited)

	Six Months Ended June 30,
	2022		2021
Operating Activities
Net earnings	$	246.0	$	215.9
Adjustments to reconcile net earnings to cash provided by (used in) operating activities:
Depreciation and amortization	38.3		39.0
Stock based compensation expense	9.0		8.9
Net changes in operating assets and liabilities:
Current assets and liabilities	(233.9)		(50.0)
Noncurrent assets and liabilities	(5.0)		(17.8)
Cash Provided by Operating Activities	54.4		196.0
Investing Activities
Capital expenditures	(30.7)		(30.7)
Acquisitions of businesses	(8.0)		—
Investments in marketable securities	(16.9)		(98.3)
Net proceeds from sale of marketable securities	96.5		79.0
Cash Provided by (Used in) Investing Activities	40.9		(50.0)
Financing Activities
Long-term debt incurred (repaid)	101.7		(6.8)
Common stock repurchases	(190.4)		(198.1)
Net (payments) proceeds from stock option activity	(2.6)		14.5
Dividends paid	(87.9)		(83.9)
Cash Used in Financing Activities	(179.2)		(274.3)
Net decrease in cash and cash equivalents	(83.9)		(128.3)
Cash and cash equivalents - beginning of period	443.3		573.1
Cash and Cash Equivalents - End of Period	$	359.4	$	444.8

See accompanying notes to unaudited condensed consolidated financial statements.

5

A. O. SMITH CORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY

(dollars in millions)

(unaudited)

	Three Months Ended June 30,				Six Months Ended June 30,
	2022		2021		2022		2021
Class A Common Stock
Balance at the beginning of period	$	130.5	$	130.6	$	130.5	$	130.8
Conversion of Class A Common Stock	—		—		—		(0.2)
Balance at end of period	$	130.5	$	130.6	$	130.5	$	130.6
Common Stock
Balance at the beginning of period	$	164.7	$	164.7	$	164.7	$	164.6
Conversion of Class A Common Stock	—		$	—	—		$	0.1
Balance at end of period	$	164.7	$	164.7	$	164.7	$	164.7
Capital in Excess of Par Value
Balance at the beginning of period	$	550.9	$	528.7	$	545.2	$	520.4
Conversion of Class A Common Stock	—		—		—		0.2
Issuance of share units	(0.2)		(0.1)		(6.0)		(5.4)
Vesting of share units	—		(0.1)		(2.4)		(1.8)
Stock based compensation expense	1.2		1.1		8.9		8.3
Exercises of stock options	—		4.4		0.4		7.0
Stock incentives	1.2		1.0		7.0		6.3
Balance at end of period	$	553.1	$	535.0	$	553.1	$	535.0
Retained Earnings
Balance at the beginning of period	$	2,902.2	$	2,565.1	$	2,826.6	$	2,509.6
Net earnings	126.2		118.2		246.0		215.9
Cash dividends on stock	(43.8)		(41.7)		(88.0)		(83.9)
Balance at end of period	$	2,984.6	$	2,641.6	$	2,984.6	$	2,641.6
Accumulated Other Comprehensive Loss (see Note 16)	$	(346.4)	$	(311.2)	$	(346.4)	$	(311.2)
Treasury Stock
Balance at the beginning of period	$	(1,611.8)	$	(1,219.3)	$	(1,503.4)	$	(1,155.9)
Exercise of stock options	—		5.7		(2.9)		7.6
Stock incentives and directors’ compensation	0.3		0.2		0.3		0.2
Shares repurchased	(82.5)		(131.1)		(190.4)		(198.1)
Vesting of share units	—		0.1		2.4		1.8
Balance at end of period	$	(1,694.0)	$	(1,344.4)	$	(1,694.0)	$	(1,344.4)
Total Stockholders’ Equity	$	1,792.5	$	1,816.3	$	1,792.5	$	1,816.3

See accompanying notes to unaudited condensed consolidated financial statements.

6

A. O. SMITH CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

June 30, 2022

(unaudited)

1. Basis of Presentation

The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States (GAAP) for interim financial information and pursuant to the rules and regulations of the Securities and Exchange Commission (SEC). Accordingly, they do not include all of the information and footnotes required for complete financial statements. In the opinion of management, all adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation have been included. Operating results for the three and six months ended June 30, 2022 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, 2021 filed with the SEC on February 11, 2022.

Recent Accounting Pronouncement

In November 2021, the Financial Accounting Standards Board (FASB) amended ASC 832, Government Assistance (issued under Accounting Standards Update (ASU) 2021-10, "Disclosures by Business Entities about Government Assistance"). This amendment requires disclosures that are expected to increase the transparency of transactions with a government accounted for by applying a grant or contribution accounting model by analogy, including (1) the types of transactions, (2) the accounting for those transactions, and (3) the effect of those transactions on an entity’s financial statements. The Company adopted the amendment on January 1, 2022, and the adoption of ASU 2021-10 is not expected to materially impact its annual disclosures, consolidated balance sheets, statements of earnings or statements of cash flows.

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 the 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 $100.7 million and $155.2 million at June 30, 2022 and December 31, 2021, respectively. Customer deposit liabilities are short term in nature, recognized into revenue within one year of receipt, and recorded in Trade payables within the condensed consolidated balance sheets. 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 credit losses, 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 credit losses, which reflects the current estimate of credit losses expected to be incurred over the life of the receivables. The Company’s allowance for credit losses was $10.6 million at June 30, 2022 and $9.5 million at December 31, 2021.

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.

7

2. Revenue Recognition (continued)

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.

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 channels 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's 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, 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 1,100 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 its 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 retail and wholesale 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 June 30,				Six Months Ended June 30,
	2022		2021		2022		2021
North America
Water heaters and related parts	$	613.9	$	498.1	$	1,229.7	$	955.8
Boilers and related parts	70.4		55.5		127.9		102.0
Water treatment products	59.8		50.0		116.6		98.7
Total North America	744.1		603.6		1,474.2		1,156.5
Rest of World
China	$	201.5	$	238.8	$	429.8	$	438.0
All other Rest of World	28.4		24.4		56.1		47.5
Total Rest of World	229.9		263.2		485.9		485.5
Inter-segment sales	(8.1)		(7.0)		(16.5)		(13.2)
Total Net Sales	$	965.9	$	859.8	$	1,943.6	$	1,628.8

8

3. Acquisitions

On October 19, 2021, the Company acquired 100 percent of the shares and related assets of Giant Factories, Inc. (Giant), a Canada-based manufacturer of residential and commercial water heaters for $198.6 million, net of cash acquired. The purchase price increased by $2.5 million during the three months ended June 30, 2022 as a result of final working capital adjustments. The Company incurred acquisition costs of approximately $1.3 million in 2021.

Under the purchase agreement for the Giant acquisition, an escrow of approximately $8 million was set aside from the purchase price to satisfy any potential obligations of the former owners of Giant, should they arise. Goodwill decreased by $2.3 million during the three months ended June 30, 2022 due to the net impact of a measurement period adjustment, primarily related to income tax matters, partially offset by the final working capital adjustment. The purchase price allocation remains preliminary and subject to final valuation adjustments that will be completed within the one year period following the acquisition date. The addition of Giant increases the Company's North America market penetration, creating additional capacity and enhancing the Company's distribution capabilities. Giant is included in the North America segment.

The following table summarizes the preliminary allocation of fair value of the assets acquired and liabilities assumed at the date of acquisition. Of the $53.8 million of acquired identifiable intangible assets, $43.9 million has been assigned to trademarks that are not subject to amortization and $9.2 million has been assigned to customer relationships which are amortized over 22 years, and the remaining $0.7 million has been assigned to non-compete agreements which are amortized over five years. The excess of the acquisition purchase price over the fair value assigned to the assets acquired and liabilities assumed was recorded as goodwill.

The following table summarizes the estimated fair values of Giant's assets acquired and liabilities assumed at the date of acquisition:

October 19, 2021 (dollars in millions)
Current assets, net of cash acquired	$	60.1
Property, plant and equipment	55.8
Intangible assets	53.8
Goodwill	77.6
Total assets acquired	247.3
Current liabilities	(39.2)
Long Term liabilities	(9.5)
Net assets acquired	$	198.6

In addition, during the second quarter of 2022, the Company acquired a privately-held water treatment company. The Company paid an aggregate cash purchase price of $5.5 million, net of cash acquired. The addition of the company acquired expands the Company's water treatment platform and is included in the North America segment for reporting purposes.

As required under ASC 805 Business Combinations, results of operations have been included in the Company’s consolidated financial statements from the date of their acquisition.

4. Leases

The Company’s lease portfolio consists of operating leases for buildings and equipment, such as forklifts and copiers, primarily in the United States and China. The Company defines a lease as a contract that gives the Company the right to control the use of a physical asset for a stated term. The Company pays the lessor for that right, with a series of payments defined in the contract and a corresponding right of use operating lease asset and liability are recorded. The Company has elected not to record leases with an initial term of 12 months or less on its condensed consolidated balance sheet. To determine balance sheet amounts, required legal payments are discounted using the Company’s incremental borrowing rate 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

9

4. Leases (continued)

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 is as follows:

(dollars in millions)	June 30, 2022		December 31, 2021
Liabilities
Short term: Accrued liabilities	$	9.7	$	11.7
Long term: Operating lease liabilities	23.0		22.3
Total operating lease liabilities	$	32.7	$	34.0
Less: Rent incentives and deferrals	(1.6)		(1.5)
Assets
Operating lease assets	$	31.1	$	32.5

Lease Term and Discount Rate	June 30, 2022
Weighted-average remaining lease term	6.7 years
Weighted-average discount rate	2.87%

The components of lease expense were as follows:

(dollars in millions)		Three months ended June 30,
Lease Expense	Classification	2022(1)		2021(2)
Operating lease expense	Cost of products sold	$	1.0	$	1.0
	Selling, general and administrative expenses	4.4		4.1

(1)2022 includes short-term and variable lease expenses of $0.6 million and $0.9 million, respectively.

(2)2021 includes short-term and variable lease expenses of $0.5 million and $0.6 million, respectively.

(dollars in millions)		Six Months Ended June 30,
Lease Expense	Classification	2022(1)		2021(2)
Operating lease expense	Cost of products sold	$	2.0	$	2.0
	Selling, general and administrative expenses	8.3		8.1

(1)2022 includes short-term and variable lease expenses of $1.1 million and $1.7 million, respectively.

(2)2021 includes short-term and variable lease expenses of $1.0 million and $1.2 million, respectively.

Maturities of lease liabilities were as follows:

(dollars in millions)	June 30, 2022
2022	$	5.9
2023	8.1
2024	6.6
2025	4.5
2026	2.8
After 2026	9.2
Total lease payments	37.1
Less: Imputed interest	(4.4)
Present value of operating lease liabilities	$	32.7

10

5. Inventories

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

(dollars in millions)	June 30, 2022		December 31, 2021
Finished products	$	174.3	$	190.2
Work in process	50.0		42.0
Raw materials	346.3		286.3
Inventories, at FIFO cost	570.6		518.5
LIFO reserve	(77.6)		(70.8)
	$	493.0	$	447.7

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 increase in the reserve for product warranties as of June 30, 2022 compared to June 30, 2021 was primarily due to increased steel prices and the acquisition of Giant. Refer to Note 3, "Acquisitions", for additional information regarding the acquisition of Giant.

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

(dollars in millions)	Three Months Ended June 30,
	2022		2021
Balance at April 1,	$	182.9	$	141.6
Expense	14.7		15.3
Claims settled	(17.6)		(12.0)
Balance at June 30,	$	180.0	$	144.9

(dollars in millions)	Six Months Ended June 30,
	2022		2021
Balance at January 1,	$	184.4	$	142.3
Expense	28.6		27.9
Claims settled	(33.0)		(25.3)
Balance at June 30,	$	180.0	$	144.9

7. Debt

In 2021, the Company renewed and amended its $500 million multi-year multi-currency revolving credit agreement with a new expiration date of April 1, 2026. The facility has an accordion provision that allows it to be increased up to $850 million if certain conditions (including lender approval) are satisfied. Borrowings under bank credit lines and commercial paper borrowings are supported by a $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, 2022. At its option, the Company either maintains cash balances or pays fees for bank credit and services. The facility requires the Company to maintain two financial covenants, a leverage ratio test and an interest coverage test. The Company was in compliance with the covenants as of June 30, 2022.

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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 June 30,		Six Months Ended June 30,
	2022	2021	2022	2021
Denominator for basic earnings per share - weighted average shares	155,692,240	160,241,814	156,351,739	160,880,724
Effect of dilutive stock options and share units	939,432	1,490,159	1,118,514	1,374,828
Denominator for diluted earnings per share	156,631,672	161,731,973	157,470,253	162,255,552

9. Stock Based Compensation

The Company adopted the A. O. Smith Combined Incentive Compensation Plan (the Incentive Plan) effective January 1, 2007. The Incentive Plan was most recently reapproved by stockholders on April 15, 2020. The Incentive 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 June 30, 2022 was 7,144,796. 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 June 30, 2022 and 2021 was $1.4 million and $1.5 million, respectively. Total stock based compensation expense recognized in the six months ended June 30, 2022 and 2021 was $9.0 million and $8.9 million, respectively.

Stock Options

The stock options granted in the six months ended June 30, 2022 and 2021 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 2022 and 2021 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 the stock option expense for the six months ended June 30, 2022 and 2021 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 June 30, 2022 and 2021 was $0.6 million and $0.5 million, respectively. Stock based compensation expense attributable to stock options in the six months ended June 30, 2022 and 2021 was $4.5 million and $4.1 million, respectively.

Changes in options, all of which relate to the Company’s Common Stock, were as follows for the six months ended June 30, 2022:

	Weighted- Avg. Per Share Exercise Price		Number of Options	Average Remaining Contractual Life	Aggregate Intrinsic Value (dollars in millions)
Outstanding at January 1, 2022	$	47.73	2,252,498
Granted	74.14		321,600
Exercised	35.80		(25,638)
Forfeited	58.09		(10,094)
Outstanding at June 30, 2022	51.16		2,538,366	7 years	$	19.2
Exercisable at June 30, 2022	46.82		1,716,451	6 years	$	16.0

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9. Stock Based Compensation (continued)

The weighted-average fair value per option at the date of grant during the six months ended June 30, 2022 and 2021 using the Black-Scholes option-pricing model was $17.58 and $14.03, respectively. Assumptions were as follows:

	Six Months Ended June 30,
	2022		2021
Expected life (years)	5.7		5.8
Risk-free interest rate	1.9	%	1.2	%
Dividend yield	1.5	%	1.6	%
Expected volatility	26.8	%	27.4	%

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 Incentive Plan. Share units vest three years after the date of grant. The Company granted 93,211 and 100,676 share units under the Incentive Plan in the six months ended June 30, 2022 and 2021, respectively.

The share units were valued at $6.9 million and $6.1 million at the date of issuance in 2022 and 2021, 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 and six months ended June 30, 2022 and 2021 was expense associated with accelerated vesting of restricted stock and 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 $0.8 million and $1.0 million was recognized in the three months ended June 30, 2022 and 2021, respectively. Stock based compensation expense attributable to share units of $4.5 million and $4.8 million was recognized in the six months ended June 30, 2022 and 2021, 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 Incentive Plan is as follows for the six months ended June 30, 2022:

	Number of Units	Weighted-Average Grant Date Value
Issued and unvested at January 1, 2022	421,138	$	47.28
Granted	93,211	73.70
Vested	(126,631)	49.49
Forfeited	(6,777)	53.93
Issued and unvested at June 30, 2022	380,941	52.98

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10. Pensions

The following table presents the components of the Company’s net pension expense (income):

(dollars in millions)	Three Months Ended June 30,				Six Months Ended June 30,
	2022		2021		2022		2021
Service cost	$	0.3	$	0.4	$	0.7	$	0.8
Interest cost	3.7		3.6		7.3		7.2
Expected return on plan assets	(5.3)		(12.0)		(10.7)		(24.0)
Amortization of unrecognized loss	5.1		5.2		10.2		10.4
Amortization of prior service cost	(0.1)		(0.1)		(0.2)		(0.2)
Defined benefit plan expense (income)	$	3.7	$	(2.9)	$	7.3	$	(5.8)

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 expense (income) are reflected in other expense (income). The Company was not required to and did not make a contribution to its U.S. pension plan in 2021. The Company is not required to make a contribution in 2022.

In 2021, the Company's Board of Directors approved the termination of the Company's largest defined benefit pension plan (the Plan) representing over 95 percent of the Company's pension plan liabilities with a termination date of December 31, 2021. In April 2022, the Plan received a determination letter from the IRS that allowed the Company to proceed with the termination process for the Plan. In 2022, the Company expects to annuitize the remaining pension liability. The Plan settlement, which the Company expects to complete in the fourth quarter of 2022, will accelerate the recognition of approximately $445 million of non-cash, pre-tax pension expenses.

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 following table presents the Company’s segment results:

(dollars in millions)	Three Months Ended June 30,				Six Months Ended June 30,
	2022		2021		2022		2021
Net sales
North America	$	744.1	$	603.6	$	1,474.2	$	1,156.5
Rest of World	229.9		263.2		485.9		485.5
Inter-segment	(8.1)		(7.0)		(16.5)		(13.2)
	$	965.9	$	859.8	$	1,943.6	$	1,628.8
Segment earnings
North America(1)	$	159.9	$	141.7	$	311.7	$	272.1
Rest of World	18.1		22.3		42.9		34.1
Inter-segment	—		—		(0.1)		—
	178.0		164.0		354.5		306.2
Corporate expense(2)	(10.6)		(11.8)		(29.0)		(26.9)
Interest expense	(2.1)		(0.9)		(3.6)		(1.9)
Earnings before income taxes	165.3		151.3		321.9		277.4
Provision for income taxes	39.1		33.1		75.9		61.5
Net earnings	$	126.2	$	118.2	$	246.0	$	215.9
(1)includes pension expense (income) of:	$	2.6	$	(2.6)	$	5.2	$	(5.2)
(2)includes pension expense (income) of:	$	0.4	$	(0.5)	$	0.7	$	(1.1)

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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 (liabilities) measured at fair value on a recurring basis (dollars in millions):

Fair Value Measurement Using	June 30, 2022		December 31, 2021
Quoted prices in active markets for identical assets (Level 1)	$	100.0	$	188.1
Significant other observable inputs (Level 2)	2.6		(0.7)

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 six months ended June 30, 2022.

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 all of its hedging instruments as 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.

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13. Derivative Instruments (continued)

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)	June 30, 2022				December 31, 2021
	Buy		Sell		Buy		Sell
Canadian dollar	$	—	$	145.5	$	—	$	113.4
Euro	37.6		—		24.2		—
Mexican peso	17.1		—		23.8		—
Total	$	54.7	$	145.5	$	48.0	$	113.4

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 $1.7 million and $1.4 million of after-tax gains associated with hedges of net investments in non-U.S. subsidiaries in currency translation adjustment in other comprehensive loss in the three and six months ended June 30, 2022, respectively. The Company recognized $(0.1) million of after-tax losses associated with hedges of a net investment in non-U.S. subsidiaries in currency translation adjustment in other comprehensive loss in both the three and six months ended June 30, 2021. The contractual amount of the Company's foreign currency forward contracts that are designated as net investment hedges is $— million as of June 30, 2022.

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, 2022		December 31, 2021
Foreign currency contracts	Other current assets	$	4.6	$	1.7
	Accrued liabilities	(1.8)		(1.6)
Total derivatives designated as hedging instruments		$	2.8	$	0.1

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

Three Months Ended June 30 (dollars in millions):

Derivatives in ASC 815 cash flow hedging relationships	Amount of gain 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
	2022		2021			2022		2021
Foreign currency contracts	$	3.4	$	0.4	Cost of products sold	$	0.7	$	(0.8)

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13. Derivative Instruments (continued)

Six Months Ended June 30 (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
	2022		2021			2022		2021
Foreign currency contracts	$	2.8	$	(2.5)	Cost of products sold	$	0.8	$	(1.1)

Balance Sheet Hedges

Foreign Exchange Contracts

The Company periodically enters into foreign exchange contracts to mitigate the foreign currency volatility relative to certain intercompany loans. These foreign exchange contracts did not qualify for hedge accounting in accordance with ASC 815 and as such were marked to market through earnings. The fair value of the foreign exchange contracts was a liability of $0.2 million as of June 30, 2022. The fair value of the foreign exchange contracts was a liability of $0.8 million as of December 31, 2021 and recorded in Accrued liabilities within the consolidated balance sheet.

The following table summarizes the contractual amounts of the Company's foreign exchange contracts that are designated as balance sheet hedges:

(dollars in millions)	June 30, 2022				December 31, 2021
	Buy		Sell		Buy		Sell
Canadian dollar	$	—	$	113.9	$	—	$	125.6

The amounts recognized within the consolidated statements of earnings related to the Company's foreign exchange contracts are set forth below.

Three Months Ended June 30 (dollars in millions):

Derivatives not designated as hedging instruments:	Location of loss within the consolidated statements of earnings	2022		2021
Foreign exchange contracts	Other (income) expense - net	$	(0.2)	$	—

Six Months Ended June 30 (dollars in millions):

Derivatives not designated as hedging instruments:	Location of loss within the consolidated statements of earnings	2022		2021
Foreign exchange contracts	Other expense (income) - net	$	1.1	$	—

14. Income Taxes

The Company’s effective income tax rate for the three and six months ended June 30, 2022 was 23.7 percent and 23.6 percent, respectively. The Company estimates that its annual effective income tax rate for the full year 2022 will be between approximately 23.5 and 24.0 percent. The effective income tax rate for the three and six months ended June 30, 2021 was 21.9 percent and 22.2 percent, respectively. The change in the effective income tax rate for the six months ended June 30, 2022 compared to the effective income tax rate for the six months ended June 30, 2021 was primarily due to a change in geographical earnings mix.

As of June 30, 2022, the Company had $14.3 million of unrecognized tax benefits of which $0.5 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 2017-2022 are subject to audit. The Company is subject to state and local income tax audits for tax years 2008-2022. The Company is subject to non-U.S. income tax examinations for years 2015-2022.

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15. 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 $2.5 million and $3.9 million as of June 30, 2022 and December 31, 2021, 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 $3.5 million as of June 30, 2022 and $7.2 million as of December 31, 2021. The Company’s reserves for estimated losses under repurchase arrangements were immaterial as of June 30, 2022 and December 31, 2021.

16. 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,
	2022			2021
Cumulative foreign currency translation
Balance at beginning of period	$	(44.1)		$	(49.5)
Other comprehensive income before reclassifications	(24.6)			4.9
Balance at end of period	(68.7)			(44.6)
Unrealized net gain (loss) on cash flow derivatives
Balance at beginning of period	—			(1.4)
Other comprehensive gain before reclassifications	2.6			0.3
Realized (gains) losses on derivatives reclassified to cost of products sold (net of income tax provision (benefit) of $0.2 and ($0.2) in 2022 and 2021, respectively)	(0.5)			0.6
Balance at end of period	2.1			(0.5)
Pension liability
Balance at beginning of period	(283.5)			(269.9)
Amounts reclassified from accumulated other comprehensive loss:(1)	3.7			3.8
Balance at end of period	(279.8)			(266.1)
Accumulated other comprehensive loss, end of period	$	(346.4)		$	(311.2)
(1) Amortization of pension items:
Actuarial losses	$	5.1	(2)	$	5.2	(2)
Prior year service cost	(0.1)		(2)	(0.1)		(2)
	5.0			5.1
Income tax benefit	(1.3)			(1.3)
Reclassification net of income tax benefit	$	3.7		$	3.8

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

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16. Changes in Accumulated Other Comprehensive Loss by Component (continued)

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

(dollars in millions)	Six Months Ended June 30,
	2022			2021
Cumulative foreign currency translation
Balance at beginning of period	$	(44.7)		$	(48.1)
Other comprehensive income before reclassifications	(24.0)			3.5
Balance at end of period	(68.7)			(44.6)
Unrealized net gain (loss) on cash flow derivatives
Balance at beginning of period	0.6			0.6
Other comprehensive gain (loss) before reclassifications	2.1			(1.9)
Realized (gains) losses on derivatives reclassified to cost of products sold (net of income tax provision (benefit) of $0.2 and $(0.3) in 2022 and 2021, respectively)	(0.6)			0.8
Balance at end of period	2.1			(0.5)
Pension liability
Balance at beginning of period	(287.3)			(273.7)
Amounts reclassified from accumulated other comprehensive loss:(1)	7.5			7.6
Balance at end of period	(279.8)			(266.1)
Accumulated other comprehensive loss, end of period	$	(346.4)		$	(311.2)
(1) Amortization of pension items:
Actuarial losses	$	10.2	(2)	$	10.4	(2)
Prior year service cost	(0.2)		(2)	(0.2)		(2)
	10.0			10.2
Income tax benefit	(2.5)			(2.6)
Reclassification net of income tax benefit	$	7.5		$	7.6

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

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ITEM 2 - MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Overview

Our company is comprised of two reporting segments: North America and Rest of World. Our Rest of World segment is primarily comprised of China, Europe and India. Both segments manufacture and market comprehensive lines of residential and commercial gas, heat pump and electric water heaters, boilers, tanks, and water treatment products. Both segments primarily manufacture and market in their respective region of the world.

We continue to seek acquisitions that enable geographic growth, expand our core business, and establish adjacencies. Consistent with this strategy, we acquired Giant Factories, Inc. (Giant), a Canada-based manufacturer of residential and commercial water heaters using a combination of debt and cash. The acquisition fits squarely in our core capabilities, supplements our presence in Canada and enhances our capacity and distribution in the region. Giant contributed $31.0 million and $63.0 million of sales in the second quarter and first half of 2022, respectively. Refer to Note 3, "Acquisitions" for additional information. We will also continue to look for opportunities to add to our existing operations in high growth regions demonstrated by our previous introductions of water treatment products in India and range hoods and cooktops in China.

Our global supply chain management team continued to navigate through supply chain and logistics challenges in the first half of 2022. We have seen supply constraints for certain components and raw materials used in our operations, limited container and trucking capacity, and port congestion and delays. While we saw improvement in our supply chain as we closed out the second quarter, challenges still persist. In addition, while steel indices moderated in the first half of 2022, commodity prices and availability remain volatile. We remain in close contact with our suppliers and logistics providers to troubleshoot, manage and resolve bottlenecks, as the environment remains unpredictable.

In our North America segment, after approximately eight percent growth in 2021, we expect residential industry water heater volumes will be down approximately four to six percent in 2022 compared with 2021 as we believe that industry demand will normalize to more historical growth rates. We saw softness in residential water heater order rates as we exited the second quarter and into July as customers right sized their inventories. We believe that commercial water heater industry volumes will decline seven to nine percent in 2022 compared to 2021 primarily due to weakness in the commercial electric water heaters greater than 55 gallons product category. We expect sales in 2022 will benefit from our 2021 price increases, which had a cumulative effect on our water heater prices of approximately 50 percent. We expect to see an approximately 25 percent increase in our sales of boilers in 2022 compared to 2021 driven by increased pricing in response to higher input costs and higher demand. We anticipate sales of our North America water treatment products, inclusive of acquisitions, will increase approximately 15 percent in 2022, compared to 2021, primarily driven by higher consumer demand for our point of use and point of entry water treatment systems.

In our Rest of World segment, after strong growth in 2021, we expect 2022 sales in China will be flat in local currency compared with 2021. Our business in China continues to experience negative impacts from the novel coronavirus (COVID-19) pandemic. To slow the spread of COVID-19 in China, targeted lockdowns began in certain cities late in the first quarter and persisted through the first half of the year. While lockdowns have lessened in recent weeks, the situation remains unpredictable.

Combining all of these factors, we expect our consolidated sales to increase between 12 and 14 percent in 2022, which includes our acquisition of Giant adding approximately $100 million in incremental sales. This guidance excludes the potential impacts from future acquisitions and assumes the COVID-19 related restrictions in China remain at current levels, and that COVID-19 does not significantly impact our operations or our employees, customers or suppliers.

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Results of Operations

(dollars in millions)	Three Months Ended June 30,						Six Months Ended June 30,
	2022			2021			2022			2021
Net sales	$	965.9		$	859.8		$	1,943.6		$	1,628.8
Cost of products sold	631.5			538.4			1,267.6			1,018.8
Gross profit	334.4			321.4			676.0			610.0
Gross profit margin %	34.6		%	37.4		%	34.8		%	37.5		%
Selling, general and administrative expenses	166.7			173.1			346.5			339.6
Interest expense	2.1			0.9			3.6			1.9
Other expense (income) - net	0.3			(3.9)			4.0			(8.9)
Earnings before provision for income taxes	165.3			151.3			321.9			277.4
Provision for income taxes	39.1			33.1			75.9			61.5
Net Earnings	$	126.2		$	118.2		$	246.0		$	215.9

Our sales in the second quarter of 2022 were $965.9 million, or 12.3 percent higher than 2021 second quarter sales of $859.8 million. Sales in the first six months of 2022 were $1,943.6 million, or approximately 19 percent higher than $1,628.8 million in the same period last year. Compared to the prior year quarter and the first six months of 2021, our sales increase was primarily driven by inflation-related pricing actions implemented in 2021 in North America, partially offset by lower sales in China. Our acquisition of Giant added $30.8 million and $62.8 million of incremental sales in the second quarter and first half of 2022, respectively. In addition, our sales in China were negatively impacted by approximately $5 million in the second quarter of 2022 compared to the second quarter of 2021 due to the depreciation of the Chinese currency compared to the U.S. dollar.

Our gross profit margin in the second quarter of 2022 was 34.6 percent compared to gross profit margin of 37.4 percent in the prior-year period. Gross profit margin in the first six months of 2022 was 34.8 percent compared to the gross profit margin of 37.5 percent in the first six months of 2021. The lower gross profit margin in the second quarter and first six months of 2022 compared to the same periods last year was primarily due to higher steel and other material costs, which outpaced our pricing actions.

Selling, general, and administrative (SG&A) expenses in the second quarter of 2022 decreased by $6.4 million compared to the second quarter of 2021. SG&A expenses increased $6.9 million in the first half of 2022 compared to the prior year period. The decrease in SG&A expenses in the second quarter of 2022 was primarily due to lower management incentive expenses and lower engineering costs in China. Higher selling expenses in North America primarily drove the increase in SG&A expenses in the first half of 2022 due to higher sales compared to the prior year period.

Interest expense in the second quarter of 2022 was $2.1 million compared to $0.9 million in the same period last year. Interest expense in the first half of 2022 was $3.6 million compared to $1.9 million in the same period the previous year. The increase in interest expense in the second quarter and first six months of 2022 compared to the same periods last year was primarily due to higher debt levels.

Other expense was $0.3 million in the second quarter of 2022 compared to other income of ($3.9) million in the second quarter of 2021. Other expense was $4.0 million in the first half of 2022 compared to other income of ($8.9) million in the first half of 2021. Pension expense in the second quarter of 2022 was $3.7 million compared to pension income of ($2.9) million in the second quarter of 2021. Pension expense in the first half of 2022 was $7.3 million compared to pension income of ($5.8) million in the first half of 2021.

In 2021, our Board of Directors approved the termination of our largest defined benefit pension plan (the Plan) representing over 95 percent of our pension plan liabilities with a termination date of December 31, 2021. In April 2022, we received a determination letter from the IRS that allowed us to proceed with the termination process for the Plan. In 2022, we expect to annuitize the remaining Plan pension liability. The Plan settlement, which we expect to complete in the fourth quarter of 2022, will accelerate the recognition of approximately $445 million of non-cash, pre-tax pension expenses, or approximately $1.73 per share. In addition, to protect the Plan’s funded status, the Plan transferred a significant portion of its assets to lower risk investments in 2021. The impact of this transition resulted in a lower expected rate of return on pension investments and accordingly, higher pension expenses in 2022, compared to previous years. The service cost component of our pension income

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is reflected in cost of products sold and SG&A expenses. All other components of our pension expense (income) are reflected in other expense (income).

We are providing non-U.S. Generally Accepted Accounting Principles (GAAP) measures (adjusted earnings, adjusted EPS, adjusted segment earnings and adjusted corporate expense) that exclude the impact of pension settlement expenses and non-operating pension income and expenses. Reconciliations from GAAP measures to non-GAAP measures are provided in the financial information included in this filing. We believe that the measures of adjusted earnings, adjusted EPS, adjusted segment earnings and adjusted corporate expense provide useful information to investors about our performance and allow management and our investors to better understand our performance between periods without regard to items that we do not consider to be a component of our core operating performance.

Our pension costs and credits are developed from actuarial valuations. The valuations reflect key assumptions regarding, among other things, discount rates, expected return on plan assets, retirement ages, and years of service. We consider current market conditions, including changes in interest rates, in making these assumptions. Our assumption for the expected rate of return on plan assets is 3.00 percent in 2022 compared to 6.25 percent in 2021. The discount rate used to determine net periodic pension costs increased to 2.72 percent in 2022 from 2.45 percent in 2021.

Our effective income tax rates for the second quarter and first six months of 2022 were 23.7 percent and 23.6 percent, respectively. Our effective income tax rates for the second quarter and first six months of 2021 were 21.9 percent and 22.2 percent, respectively. Our effective income tax rates in the second quarter and first half of 2022 were higher than the effective income tax rates in the same periods of 2021 primarily due to a change in geographic earnings mix. We estimate that our annual effective income tax rate for the full year of 2022 will be between 23.5 and 24.0 percent.

North America Segment

(dollars in millions)	Three Months Ended June 30,						Six Months Ended June 30,
	2022			2021			2022			2021
Net Sales	$	744.1		$	603.6		$	1,474.2		$	1,156.5
Segment Earnings	159.9			141.7			311.7			272.1
Segment margin	21.5		%	23.5		%	21.1		%	23.5		%

Sales in our North America segment were $744.1 million in the second quarter of 2022 or $140.5 million higher than sales of $603.6 million in the second quarter of 2021. Sales in the first six months of 2022 were $1,474.2 million or $317.7 million higher than sales of $1,156.5 million in the same period last year. Higher sales in the second quarter of 2022 were primarily driven by price increases implemented in 2021, largely on water heaters, which were in response to rising material and other input costs. The second quarter of 2022 also benefited from higher volumes of water treatment products, boilers and commercial water heaters, partially offset by lower residential water heater volumes. The increased sales in the first half of 2022 compared to the prior year period were primarily driven by the same price increases discussed above, partially offset by lower residential and commercial water heater volumes. In addition, our acquisition of Giant added $30.8 million and $62.8 million of incremental sales in the second quarter and first half of 2022, respectively.

North America segment earnings were $159.9 million in the second quarter of 2022, an increase of 13 percent compared to segment earnings of $141.7 million in the second quarter of 2021. Segment earnings in the first half of 2022 were $311.7 million, an increase of 15 percent compared to segment earnings of $272.1 million in the first half of 2021. Segment margins were 21.5 percent and 23.5 percent in the second quarter of 2022 and 2021, respectively. Segment margins were 21.1 percent and 23.5 percent in the first half of 2022 and 2021, respectively. Higher segment earnings in the second quarter of 2022 compared to the second quarter of 2021 were primarily due to inflation-related price increases, which were partially offset by higher material and logistics costs and lower residential water heater volumes. Higher segment earnings in the first half of 2022 compared to the prior year period were primarily due to inflation-related price increases which were partially offset by higher material and logistics costs. Segment margin was lower in the second quarter and the first half of 2022, primarily due to an overall increase in costs, including production inefficiencies, outpacing pricing actions.

Adjusted segment earnings and adjusted segment margin in the second quarter of 2022 were $162.5 million and 21.8 percent, respectively. Adjusted segment earnings and adjusted segment margin in the second quarter of 2021 were $139.1 million and 23.0 percent, respectively. Adjusted segment earnings and adjusted segment margin in the first half of 2022 were $316.9 million and 21.5 percent, respectively. Adjusted segment earnings and adjusted segment margin in the first half of 2021 were $266.9 million and 23.1 percent, respectively. We estimate our 2022 North America adjusted segment margin will be between 22.5 and 23.0 percent.

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Adjusted segment earnings and adjusted segment margin in the second quarter of 2022 and 2021 exclude $2.6 million and ($2.6) million of pension expense (income), respectively. Adjusted segment earnings and adjusted segment margin in the first half of 2022 and 2021 exclude $5.2 million and ($5.2) million of pension expense (income), respectively.

Rest of World Segment

(dollars in millions)	Three Months Ended June 30,						Six Months Ended June 30,
	2022			2021			2022			2021
Net Sales	$	229.9		$	263.2		$	485.9		$	485.5
Segment Earnings	18.1			22.3			42.9			34.1
Segment margin	7.9		%	8.5		%	8.8		%	7.0		%

Sales in the Rest of World segment were $229.9 million in the second quarter of 2022, or $33.3 million lower than sales of $263.2 million in the second quarter of 2021. Sales in the first six months of 2022 were $485.9 million, essentially flat to the first six months of 2021. Sales in China decreased approximately 16 percent in U.S. dollar terms and 14 percent in local currency in the second quarter of 2022 and approximately two percent in U.S. dollar terms and local currency in the first six months of 2022 compared to the same period last year. Lower sales in China in the second quarter of 2022 were primarily driven by lower consumer demand due to COVID-19 related lockdowns. In addition, our sales in China were negatively impacted by approximately $5 million in the second quarter of 2022 compared to the second quarter of 2021, due to the depreciation of the Chinese currency compared to the U.S. dollar. Sales in India increased 79 percent in the second quarter of 2022 on strong demand, compared to the prior year quarter, which was negatively impacted by the COVID-19 pandemic.

Rest of World segment earnings were $18.1 million in the second quarter of 2022, compared to $22.3 million in the second quarter of 2021. Segment earnings in the first six months of 2022 were $42.9 million, compared to $34.1 million in the first half of 2021. Segment margins were 7.9 percent and 8.5 percent in the second quarter of 2022 and 2021, respectively. Segment margins were 8.8 percent and 7.0 percent in the first half of 2022 and 2021, respectively.

Lower segment earnings in the second quarter of 2022 compared to the prior year period were largely driven by lower volumes in China, due primarily to COVID-19 related lockdowns, partially offset by lower selling, advertising, and engineering expenses. Higher segment earnings and margin in the first half of 2022 compared to the prior year period were primarily driven by favorable mix and lower advertising and selling expenses in China. We expect full-year segment margin to be between 9.5 and 10 percent in 2022.

Outlook

We expect our consolidated sales to increase between 12 and 14 percent in 2022, which includes our acquisition of Giant adding approximately $100 million in incremental sales. Our higher expected sales are driven by pricing actions implemented in 2021 in North America, partially offset by lower volumes of residential water heaters. We expect to achieve full-year earnings of between $1.56 and $1.76 per share and adjusted EPS between $3.35 and $3.55 per share. Our 2022 guidance excludes the potential impacts from future acquisitions and assumes the COVID-19 related lockdowns in China subside during the second half of 2022, and that COVID-19 does not significantly impact our operations or our employees, customers or suppliers.

Liquidity & Capital Resources

Our working capital was $702.9 million at June 30, 2022 compared with $633.8 million at December 31, 2021. A majority of the increase in working capital was driven by lower accounts payable and payroll related accruals and higher inventory balances than at December 2021, due to higher levels of safety stock on higher cost inventory which were partially offset by lower accounts receivable and cash balances. In the first half of 2022, we repatriated approximately $120 million of cash from our foreign subsidiaries. We used the proceeds to pay down outstanding debt balances.

(dollars in millions)	Six Months Ended June 30,
	2022		2021
Cash provided by operating activities	$	54.4	$	196.0
Cash provided by (used in) investing activities	40.9		(50.0)
Cash used in financing activities	(179.2)		(274.3)

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Cash provided by operating activities in the first half of 2022 was $54.4 million compared with $196.0 million in the first half of 2021. Cash provided by higher earnings in the first half of 2022 compared with the prior year was more than offset by lower customer deposits in China, higher incentive payments in 2022 due to record 2021 sales and earnings and additional working capital cash outlays for higher levels of safety stock on higher cost inventory. Our free cash flow in the first half of 2022 and 2021 was $23.7 million and $165.3 million, respectively. We expect free cash flow to be between $450 million to $500 million in 2022. Free cash flow is a non-GAAP measure and is described in more detail in the Non-GAAP Measures section below.

Our capital expenditures were $30.7 million in the first half of 2022 and equal to the first half of 2021. We project our 2022 capital expenditures, as well as depreciation and amortization, will be approximately $80 million.

In 2021, we renewed and amended our $500 million revolving credit facility, which now expires on April 1, 2026. The renewed and amended facility, with a group of nine banks, has an accordion provision that allows it to be increased up to $850 million if certain conditions (including lender approval) are satisfied. Borrowing rates under the facility are determined by our leverage ratio. The facility requires us to maintain two financial covenants, a leverage ratio test and an interest coverage test, and we were in compliance with the covenants as of June 30, 2022 and expect to be in compliance for the foreseeable future.

The facility backs up commercial paper and credit line borrowings. At June 30, 2022, we had $160.0 million outstanding under the facility and an available borrowing capacity of $340.0 million. We believe the combination of available borrowing capacity and operating cash flows will provide sufficient funds to finance our existing operations for the foreseeable future.

Our total debt increased by $101.7 million from $196.7 million at December 31, 2021 to $298.4 million at June 30, 2022. The increase in debt balances was due to repurchases of our common stock. Our leverage, as measured by the ratio of total debt to total capitalization, was 14.3 percent at June 30, 2022, compared with 9.7 percent at December 31, 2021.

Our U.S. pension plan continues to meet all funding requirements under ERISA regulations. We were not required to make a contribution to our pension plan in 2021. We forecast that we will not be required to make a contribution to the plan in 2022, and we do not plan to make any voluntary contributions in 2022.

In the first quarter of 2022, our Board of Directors approved adding 3,500,000 shares of common stock to our existing discretionary share repurchase authority. Under our share repurchase program, we may purchase our common stock through a combination of a Rule 10b5-1 automatic trading plan and discretionary purchases in accordance with applicable securities laws. The stock repurchase authorization remains effective until terminated by our Board of Directors, which may occur at any time, subject to the parameters of any Rule 10b5-1 automatic trading plan that we may then have in effect. During the first half of 2022, we repurchased 2,868,500 shares of our stock at a total cost of $190.4 million. At June 30, 2022, we had 4,157,857 shares remaining on the share repurchase authority. Depending on factors such as stock price, working capital requirements and alternative investment opportunities, we expect to spend approximately $400 million on stock repurchases in 2022 through a combination of our Rule 10b5-1 automatic trading plan and open market repurchases.

On July 11, 2022, our Board of Directors declared a regular quarterly cash dividend of $0.28 per share on our Common Stock and Class A common stock. The dividend is payable on August 15, 2022, to shareholders of record on July 29, 2022.

Non-GAAP Financial Information

We provide non-GAAP measures of free cash flow, adjusted earnings, adjusted EPS, adjusted segment earnings and adjusted corporate expense. We define free cash flow as cash provided by operating activities less capital expenditures. Our adjusted earnings, adjusted EPS, adjusted segment earnings and adjusted corporate expenses excludes the impact of pension settlement expenses and non-operating pension income and expenses.

We believe that free cash flow provides useful additional information concerning cash flow available to meet future debt service obligations and working capital requirements. We believe that the measure of adjusted earnings, adjusted EPS, adjusted segment earnings and adjusted corporate expense provides useful information to investors about our performance and allows management and our investors to better understand our performance between periods without regard to items we do not consider to be a component of our core operating performance.

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A. O. SMITH CORPORATION

Adjusted Earnings and Adjusted EPS

(dollars in millions, except per share data)

(unaudited)

The following is a reconciliation of net earnings and diluted EPS to adjusted earnings (non-GAAP) and adjusted EPS (non-GAAP):

 

	Three Months Ended June 30,				Six Months Ended June 30,
	2022		2021		2022		2021
Net Earnings (GAAP)	$	126.2	$	118.2	$	246.0	$	215.9
Pension expense (income), before tax	3.0		(3.1)		5.9		(6.3)
Tax effect of pension expense (income)	(0.7)		0.8		(1.4)		1.6
Adjusted Earnings (non-GAAP)	$	128.5	$	115.9	$	250.5	$	211.2
Diluted EPS (GAAP)(1)	$	0.81	$	0.73	$	1.56	$	1.33
Pension expense (income) per diluted share, before tax	0.02		(0.02)		0.04		(0.04)
Tax effect of pension expense (income), per diluted share	(0.01)		0.01		(0.01)		0.01
Adjusted EPS (non-GAAP)(1)	$	0.82	$	0.72	$	1.59	$	1.30

(1) Earning per share amounts are calculated discretely and, therefore, may not add up to the total due to rounding.

A. O. SMITH CORPORATION

Adjusted Segment Earnings

(dollars in millions)

(unaudited)

The following is a reconciliation of reported segment earnings to adjusted segment earnings (non-GAAP):

 

	Three Months Ended June 30,				Six Months Ended, June 30,
	2022		2021		2022		2021
Segment Earnings (GAAP)
North America	$	159.9	$	141.7	$	311.7	$	272.1
Rest of World	18.1		22.3		42.9		34.1
Inter-segment earnings elimination	—		—		(0.1)		—
Total Segment Earnings (GAAP)	$	178.0	$	164.0	$	354.5	$	306.2
Adjustments:
North America pension expense (income)	$	2.6	$	(2.6)	$	5.2	$	(5.2)
Rest of World	—		—		—		—
Inter-segment earnings elimination	—		—		—		—
Total Adjustments	$	2.6	$	(2.6)	$	5.2	$	(5.2)
Adjusted Segment Earnings (non-GAAP)
North America	$	162.5	$	139.1	$	316.9	$	266.9
Rest of World	18.1		22.3		42.9		34.1
Inter-segment earnings elimination	—		—		(0.1)		—
Total Adjusted Segment Earnings (non-GAAP)	$	180.6	$	161.4	$	359.7	$	301.0

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A. O. SMITH CORPORATION

Adjusted Corporate Expense

(dollars in millions)

(unaudited)

The following is a reconciliation of reported Corporate Expense to adjusted Corporate Expense (non-GAAP):

 

	Three Months Ended June 30,				Six Months Ended, June 30,
	2022		2021		2022		2021
Corporate Expense (GAAP)	$	(10.6)	$	(11.8)	$	(29.0)	$	(26.9)
Adjustments: Corporate pension expense (income)	0.4		(0.5)		0.7		(1.1)
Corporate Expense (non-GAAP)	$	(10.2)	$	(12.3)	$	(28.3)	$	(28.0)

A. O. SMITH CORPORATION

Free Cash Flow

(dollars in millions)

(unaudited)

The following is a reconciliation of reported cash flow from operating activities to free cash flow (non-GAAP):

	Six Months Ended, June 30,
	2022		2021
Cash provided by operating activities (GAAP)	$	54.4	$	196.0
Less: Capital expenditures	(30.7)		(30.7)
Free cash flow (non-GAAP)	$	23.7	$	165.3

A. O. SMITH CORPORATION

2022 Adjusted EPS Guidance and 2021 Adjusted EPS

(unaudited)

The following is a reconciliation of diluted EPS to adjusted EPS (non-GAAP) (all items are net of tax):

	2022 Guidance		2021
Diluted EPS (GAAP)	$ 1.56 - 1.76		$	3.02
Estimated pension settlement charge	1.73	(1)	—
Pension expense (income)	0.06	(2)	(0.06)		(3)
Adjusted EPS (non-GAAP)	$ 3.35 - 3.55		$	2.96

(1)Includes pre-tax pension settlement charges of $378.3 million and $66.7 million, within the North America segment and Corporate expenses, respectively.

(2)Includes pre-tax pension expense of $10.5 million and $1.3 million, within the North America segment and Corporate expenses, respectively.

(3)Includes pre-tax pension income of $10.5 million and $2.6 million, within the North America segment and Corporate expenses, respectively.

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Critical Accounting Policies

Our consolidated financial statements are prepared in conformity with accounting principles generally accepted in the U.S., which requires the use of estimates and assumptions about future events that affect the amounts reported in the financial statements and accompanying notes. Future events and their effects cannot be determined with absolute certainty. Therefore, the determination of estimates requires the exercise of judgment. Actual results inevitably will differ from those estimates, and such differences may be material to the financial statements. The critical accounting policies that we believe could have the most significant effect on our reported results or require complex judgment by management are contained in Item 7, Management’s Discussion and Analysis of Financial Condition and Results of Operations, of our Annual Report on Form 10-K for the year ended December 31, 2021. We believe that at June 30, 2022, there was no material change to this information.

Recent Accounting Pronouncement

Refer to Recent Accounting Pronouncement in Note 1 – Basis of Presentation in the notes to our condensed consolidated financial statements included in Part 1 Financial Information.

Forward Looking Statements

This filing contains statements that the Company believes are “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995. Forward-looking statements generally can be identified by the use of words such as “may,” “will,” “expect,” “intend,” “estimate,” “anticipate,” “believe,” “forecast,” “continue,” “guidance”, “outlook” or words of similar meaning. All forward-looking statements are subject to risks and uncertainties that could cause actual results to differ materially from those anticipated as of the date of this filing. Important factors that could cause actual results to differ materially from these expectations include, among other things, the following: the Company's ability to continue to obtain commodities, components, parts and accessories on a timely basis through its supply chain and at expected costs; negative impacts to demand for the Company’s products, particularly commercial products, and to its operations and workforce as a result of the severity and duration of the COVID-19 pandemic; inability of the Company to implement or maintain pricing actions; an uneven recovery of the Chinese economy or decline in the growth rate of consumer spending or housing sales in China; negative impact to the Company’s business in China as a result of future COVID-19 related shutdowns there; negative impact to the Company's businesses from international tariffs, trade disputes and geopolitical differences, including the conflict in Ukraine; potential weakening in the high-efficiency boiler segment in the U.S.; substantial defaults in payment by, material reduction in purchases by or the loss, bankruptcy or insolvency of a major customer; a weakening in U.S. residential or commercial construction or instability in the Company’s replacement markets; foreign currency fluctuations; the Company’s inability to successfully integrate or achieve its strategic objectives resulting from acquisitions; competitive pressures on the Company’s businesses; the impact of potential information technology or data security breaches; changes in government regulations or regulatory requirements; and adverse developments in general economic, political and business conditions in key regions of the world. Forward-looking statements included in this filing are made only as of the date of this filing, and the Company is under no obligation to update these statements to reflect subsequent events or circumstances. All subsequent written and oral forward-looking statements attributed to the Company, or persons acting on its behalf, are qualified entirely by these cautionary statements.

ITEM 3 - QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

As is more fully described in our Annual Report on Form 10-K for the year ended December 31, 2021, we are exposed to various types of market risks, including currency and certain commodity risks. Our quantitative and qualitative disclosures about market risk have not materially changed since that report was filed. We monitor our currency and commodity risks on a continuous basis and generally enter into forward and futures contracts to minimize these exposures. The majority of the contracts are for periods of less than one year. Our Company does not engage in speculation in our derivative strategies. It is important to note that gains and losses from our forward and futures contract activities are offset by changes in the underlying costs of the transactions being hedged.

ITEM 4 - CONTROLS AND PROCEDURES

Evaluation of disclosure controls and procedures

Under the supervision and with the participation of our management, including our principal executive officer and principal financial officer, we conducted an evaluation of our disclosure controls and procedures, as such term is defined under Rule13a-15(e) promulgated under the Securities Exchange Act of 1934, as amended (Exchange Act). Based upon this evaluation of these disclosure controls and procedures, our principal executive officer and principal financial officer concluded that the disclosure controls and procedures were effective as of June 30, 2022 to ensure that information required to be disclosed by us in the reports we file or submit under the Exchange Act is recorded, processed, summarized and reported,

27

within the time period specified in the SEC rules and forms, and to ensure that information required to be disclosed by us in the reports we file or submit under the Exchange Act is accumulated and communicated to our management, including our principal executive and principal financial officers, as appropriate, to allow timely decisions regarding disclosure.

Changes in internal control over financial reporting

There have been no changes in our internal control over financial reporting during the quarter ended June 30, 2022 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

PART II - OTHER INFORMATION

ITEM 1 - LEGAL PROCEEDINGS

There have been no material changes in the legal and environmental matters discussed in Part 1, Item 3 and Note 16 of the Notes to Consolidated Financial Statements in our Annual Report on Form 10-K for the year ended December 31, 2021.

ITEM 1A RISK FACTORS

There have been no material changes from the risk factors disclosed in the Company’s Annual Report on Form 10-K for the year ended December 31, 2021, except for the addition of the risk factor set forth below:

■The outbreak of hostilities in Ukraine may exacerbate certain risks we face

Russia’s invasion of Ukraine and the global response, including the imposition of sanctions by the European Union, the United States and other countries, could create or exacerbate risks facing our business. While we do not have a physical presence in Russia or Ukraine, we have evaluated our operations, vendor contracts and customer arrangements, and at present we do not expect the conflict to directly have a material and adverse effect on our financial condition or results of operations. However, further escalation of geopolitical tensions related to the military conflict, including increased trade barriers or restrictions on global trade, could result in, among other things, cyberattacks, supply disruptions, significant volatility in commodity prices and availability, supply of energy resources, lower consumer demand, changes to foreign exchange rates and financial and capital markets. These risks and others described more fully in our Annual Report could be exacerbated by this military conflict. The extent and duration of the military action, sanctions and resulting market disruptions could be significant and could potentially have substantial impact on the global economy and our business for an unknown period of time.

■The global coronavirus (COVID-19) pandemic, or other global public health pandemics, could have a material adverse effect on our business, results of operations and financial condition

Our business, results of operations and financial condition may be adversely affected if a global public health pandemic, including the current COVID-19 pandemic, interferes with the ability of our employees, suppliers, and customers to perform our and their respective responsibilities and obligations relative to the conduct of our business and operations. The COVID-19 pandemic has significantly impacted economic activity and markets around the world, and it could have a material negative impact on our business and operations in numerous ways, including but not limited to those outlined below:

•The risk that we, or our employees, suppliers or customers may be prevented from conducting business activities for an indefinite period of time, including shutdowns that may be requested or mandated by governmental authorities

•Restrictions on shipping products from certain jurisdictions where they are produced or into certain jurisdictions where customers are located.

•Inability to meet our customers’ needs and achieve cost targets due to increased logistics costs, longer shipment times, and disruptions in our manufacturing and supply arrangements caused by the loss or disruption of essential manufacturing and supply elements, such as raw materials or other finished product components, transportation, workforce or other manufacturing and distribution capability.

•Failure of third parties on which we rely, including our suppliers, distributors, contractors and commercial banks, to meet their obligations to us, or significant disruptions in their ability to do so, which may be caused by their own financial or operational difficulties, workforce disruptions, or mandated shutdowns by governmental authorities, may adversely impact our operations.

•Significant reductions in demand, particularly for our commercial products, or significant volatility in demand and a global economic recession that could reduce demand for our products, resulting from actions taken by governments, businesses, and/or the general public in an effort to limit exposure to and spreading of such infectious diseases, such as travel restrictions, quarantines, and business shutdowns or slowdowns. In addition, there is risk that the commercial

28

sector, such as the restaurant and hospitality industries in which we have customers, will experience long-term shifts in consumer behavior which could negatively impact demand or capacity and may not return to pre-pandemic levels.

•Manufacturing plant inefficiencies due to safety and preventative health measures that we have implemented in our plants to prevent the spread of COVID-19.

•Deterioration of worldwide capital, credit, and financial markets that could limit our ability to obtain external financing to fund our operations and capital expenditures.

The extent to which the COVID-19 pandemic, or other outbreaks of disease or similar public health threats, materially and adversely impacts our business, results of operations and financial condition remains uncertain and will depend on future developments. Such developments may include the geographic spread and duration of the virus, periodic surges of the virus, the severity of the virus and the actions that may be taken by various governmental authorities and other third parties in response to the outbreak. In the first half of 2022, a number of municipal governments in China imposed shutdowns to prevent further spread of COVID-19. These shutdowns may continue or recur during the foreseeable future, and could have a material negative impact on our business and operations there.

In addition, we cannot predict how quickly, and to what extent, normal economic and operating conditions can resume throughout the world, and the resumption of normal business operations may be delayed or constrained by lingering effects of the COVID-19 pandemic on our suppliers, third-party service providers, and/or customers.

ITEM 2 - UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

In the first quarter of 2022, our Board of Directors approved adding 3,500,000 shares of common stock to the existing discretionary share repurchase authority. Under the share repurchase program, the Common Stock may be purchased through a combination of Rule 10b5-1 automatic trading plan and discretionary purchases in accordance with applicable securities laws. The number of shares purchased and the timing of the purchases will depend on a number of factors, including share price, trading volume and general market conditions, as well as working capital requirements, general business conditions and other factors, including alternative investment opportunities. The stock repurchase authorization remains effective until terminated by our Board of Directors which may occur at any time, subject to the parameters of any Rule 10b5-1 automatic trading plan that we may then have in effect. In the second quarter of 2022, we repurchased 1,382,000 shares at an average price of $59.74 per share and at a total cost of $82.5 million. As of June 30, 2022, there were 4,157,857 shares remaining on the existing repurchase authorization.

ISSUER PURCHASES OF EQUITY SECURITIES
Period	Total Number of Shares Purchased	Average Price Paid per Share		Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs	Maximum Number of Shares that may yet be Purchased Under the Plans or Programs
April 1 - April 30, 2022	273,000	$	64.66	273,000	5,266,857
May 1 - May 31, 2022	503,000	58.97		503,000	4,763,857
June 1 - June 30, 2022	606,000	58.16		606,000	4,157,857

ITEM 6 - EXHIBITS

Refer to the Exhibit Index on page 30 of this report.

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INDEX TO EXHIBITS

Exhibit Number	Description
31.1	Certification of the Chief Executive Officer pursuant to Rule 13a-14(a) of the Securities Exchange Act of 1934
31.2	Certification of the Chief Financial Officer pursuant to Rule 13a-14(a) of the Securities Exchange Act of 1934
32.1	Written Statement of the Chief Executive Officer Pursuant to 18 U.S.C. Section 1350
32.2	Written Statement of the Chief Financial Officer Pursuant to 18 U.S.C. Section 1350
101	The following materials from A. O. Smith Corporation’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2022 are filed herewith, formatted in XBRL (Extensive Business Reporting Language): (i) the Condensed Consolidated Statement of Earnings for the three and six months ended June 30, 2022 and 2021, (ii) the Condensed Consolidated Statement of Comprehensive Earnings for the three and six months ended June 30, 2022 and 2021, (iii) the Condensed Consolidated Balance Sheets as of June 30, 2022, and December 31, 2021 (iv) the Condensed Consolidated Statement of Cash Flows for the six months ended June 30, 2022 and 2021 (v) the Condensed Consolidated Statement of Stockholders’ Equity for the three and six months ended June 30, 2022 and 2021 (vi) the Notes to Condensed Consolidated Financial Statements.

30

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has authorized this report to be signed on its behalf by the undersigned.

	A. O. SMITH CORPORATION
July 29, 2022	/s/ Benjamin A. Otchere
	Benjamin A. Otchere
	Vice President and Controller
	/s/ Charles T. Lauber
	Charles T. Lauber
	Executive Vice President and Chief Financial Officer

31

EX-31.1

Exhibit 31.1

CERTIFICATION

I, Kevin J. Wheeler, certify that:

1.I have reviewed this quarterly report on Form 10-Q of A. O. Smith Corporation;

2.Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3.Based on my knowledge, the financial statements and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4.The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

a)Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b)Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

c)Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

d)Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and

5.The registrant's other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's Board of Directors (or persons performing the equivalent functions):

a)    All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and

b)    Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.

July 29, 2022

/s/ Kevin J. Wheeler

Kevin J. Wheeler

Chairman, President and Chief Executive Officer

EX-31.2

Exhibit 31.2

CERTIFICATION

I, Charles T. Lauber, certify that;

1.    I have reviewed this quarterly report on Form 10-Q of A. O. Smith Corporation;

2.    Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3.    Based on my knowledge, the financial statements and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4.    The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

a)    Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b)    Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

c)    Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

d)    Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and

5.    The registrant's other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's Board of Directors (or persons performing the equivalent functions):

a)    All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and

b)    Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.

July 29, 2022

/s/ Charles T. Lauber

Charles T. Lauber

Executive Vice President and Chief Financial Officer

EX-32.1

Exhibit 32.1

Written Statement of the Chief Executive Officer Pursuant to 18 U.S.C. Section 1350

Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, 18 U.S.C. Section 1350, the undersigned certifies that to the best of my knowledge:

(1)the Quarterly Report on Form 10-Q of A. O. Smith Corporation for the quarter ended June 30, 2022 (the "Report") fully complies with the requirements of Section 13(a) or Section 15(d) of the Securities Exchange Act of 1934; and

(2)the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of A. O. Smith Corporation.

July 29, 2022

/s/ Kevin J. Wheeler

Kevin J. Wheeler

Chairman, President and Chief Executive Officer

EX-32.2

Exhibit 32.2

Written Statement of the Chief Financial Officer Pursuant to 18 U.S.C. Section 1350

Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, 18 U.S.C. Section 1350, the undersigned certifies that to the best of my knowledge:

(1)the Quarterly Report on Form 10-Q of A. O. Smith Corporation for the quarter ended June 30, 2022 (the "Report") fully complies with the requirements of Section 13(a) or Section 15(d) of the Securities Exchange Act of 1934; and

(2)the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of A. O. Smith Corporation.

July 29, 2022

/s/ Charles T. Lauber

Charles T. Lauber

Executive Vice President and Chief Financial Officer

XML

Cover Page - shares	6 Months Ended
	Jun. 30, 2022	Jul. 27, 2022
Document Information [Line Items]
Document Type	10-Q
Document Quarterly Report	true
Document Period End Date	Jun. 30, 2022
Document Transition Report	false
Entity File Number	1-475
Entity Registrant Name	A. O. Smith Corporation
Entity Incorporation, State or Country Code	DE
Entity Tax Identification Number	39-0619790
Entity Address, Address Line One	11270 West Park Place
Entity Address, City or Town	Milwaukee
Entity Address, State or Province	WI
Entity Address, Postal Zip Code	53224-9508
City Area Code	414
Local Phone Number	359-4000
Title of 12(b) Security	Common Stock (par value $1.00 per share)
Trading Symbol	AOS
Security Exchange Name	NYSE
Entity Current Reporting Status	Yes
Entity Interactive Data Current	Yes
Entity Filer Category	Large Accelerated Filer
Entity Small Business	false
Entity Emerging Growth Company	false
Entity Shell Company	false
Amendment Flag	false
Entity Central Index Key	0000091142
Document Fiscal Period Focus	Q2
Current Fiscal Year End Date	--12-31
Document Fiscal Year Focus	2022
Class A Common Stock
Document Information [Line Items]
Entity Common Stock, Shares Outstanding		25,970,688
Common Stock
Document Information [Line Items]
Entity Common Stock, Shares Outstanding		128,477,403

XML

CONDENSED CONSOLIDATED STATEMENTS OF EARNINGS - USD ($) $ in Millions		3 Months Ended		6 Months Ended
		Jun. 30, 2022	Jun. 30, 2021	Jun. 30, 2022	Jun. 30, 2021
Income Statement [Abstract]
Net sales		$ 965.9	$ 859.8	$ 1,943.6	$ 1,628.8
Cost of products sold		631.5	538.4	1,267.6	1,018.8
Gross profit		334.4	321.4	676.0	610.0
Selling, general and administrative expenses		166.7	173.1	346.5	339.6
Interest expense		2.1	0.9	3.6	1.9
Other expense (income), net		0.3	(3.9)	4.0	(8.9)
Earnings before provision for income taxes		165.3	151.3	321.9	277.4
Provision for income taxes		39.1	33.1	75.9	61.5
Net Earnings		$ 126.2	$ 118.2	$ 246.0	$ 215.9
Net Earnings Per Share of Common Stock (in USD per share)	[1]	$ 0.81	$ 0.74	$ 1.57	$ 1.34
Diluted Net Earnings Per Share of Common Stock (in USD per share)	[1]	0.81	0.73	1.56	1.33
Dividends Per Share of Common Stock (in USD per share)		$ 0.28	$ 0.26	$ 0.56	$ 0.52

[1] Earning per share amounts are calculated discretely and, therefore, may not add up to the total due to rounding.

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CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE EARNINGS - USD ($) $ in Millions	3 Months Ended		6 Months Ended
	Jun. 30, 2022	Jun. 30, 2021	Jun. 30, 2022	Jun. 30, 2021
Statement of Comprehensive Income [Abstract]
Net earnings	$ 126.2	$ 118.2	$ 246.0	$ 215.9
Other comprehensive (loss) earnings
Foreign currency translation adjustments	(24.6)	4.9	(24.0)	3.5
Unrealized gains (losses) on cash flow derivative instruments, less related income tax (provision) benefit of $(0.7) and $(0.5) in 2022, $(0.3) and $0.4 in 2021	2.1	0.9	1.5	(1.1)
Adjustment to pension liability, less related income tax provision of $(1.3) and $(2.5) in 2022, $(1.3) and $(2.6) in 2021	3.7	3.8	7.5	7.6
Comprehensive Earnings	$ 107.4	$ 127.8	$ 231.0	$ 225.9

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CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE EARNINGS (Parenthetical) - USD ($) $ in Millions	3 Months Ended		6 Months Ended
	Jun. 30, 2022	Jun. 30, 2021	Jun. 30, 2022	Jun. 30, 2021
Statement of Comprehensive Income [Abstract]
Income tax benefit on cash flow derivative instruments	$ (0.7)	$ (0.3)	$ (0.5)	$ 0.4
Income tax provision on adjustment to pension liability	$ (1.3)	$ (1.3)	$ (2.5)	$ (2.6)

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CONDENSED CONSOLIDATED BALANCE SHEETS - USD ($) $ in Millions	Jun. 30, 2022	Dec. 31, 2021
Current Assets
Cash and cash equivalents	$ 359.4	$ 443.3
Marketable securities	100.0	188.1
Receivables	621.5	634.4
Inventories	493.0	447.7
Other current assets	57.3	39.1
Total Current Assets	1,631.2	1,752.6
Property, plant and equipment	1,346.3	1,343.2
Less accumulated depreciation	(753.6)	(736.5)
Net property, plant and equipment	592.7	606.7
Goodwill	627.4	627.8
Other intangibles	357.5	364.8
Operating lease assets	31.1	32.5
Other assets	81.5	90.0
Total Assets	3,321.4	3,474.4
Current Liabilities
Trade payables	624.5	745.9
Accrued payroll and benefits	66.6	113.4
Accrued liabilities	165.3	181.8
Product warranties	65.1	70.9
Debt due within one year	6.8	6.8
Total Current Liabilities	928.3	1,118.8
Long-term debt	291.6	189.9
Product warranties	114.9	113.5
Long-term operating lease liabilities	23.0	22.3
Other liabilities	171.1	197.7
Total Liabilities	1,528.9	1,642.2
Stockholders’ Equity
Capital in excess of par value	553.1	545.2
Retained earnings	2,984.6	2,826.6
Accumulated other comprehensive loss	(346.4)	(331.4)
Treasury stock at cost	(1,694.0)	(1,503.4)
Total Stockholders’ Equity	1,792.5	1,832.2
Total Liabilities and Stockholders’ Equity	3,321.4	3,474.4
Class A Common Stock
Stockholders’ Equity
Common Stock, value	130.5	130.5
Common Stock
Stockholders’ Equity
Common Stock, value	$ 164.7	$ 164.7

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CONDENSED CONSOLIDATED BALANCE SHEETS (Parenthetical) - $ / shares	Jun. 30, 2022	Dec. 31, 2021
Class A Common Stock
Common Stock, par value (in USD per share)	$ 5	$ 5
Common Stock, shares authorized (in shares)	27,000,000	27,000,000
Common Stock, shares issued (in shares)	26,101,181	26,104,441
Common Stock
Common Stock, par value (in USD per share)	$ 1	$ 1
Common Stock, shares authorized (in shares)	240,000,000	240,000,000
Common Stock, shares issued (in shares)	164,606,413	164,603,153

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CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS - USD ($) $ in Millions	6 Months Ended
	Jun. 30, 2022	Jun. 30, 2021
Operating Activities
Net earnings	$ 246.0	$ 215.9
Adjustments to reconcile net earnings to cash provided by (used in) operating activities:
Depreciation and amortization	38.3	39.0
Stock based compensation expense	9.0	8.9
Net changes in operating assets and liabilities:
Current assets and liabilities	(233.9)	(50.0)
Noncurrent assets and liabilities	(5.0)	(17.8)
Cash Provided by Operating Activities	54.4	196.0
Investing Activities
Capital expenditures	(30.7)	(30.7)
Acquisitions of businesses	(8.0)	0.0
Investments in marketable securities	(16.9)	(98.3)
Net proceeds from sale of marketable securities	96.5	79.0
Cash Provided by (Used in) Investing Activities	40.9	(50.0)
Financing Activities
Long-term debt incurred	101.7
Long-term debt (repaid)		(6.8)
Common stock repurchases	(190.4)	(198.1)
Net (payments) proceeds from stock option activity	(2.6)	14.5
Dividends paid	(87.9)	(83.9)
Cash Used in Financing Activities	(179.2)	(274.3)
Net decrease in cash and cash equivalents	(83.9)	(128.3)
Cash and cash equivalents - beginning of period	443.3	573.1
Cash and Cash Equivalents - End of Period	$ 359.4	$ 444.8

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CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY - USD ($) $ in Millions	Total	Common Stock Class A Common Stock	Common Stock Common Stock	Capital in Excess of Par Value	Retained Earnings	Accumulated Other Comprehensive Loss	Treasury Stock
Balance at the beginning of period at Dec. 31, 2020		$ 130.8	$ 164.6	$ 520.4	$ 2,509.6		$ (1,155.9)
Increase (Decrease) in Stockholders' Equity [Roll Forward]
Conversion of Class A Common Stock		(0.2)	0.1	0.2
Issuance of share units				(5.4)
Vesting of share units				(1.8)			1.8
Stock based compensation expense				8.3
Exercise of stock options				7.0			7.6
Stock incentives and directors’ compensation				6.3			0.2
Net earnings	$ 215.9				215.9
Cash dividends on stock					(83.9)
Shares repurchased							(198.1)
Balance at end of period at Jun. 30, 2021	1,816.3	130.6	164.7	535.0	2,641.6	$ (311.2)	(1,344.4)
Balance at the beginning of period at Mar. 31, 2021		130.6	164.7	528.7	2,565.1		(1,219.3)
Increase (Decrease) in Stockholders' Equity [Roll Forward]
Conversion of Class A Common Stock		0.0	0.0	0.0
Issuance of share units				(0.1)
Vesting of share units				(0.1)			0.1
Stock based compensation expense				1.1
Exercise of stock options				4.4			5.7
Stock incentives and directors’ compensation				1.0			0.2
Net earnings	118.2				118.2
Cash dividends on stock					(41.7)
Shares repurchased							(131.1)
Balance at end of period at Jun. 30, 2021	1,816.3	130.6	164.7	535.0	2,641.6	(311.2)	(1,344.4)
Balance at the beginning of period at Dec. 31, 2021	1,832.2	130.5	164.7	545.2	2,826.6		(1,503.4)
Increase (Decrease) in Stockholders' Equity [Roll Forward]
Conversion of Class A Common Stock		0.0	0.0	0.0
Issuance of share units				(6.0)
Vesting of share units				(2.4)			2.4
Stock based compensation expense				8.9
Exercise of stock options				0.4			(2.9)
Stock incentives and directors’ compensation				7.0			0.3
Net earnings	246.0				246.0
Cash dividends on stock					(88.0)
Shares repurchased							(190.4)
Balance at end of period at Jun. 30, 2022	1,792.5	130.5	164.7	553.1	2,984.6	(346.4)	(1,694.0)
Balance at the beginning of period at Mar. 31, 2022		130.5	164.7	550.9	2,902.2		(1,611.8)
Increase (Decrease) in Stockholders' Equity [Roll Forward]
Conversion of Class A Common Stock		0.0	0.0	0.0
Issuance of share units				(0.2)
Vesting of share units				0.0			0.0
Stock based compensation expense				1.2
Exercise of stock options				0.0			0.0
Stock incentives and directors’ compensation				1.2			0.3
Net earnings	126.2				126.2
Cash dividends on stock					(43.8)
Shares repurchased							(82.5)
Balance at end of period at Jun. 30, 2022	$ 1,792.5	$ 130.5	$ 164.7	$ 553.1	$ 2,984.6	$ (346.4)	$ (1,694.0)

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Basis of Presentation

6 Months Ended

Jun. 30, 2022

Organization, Consolidation and Presentation of Financial Statements [Abstract]

Basis of Presentation

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, 2022 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, 2021 filed with the SEC on February 11, 2022.

Recent Accounting Pronouncement

In November 2021, the Financial Accounting Standards Board (FASB) amended ASC 832, Government Assistance (issued under Accounting Standards Update (ASU) 2021-10, "Disclosures by Business Entities about Government Assistance"). This amendment requires disclosures that are expected to increase the transparency of transactions with a government accounted for by applying a grant or contribution accounting model by analogy, including (1) the types of transactions, (2) the accounting for those transactions, and (3) the effect of those transactions on an entity’s financial statements. The Company adopted the amendment on January 1, 2022, and the adoption of ASU 2021-10 is not expected to materially impact its annual disclosures, consolidated balance sheets, statements of earnings or statements of cash flows.

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Revenue Recognition

6 Months Ended

Jun. 30, 2022

Revenue from Contract with Customer [Abstract]

Revenue Recognition

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 the 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 $100.7 million and $155.2 million at June 30, 2022 and December 31, 2021, respectively. Customer deposit liabilities are short term in nature, recognized into revenue within one year of receipt, and recorded in Trade payables within the condensed consolidated balance sheets. 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 credit losses, 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 credit losses, which reflects the current estimate of credit losses expected to be incurred over the life of the receivables. The Company’s allowance for credit losses was $10.6 million at June 30, 2022 and $9.5 million at December 31, 2021.

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.

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 channels 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's 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, 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 1,100 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 its 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 retail and wholesale 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 June 30,				Six Months Ended June 30,
	2022		2021		2022		2021
North America
Water heaters and related parts	$	613.9	$	498.1	$	1,229.7	$	955.8
Boilers and related parts	70.4		55.5		127.9		102.0
Water treatment products	59.8		50.0		116.6		98.7
Total North America	744.1		603.6		1,474.2		1,156.5
Rest of World
China	$	201.5	$	238.8	$	429.8	$	438.0
All other Rest of World	28.4		24.4		56.1		47.5
Total Rest of World	229.9		263.2		485.9		485.5
Inter-segment sales	(8.1)		(7.0)		(16.5)		(13.2)
Total Net Sales	$	965.9	$	859.8	$	1,943.6	$	1,628.8

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Acquisitions

6 Months Ended

Jun. 30, 2022

Business Combination and Asset Acquisition [Abstract]

Acquisitions

Acquisitions

On October 19, 2021, the Company acquired 100 percent of the shares and related assets of Giant Factories, Inc. (Giant), a Canada-based manufacturer of residential and commercial water heaters for $198.6 million, net of cash acquired. The purchase price increased by $2.5 million during the three months ended June 30, 2022 as a result of final working capital adjustments. The Company incurred acquisition costs of approximately $1.3 million in 2021.

Under the purchase agreement for the Giant acquisition, an escrow of approximately $8 million was set aside from the purchase price to satisfy any potential obligations of the former owners of Giant, should they arise. Goodwill decreased by $2.3 million during the three months ended June 30, 2022 due to the net impact of a measurement period adjustment, primarily related to income tax matters, partially offset by the final working capital adjustment. The purchase price allocation remains preliminary and subject to final valuation adjustments that will be completed within the one year period following the acquisition date. The addition of Giant increases the Company's North America market penetration, creating additional capacity and enhancing the Company's distribution capabilities. Giant is included in the North America segment.

The following table summarizes the preliminary allocation of fair value of the assets acquired and liabilities assumed at the date of acquisition. Of the $53.8 million of acquired identifiable intangible assets, $43.9 million has been assigned to trademarks that are not subject to amortization and $9.2 million has been assigned to customer relationships which are amortized over 22 years, and the remaining $0.7 million has been assigned to non-compete agreements which are amortized over five years. The excess of the acquisition purchase price over the fair value assigned to the assets acquired and liabilities assumed was recorded as goodwill.

The following table summarizes the estimated fair values of Giant's assets acquired and liabilities assumed at the date of acquisition:

October 19, 2021 (dollars in millions)
Current assets, net of cash acquired	$	60.1
Property, plant and equipment	55.8
Intangible assets	53.8
Goodwill	77.6
Total assets acquired	247.3
Current liabilities	(39.2)
Long Term liabilities	(9.5)
Net assets acquired	$	198.6

In addition, during the second quarter of 2022, the Company acquired a privately-held water treatment company. The Company paid an aggregate cash purchase price of $5.5 million, net of cash acquired. The addition of the company acquired expands the Company's water treatment platform and is included in the North America segment for reporting purposes.

As required under ASC 805 Business Combinations, results of operations have been included in the Company’s consolidated financial statements from the date of their acquisition.

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Leases

6 Months Ended

Jun. 30, 2022

Leases [Abstract]

Leases

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 is as follows:

(dollars in millions)	June 30, 2022		December 31, 2021
Liabilities
Short term: Accrued liabilities	$	9.7	$	11.7
Long term: Operating lease liabilities	23.0		22.3
Total operating lease liabilities	$	32.7	$	34.0
Less: Rent incentives and deferrals	(1.6)		(1.5)
Assets
Operating lease assets	$	31.1	$	32.5

Lease Term and Discount Rate	June 30, 2022
Weighted-average remaining lease term	6.7 years
Weighted-average discount rate	2.87%

The components of lease expense were as follows:

(dollars in millions)		Three months ended June 30,
Lease Expense	Classification	2022(1)		2021(2)
Operating lease expense	Cost of products sold	$	1.0	$	1.0
	Selling, general and administrative expenses	4.4		4.1

(1)2022 includes short-term and variable lease expenses of $0.6 million and $0.9 million, respectively.

(2)2021 includes short-term and variable lease expenses of $0.5 million and $0.6 million, respectively.

(dollars in millions)		Six Months Ended June 30,
Lease Expense	Classification	2022(1)		2021(2)
Operating lease expense	Cost of products sold	$	2.0	$	2.0
	Selling, general and administrative expenses	8.3		8.1

(1)2022 includes short-term and variable lease expenses of $1.1 million and $1.7 million, respectively.

(2)2021 includes short-term and variable lease expenses of $1.0 million and $1.2 million, respectively.

Maturities of lease liabilities were as follows:

(dollars in millions)	June 30, 2022
2022	$	5.9
2023	8.1
2024	6.6
2025	4.5
2026	2.8
After 2026	9.2
Total lease payments	37.1
Less: Imputed interest	(4.4)
Present value of operating lease liabilities	$	32.7

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Inventories

6 Months Ended

Jun. 30, 2022

Inventory Disclosure [Abstract]

Inventories

Inventories

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

(dollars in millions)	June 30, 2022		December 31, 2021
Finished products	$	174.3	$	190.2
Work in process	50.0		42.0
Raw materials	346.3		286.3
Inventories, at FIFO cost	570.6		518.5
LIFO reserve	(77.6)		(70.8)
	$	493.0	$	447.7

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Product Warranties

6 Months Ended

Jun. 30, 2022

Guarantees and Product Warranties [Abstract]

Product Warranties

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 increase in the reserve for product warranties as of June 30, 2022 compared to June 30, 2021 was primarily due to increased steel prices and the acquisition of Giant. Refer to Note 3, "Acquisitions", for additional information regarding the acquisition of Giant.

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

(dollars in millions)	Three Months Ended June 30,
	2022		2021
Balance at April 1,	$	182.9	$	141.6
Expense	14.7		15.3
Claims settled	(17.6)		(12.0)
Balance at June 30,	$	180.0	$	144.9

(dollars in millions)	Six Months Ended June 30,
	2022		2021
Balance at January 1,	$	184.4	$	142.3
Expense	28.6		27.9
Claims settled	(33.0)		(25.3)
Balance at June 30,	$	180.0	$	144.9

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Debt	6 Months Ended
	Jun. 30, 2022
Debt Disclosure [Abstract]
Debt	DebtIn 2021, the Company renewed and amended its $500 million multi-year multi-currency revolving credit agreement with a new expiration date of April 1, 2026. The facility has an accordion provision that allows it to be increased up to $850 million if certain conditions (including lender approval) are satisfied. Borrowings under bank credit lines and commercial paper borrowings are supported by a $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, 2022. At its option, the Company either maintains cash balances or pays fees for bank credit and services. The facility requires the Company to maintain two financial covenants, a leverage ratio test and an interest coverage test. The Company was in compliance with the covenants as of June 30, 2022.

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Earnings per Share of Common Stock

6 Months Ended

Jun. 30, 2022

Earnings Per Share [Abstract]

Earnings per Share of Common Stock

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,
	2022	2021	2022	2021
Denominator for basic earnings per share - weighted average shares	155,692,240	160,241,814	156,351,739	160,880,724
Effect of dilutive stock options and share units	939,432	1,490,159	1,118,514	1,374,828
Denominator for diluted earnings per share	156,631,672	161,731,973	157,470,253	162,255,552

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Stock Based Compensation

6 Months Ended

Jun. 30, 2022

Share-Based Payment Arrangement [Abstract]

Stock Based Compensation

Stock Based Compensation

The Company adopted the A. O. Smith Combined Incentive Compensation Plan (the Incentive Plan) effective January 1, 2007. The Incentive Plan was most recently reapproved by stockholders on April 15, 2020. The Incentive 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 June 30, 2022 was 7,144,796. 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 June 30, 2022 and 2021 was $1.4 million and $1.5 million, respectively. Total stock based compensation expense recognized in the six months ended June 30, 2022 and 2021 was $9.0 million and $8.9 million, respectively.

Stock Options

The stock options granted in the six months ended June 30, 2022 and 2021 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 2022 and 2021 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 the stock option expense for the six months ended June 30, 2022 and 2021 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 June 30, 2022 and 2021 was $0.6 million and $0.5 million, respectively. Stock based compensation expense attributable to stock options in the six months ended June 30, 2022 and 2021 was $4.5 million and $4.1 million, respectively.

Changes in options, all of which relate to the Company’s Common Stock, were as follows for the six months ended June 30, 2022:

	Weighted- Avg. Per Share Exercise Price		Number of Options	Average Remaining Contractual Life	Aggregate Intrinsic Value (dollars in millions)
Outstanding at January 1, 2022	$	47.73	2,252,498
Granted	74.14		321,600
Exercised	35.80		(25,638)
Forfeited	58.09		(10,094)
Outstanding at June 30, 2022	51.16		2,538,366	7 years	$	19.2
Exercisable at June 30, 2022	46.82		1,716,451	6 years	$	16.0

The weighted-average fair value per option at the date of grant during the six months ended June 30, 2022 and 2021 using the Black-Scholes option-pricing model was $17.58 and $14.03, respectively. Assumptions were as follows:

	Six Months Ended June 30,
	2022		2021
Expected life (years)	5.7		5.8
Risk-free interest rate	1.9	%	1.2	%
Dividend yield	1.5	%	1.6	%
Expected volatility	26.8	%	27.4	%

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 Incentive Plan. Share units vest three years after the date of grant. The Company granted 93,211 and 100,676 share units under the Incentive Plan in the six months ended June 30, 2022 and 2021, respectively.

The share units were valued at $6.9 million and $6.1 million at the date of issuance in 2022 and 2021, 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 and six months ended June 30, 2022 and 2021 was expense associated with accelerated vesting of restricted stock and 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 $0.8 million and $1.0 million was recognized in the three months ended June 30, 2022 and 2021, respectively. Stock based compensation expense attributable to share units of $4.5 million and $4.8 million was recognized in the six months ended June 30, 2022 and 2021, 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 Incentive Plan is as follows for the six months ended June 30, 2022:

	Number of Units	Weighted-Average Grant Date Value
Issued and unvested at January 1, 2022	421,138	$	47.28
Granted	93,211	73.70
Vested	(126,631)	49.49
Forfeited	(6,777)	53.93
Issued and unvested at June 30, 2022	380,941	52.98

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Pensions

6 Months Ended

Jun. 30, 2022

Retirement Benefits [Abstract]

Pensions

Pensions

The following table presents the components of the Company’s net pension expense (income):

(dollars in millions)	Three Months Ended June 30,				Six Months Ended June 30,
	2022		2021		2022		2021
Service cost	$	0.3	$	0.4	$	0.7	$	0.8
Interest cost	3.7		3.6		7.3		7.2
Expected return on plan assets	(5.3)		(12.0)		(10.7)		(24.0)
Amortization of unrecognized loss	5.1		5.2		10.2		10.4
Amortization of prior service cost	(0.1)		(0.1)		(0.2)		(0.2)
Defined benefit plan expense (income)	$	3.7	$	(2.9)	$	7.3	$	(5.8)

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 expense (income) are reflected in other expense (income). The Company was not required to and did not make a contribution to its U.S. pension plan in 2021. The Company is not required to make a contribution in 2022.

In 2021, the Company's Board of Directors approved the termination of the Company's largest defined benefit pension plan (the Plan) representing over 95 percent of the Company's pension plan liabilities with a termination date of December 31, 2021. In April 2022, the Plan received a determination letter from the IRS that allowed the Company to proceed with the termination process for the Plan. In 2022, the Company expects to annuitize the remaining pension liability. The Plan settlement, which the Company expects to complete in the fourth quarter of 2022, will accelerate the recognition of approximately $445 million of non-cash, pre-tax pension expenses.

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Segment Results

6 Months Ended

Jun. 30, 2022

Segment Reporting [Abstract]

Segment Results

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 following table presents the Company’s segment results:

(dollars in millions)	Three Months Ended June 30,				Six Months Ended June 30,
	2022		2021		2022		2021
Net sales
North America	$	744.1	$	603.6	$	1,474.2	$	1,156.5
Rest of World	229.9		263.2		485.9		485.5
Inter-segment	(8.1)		(7.0)		(16.5)		(13.2)
	$	965.9	$	859.8	$	1,943.6	$	1,628.8
Segment earnings
North America(1)	$	159.9	$	141.7	$	311.7	$	272.1
Rest of World	18.1		22.3		42.9		34.1
Inter-segment	—		—		(0.1)		—
	178.0		164.0		354.5		306.2
Corporate expense(2)	(10.6)		(11.8)		(29.0)		(26.9)
Interest expense	(2.1)		(0.9)		(3.6)		(1.9)
Earnings before income taxes	165.3		151.3		321.9		277.4
Provision for income taxes	39.1		33.1		75.9		61.5
Net earnings	$	126.2	$	118.2	$	246.0	$	215.9
(1)includes pension expense (income) of:	$	2.6	$	(2.6)	$	5.2	$	(5.2)
(2)includes pension expense (income) of:	$	0.4	$	(0.5)	$	0.7	$	(1.1)

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Fair Value Measurements

6 Months Ended

Jun. 30, 2022

Fair Value Disclosures [Abstract]

Fair Value Measurements

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 (liabilities) measured at fair value on a recurring basis (dollars in millions):

Fair Value Measurement Using	June 30, 2022		December 31, 2021
Quoted prices in active markets for identical assets (Level 1)	$	100.0	$	188.1
Significant other observable inputs (Level 2)	2.6		(0.7)

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 six months ended June 30, 2022.

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Derivative Instruments

6 Months Ended

Jun. 30, 2022

Derivative Instruments and Hedging Activities Disclosure [Abstract]

Derivative Instruments

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 all of its hedging instruments as 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)	June 30, 2022				December 31, 2021
	Buy		Sell		Buy		Sell
Canadian dollar	$	—	$	145.5	$	—	$	113.4
Euro	37.6		—		24.2		—
Mexican peso	17.1		—		23.8		—
Total	$	54.7	$	145.5	$	48.0	$	113.4

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 $1.7 million and $1.4 million of after-tax gains associated with hedges of net investments in non-U.S. subsidiaries in currency translation adjustment in other comprehensive loss in the three and six months ended June 30, 2022, respectively. The Company recognized $(0.1) million of after-tax losses associated with hedges of a net investment in non-U.S. subsidiaries in currency translation adjustment in other comprehensive loss in both the three and six months ended June 30, 2021. The contractual amount of the Company's foreign currency forward contracts that are designated as net investment hedges is $— million as of June 30, 2022.

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, 2022		December 31, 2021
Foreign currency contracts	Other current assets	$	4.6	$	1.7
	Accrued liabilities	(1.8)		(1.6)
Total derivatives designated as hedging instruments		$	2.8	$	0.1

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

Three Months Ended June 30 (dollars in millions):

Derivatives in ASC 815 cash flow hedging relationships	Amount of gain 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
	2022		2021			2022		2021
Foreign currency contracts	$	3.4	$	0.4	Cost of products sold	$	0.7	$	(0.8)

Six Months Ended June 30 (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
	2022		2021			2022		2021
Foreign currency contracts	$	2.8	$	(2.5)	Cost of products sold	$	0.8	$	(1.1)

Balance Sheet Hedges

Foreign Exchange Contracts

The Company periodically enters into foreign exchange contracts to mitigate the foreign currency volatility relative to certain intercompany loans. These foreign exchange contracts did not qualify for hedge accounting in accordance with ASC 815 and as such were marked to market through earnings. The fair value of the foreign exchange contracts was a liability of $0.2 million as of June 30, 2022. The fair value of the foreign exchange contracts was a liability of $0.8 million as of December 31, 2021 and recorded in Accrued liabilities within the consolidated balance sheet.

The following table summarizes the contractual amounts of the Company's foreign exchange contracts that are designated as balance sheet hedges:

(dollars in millions)	June 30, 2022				December 31, 2021
	Buy		Sell		Buy		Sell
Canadian dollar	$	—	$	113.9	$	—	$	125.6

The amounts recognized within the consolidated statements of earnings related to the Company's foreign exchange contracts are set forth below.

Three Months Ended June 30 (dollars in millions):

Derivatives not designated as hedging instruments:	Location of loss within the consolidated statements of earnings	2022		2021
Foreign exchange contracts	Other (income) expense - net	$	(0.2)	$	—

Six Months Ended June 30 (dollars in millions):

Derivatives not designated as hedging instruments:	Location of loss within the consolidated statements of earnings	2022		2021
Foreign exchange contracts	Other expense (income) - net	$	1.1	$	—

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Income Taxes

6 Months Ended

Jun. 30, 2022

Income Tax Disclosure [Abstract]

Income Taxes

Income Taxes

The Company’s effective income tax rate for the three and six months ended June 30, 2022 was 23.7 percent and 23.6 percent, respectively. The Company estimates that its annual effective income tax rate for the full year 2022 will be between approximately 23.5 and 24.0 percent. The effective income tax rate for the three and six months ended June 30, 2021 was 21.9 percent and 22.2 percent, respectively. The change in the effective income tax rate for the six months ended June 30, 2022 compared to the effective income tax rate for the six months ended June 30, 2021 was primarily due to a change in geographical earnings mix.

As of June 30, 2022, the Company had $14.3 million of unrecognized tax benefits of which $0.5 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 2017-2022 are subject to audit. The Company is subject to state and local income tax audits for tax years 2008-2022. The Company is subject to non-U.S. income tax examinations for years 2015-2022.

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Commitments and Contingencies

6 Months Ended

Jun. 30, 2022

Commitments and Contingencies Disclosure [Abstract]

Commitments and Contingencies

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 $2.5 million and $3.9 million as of June 30, 2022 and December 31, 2021, 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 $3.5 million as of June 30, 2022 and $7.2 million as of December 31, 2021. The Company’s reserves for estimated losses under repurchase arrangements were immaterial as of June 30, 2022 and December 31, 2021.

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Changes in Accumulated Other Comprehensive Loss by Component

6 Months Ended

Jun. 30, 2022

Equity [Abstract]

Changes in Accumulated Other Comprehensive Loss by Component

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,
	2022			2021
Cumulative foreign currency translation
Balance at beginning of period	$	(44.1)		$	(49.5)
Other comprehensive income before reclassifications	(24.6)			4.9
Balance at end of period	(68.7)			(44.6)
Unrealized net gain (loss) on cash flow derivatives
Balance at beginning of period	—			(1.4)
Other comprehensive gain before reclassifications	2.6			0.3
Realized (gains) losses on derivatives reclassified to cost of products sold (net of income tax provision (benefit) of $0.2 and ($0.2) in 2022 and 2021, respectively)	(0.5)			0.6
Balance at end of period	2.1			(0.5)
Pension liability
Balance at beginning of period	(283.5)			(269.9)
Amounts reclassified from accumulated other comprehensive loss:(1)	3.7			3.8
Balance at end of period	(279.8)			(266.1)
Accumulated other comprehensive loss, end of period	$	(346.4)		$	(311.2)
(1) Amortization of pension items:
Actuarial losses	$	5.1	(2)	$	5.2	(2)
Prior year service cost	(0.1)		(2)	(0.1)		(2)
	5.0			5.1
Income tax benefit	(1.3)			(1.3)
Reclassification net of income tax benefit	$	3.7		$	3.8

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

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

(dollars in millions)	Six Months Ended June 30,
	2022			2021
Cumulative foreign currency translation
Balance at beginning of period	$	(44.7)		$	(48.1)
Other comprehensive income before reclassifications	(24.0)			3.5
Balance at end of period	(68.7)			(44.6)
Unrealized net gain (loss) on cash flow derivatives
Balance at beginning of period	0.6			0.6
Other comprehensive gain (loss) before reclassifications	2.1			(1.9)
Realized (gains) losses on derivatives reclassified to cost of products sold (net of income tax provision (benefit) of $0.2 and $(0.3) in 2022 and 2021, respectively)	(0.6)			0.8
Balance at end of period	2.1			(0.5)
Pension liability
Balance at beginning of period	(287.3)			(273.7)
Amounts reclassified from accumulated other comprehensive loss:(1)	7.5			7.6
Balance at end of period	(279.8)			(266.1)
Accumulated other comprehensive loss, end of period	$	(346.4)		$	(311.2)
(1) Amortization of pension items:
Actuarial losses	$	10.2	(2)	$	10.4	(2)
Prior year service cost	(0.2)		(2)	(0.2)		(2)
	10.0			10.2
Income tax benefit	(2.5)			(2.6)
Reclassification net of income tax benefit	$	7.5		$	7.6

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

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Basis of Presentation (Policies)

6 Months Ended

Jun. 30, 2022

Organization, Consolidation and Presentation of Financial Statements [Abstract]

Recent Accounting Pronouncement

Recent Accounting Pronouncement

In November 2021, the Financial Accounting Standards Board (FASB) amended ASC 832, Government Assistance (issued under Accounting Standards Update (ASU) 2021-10, "Disclosures by Business Entities about Government Assistance"). This amendment requires disclosures that are expected to increase the transparency of transactions with a government accounted for by applying a grant or contribution accounting model by analogy, including (1) the types of transactions, (2) the accounting for those transactions, and (3) the effect of those transactions on an entity’s financial statements. The Company adopted the amendment on January 1, 2022, and the adoption of ASU 2021-10 is not expected to materially impact its annual disclosures, consolidated balance sheets, statements of earnings or statements of cash flows.

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Revenue Recognition (Tables)

6 Months Ended

Jun. 30, 2022

Revenue from Contract with Customer [Abstract]

Net Sales Disaggregated by Segment and Major Product Line

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 June 30,				Six Months Ended June 30,
	2022		2021		2022		2021
North America
Water heaters and related parts	$	613.9	$	498.1	$	1,229.7	$	955.8
Boilers and related parts	70.4		55.5		127.9		102.0
Water treatment products	59.8		50.0		116.6		98.7
Total North America	744.1		603.6		1,474.2		1,156.5
Rest of World
China	$	201.5	$	238.8	$	429.8	$	438.0
All other Rest of World	28.4		24.4		56.1		47.5
Total Rest of World	229.9		263.2		485.9		485.5
Inter-segment sales	(8.1)		(7.0)		(16.5)		(13.2)
Total Net Sales	$	965.9	$	859.8	$	1,943.6	$	1,628.8

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Acquisitions (Tables)

6 Months Ended

Jun. 30, 2022

Business Combination and Asset Acquisition [Abstract]

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

The following table summarizes the estimated fair values of Giant's assets acquired and liabilities assumed at the date of acquisition:

October 19, 2021 (dollars in millions)
Current assets, net of cash acquired	$	60.1
Property, plant and equipment	55.8
Intangible assets	53.8
Goodwill	77.6
Total assets acquired	247.3
Current liabilities	(39.2)
Long Term liabilities	(9.5)
Net assets acquired	$	198.6

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Leases (Tables)

6 Months Ended

Jun. 30, 2022

Leases [Abstract]

Schedule of Supplemental Balance Sheet Related to Leases

Supplemental balance sheet information related to leases is as follows:

(dollars in millions)	June 30, 2022		December 31, 2021
Liabilities
Short term: Accrued liabilities	$	9.7	$	11.7
Long term: Operating lease liabilities	23.0		22.3
Total operating lease liabilities	$	32.7	$	34.0
Less: Rent incentives and deferrals	(1.6)		(1.5)
Assets
Operating lease assets	$	31.1	$	32.5

Lease Term and Discount Rate	June 30, 2022
Weighted-average remaining lease term	6.7 years
Weighted-average discount rate	2.87%

Schedule of Components of Lease Expense

The components of lease expense were as follows:

(dollars in millions)		Three months ended June 30,
Lease Expense	Classification	2022(1)		2021(2)
Operating lease expense	Cost of products sold	$	1.0	$	1.0
	Selling, general and administrative expenses	4.4		4.1

(1)2022 includes short-term and variable lease expenses of $0.6 million and $0.9 million, respectively.

(2)2021 includes short-term and variable lease expenses of $0.5 million and $0.6 million, respectively.

(dollars in millions)		Six Months Ended June 30,
Lease Expense	Classification	2022(1)		2021(2)
Operating lease expense	Cost of products sold	$	2.0	$	2.0
	Selling, general and administrative expenses	8.3		8.1

(1)2022 includes short-term and variable lease expenses of $1.1 million and $1.7 million, respectively.

(2)2021 includes short-term and variable lease expenses of $1.0 million and $1.2 million, respectively.

Schedule of Maturities of Lease Liabilities

Maturities of lease liabilities were as follows:

(dollars in millions)	June 30, 2022
2022	$	5.9
2023	8.1
2024	6.6
2025	4.5
2026	2.8
After 2026	9.2
Total lease payments	37.1
Less: Imputed interest	(4.4)
Present value of operating lease liabilities	$	32.7

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Inventories (Tables)

6 Months Ended

Jun. 30, 2022

Inventory Disclosure [Abstract]

Schedule of Inventories

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

(dollars in millions)	June 30, 2022		December 31, 2021
Finished products	$	174.3	$	190.2
Work in process	50.0		42.0
Raw materials	346.3		286.3
Inventories, at FIFO cost	570.6		518.5
LIFO reserve	(77.6)		(70.8)
	$	493.0	$	447.7

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Product Warranties (Tables)

6 Months Ended

Jun. 30, 2022

Guarantees and Product Warranties [Abstract]

Schedule of Warranty Liability Activity

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

(dollars in millions)	Three Months Ended June 30,
	2022		2021
Balance at April 1,	$	182.9	$	141.6
Expense	14.7		15.3
Claims settled	(17.6)		(12.0)
Balance at June 30,	$	180.0	$	144.9

(dollars in millions)	Six Months Ended June 30,
	2022		2021
Balance at January 1,	$	184.4	$	142.3
Expense	28.6		27.9
Claims settled	(33.0)		(25.3)
Balance at June 30,	$	180.0	$	144.9

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Earnings per Share of Common Stock (Tables)

6 Months Ended

Jun. 30, 2022

Earnings Per Share [Abstract]

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,
	2022	2021	2022	2021
Denominator for basic earnings per share - weighted average shares	155,692,240	160,241,814	156,351,739	160,880,724
Effect of dilutive stock options and share units	939,432	1,490,159	1,118,514	1,374,828
Denominator for diluted earnings per share	156,631,672	161,731,973	157,470,253	162,255,552

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Stock Based Compensation (Tables)

6 Months Ended

Jun. 30, 2022

Share-Based Payment Arrangement [Abstract]

Schedule of Changes in Options

Changes in options, all of which relate to the Company’s Common Stock, were as follows for the six months ended June 30, 2022:

	Weighted- Avg. Per Share Exercise Price		Number of Options	Average Remaining Contractual Life	Aggregate Intrinsic Value (dollars in millions)
Outstanding at January 1, 2022	$	47.73	2,252,498
Granted	74.14		321,600
Exercised	35.80		(25,638)
Forfeited	58.09		(10,094)
Outstanding at June 30, 2022	51.16		2,538,366	7 years	$	19.2
Exercisable at June 30, 2022	46.82		1,716,451	6 years	$	16.0

Schedule of Assumptions

Assumptions were as follows:

	Six Months Ended June 30,
	2022		2021
Expected life (years)	5.7		5.8
Risk-free interest rate	1.9	%	1.2	%
Dividend yield	1.5	%	1.6	%
Expected volatility	26.8	%	27.4	%

Schedule of Share Unit Activity

A summary of share unit activity under the Incentive Plan is as follows for the six months ended June 30, 2022:

	Number of Units	Weighted-Average Grant Date Value
Issued and unvested at January 1, 2022	421,138	$	47.28
Granted	93,211	73.70
Vested	(126,631)	49.49
Forfeited	(6,777)	53.93
Issued and unvested at June 30, 2022	380,941	52.98

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Pensions (Tables)

6 Months Ended

Jun. 30, 2022

Retirement Benefits [Abstract]

Schedule of Components of Net Pension Expense (Income)

The following table presents the components of the Company’s net pension expense (income):

(dollars in millions)	Three Months Ended June 30,				Six Months Ended June 30,
	2022		2021		2022		2021
Service cost	$	0.3	$	0.4	$	0.7	$	0.8
Interest cost	3.7		3.6		7.3		7.2
Expected return on plan assets	(5.3)		(12.0)		(10.7)		(24.0)
Amortization of unrecognized loss	5.1		5.2		10.2		10.4
Amortization of prior service cost	(0.1)		(0.1)		(0.2)		(0.2)
Defined benefit plan expense (income)	$	3.7	$	(2.9)	$	7.3	$	(5.8)

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Segment Results (Tables)

6 Months Ended

Jun. 30, 2022

Segment Reporting [Abstract]

Schedule of Segment Results

The following table presents the Company’s segment results:

(dollars in millions)	Three Months Ended June 30,				Six Months Ended June 30,
	2022		2021		2022		2021
Net sales
North America	$	744.1	$	603.6	$	1,474.2	$	1,156.5
Rest of World	229.9		263.2		485.9		485.5
Inter-segment	(8.1)		(7.0)		(16.5)		(13.2)
	$	965.9	$	859.8	$	1,943.6	$	1,628.8
Segment earnings
North America(1)	$	159.9	$	141.7	$	311.7	$	272.1
Rest of World	18.1		22.3		42.9		34.1
Inter-segment	—		—		(0.1)		—
	178.0		164.0		354.5		306.2
Corporate expense(2)	(10.6)		(11.8)		(29.0)		(26.9)
Interest expense	(2.1)		(0.9)		(3.6)		(1.9)
Earnings before income taxes	165.3		151.3		321.9		277.4
Provision for income taxes	39.1		33.1		75.9		61.5
Net earnings	$	126.2	$	118.2	$	246.0	$	215.9
(1)includes pension expense (income) of:	$	2.6	$	(2.6)	$	5.2	$	(5.2)
(2)includes pension expense (income) of:	$	0.4	$	(0.5)	$	0.7	$	(1.1)

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Fair Value Measurements (Tables)

6 Months Ended

Jun. 30, 2022

Fair Value Disclosures [Abstract]

Schedule of Assets (Liabilities) Measured at Fair Value on a Recurring Basis

The following table presents assets (liabilities) measured at fair value on a recurring basis (dollars in millions):

Fair Value Measurement Using	June 30, 2022		December 31, 2021
Quoted prices in active markets for identical assets (Level 1)	$	100.0	$	188.1
Significant other observable inputs (Level 2)	2.6		(0.7)

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Derivative Instruments (Tables)

6 Months Ended

Jun. 30, 2022

Derivative Instruments and Hedging Activities Disclosure [Abstract]

Schedule of Contractual Amounts for Derivative 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)	June 30, 2022				December 31, 2021
	Buy		Sell		Buy		Sell
Canadian dollar	$	—	$	145.5	$	—	$	113.4
Euro	37.6		—		24.2		—
Mexican peso	17.1		—		23.8		—
Total	$	54.7	$	145.5	$	48.0	$	113.4

The following table summarizes the contractual amounts of the Company's foreign exchange contracts that are designated as balance sheet hedges:

(dollars in millions)	June 30, 2022				December 31, 2021
	Buy		Sell		Buy		Sell
Canadian dollar	$	—	$	113.9	$	—	$	125.6

Schedule of Impact of Derivative Contracts on the 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, 2022		December 31, 2021
Foreign currency contracts	Other current assets	$	4.6	$	1.7
	Accrued liabilities	(1.8)		(1.6)
Total derivatives designated as hedging instruments		$	2.8	$	0.1

Schedule of Effect of Derivatives on the Statement of Earnings

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

Three Months Ended June 30 (dollars in millions):

Derivatives in ASC 815 cash flow hedging relationships	Amount of gain 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
	2022		2021			2022		2021
Foreign currency contracts	$	3.4	$	0.4	Cost of products sold	$	0.7	$	(0.8)

Six Months Ended June 30 (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
	2022		2021			2022		2021
Foreign currency contracts	$	2.8	$	(2.5)	Cost of products sold	$	0.8	$	(1.1)

The amounts recognized within the consolidated statements of earnings related to the Company's foreign exchange contracts are set forth below.

Three Months Ended June 30 (dollars in millions):

Derivatives not designated as hedging instruments:	Location of loss within the consolidated statements of earnings	2022		2021
Foreign exchange contracts	Other (income) expense - net	$	(0.2)	$	—

Six Months Ended June 30 (dollars in millions):

Derivatives not designated as hedging instruments:	Location of loss within the consolidated statements of earnings	2022		2021
Foreign exchange contracts	Other expense (income) - net	$	1.1	$	—

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Changes in Accumulated Other Comprehensive Loss by Component (Tables)

6 Months Ended

Jun. 30, 2022

Equity [Abstract]

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 June 30,
	2022			2021
Cumulative foreign currency translation
Balance at beginning of period	$	(44.1)		$	(49.5)
Other comprehensive income before reclassifications	(24.6)			4.9
Balance at end of period	(68.7)			(44.6)
Unrealized net gain (loss) on cash flow derivatives
Balance at beginning of period	—			(1.4)
Other comprehensive gain before reclassifications	2.6			0.3
Realized (gains) losses on derivatives reclassified to cost of products sold (net of income tax provision (benefit) of $0.2 and ($0.2) in 2022 and 2021, respectively)	(0.5)			0.6
Balance at end of period	2.1			(0.5)
Pension liability
Balance at beginning of period	(283.5)			(269.9)
Amounts reclassified from accumulated other comprehensive loss:(1)	3.7			3.8
Balance at end of period	(279.8)			(266.1)
Accumulated other comprehensive loss, end of period	$	(346.4)		$	(311.2)
(1) Amortization of pension items:
Actuarial losses	$	5.1	(2)	$	5.2	(2)
Prior year service cost	(0.1)		(2)	(0.1)		(2)
	5.0			5.1
Income tax benefit	(1.3)			(1.3)
Reclassification net of income tax benefit	$	3.7		$	3.8

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

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

(dollars in millions)	Six Months Ended June 30,
	2022			2021
Cumulative foreign currency translation
Balance at beginning of period	$	(44.7)		$	(48.1)
Other comprehensive income before reclassifications	(24.0)			3.5
Balance at end of period	(68.7)			(44.6)
Unrealized net gain (loss) on cash flow derivatives
Balance at beginning of period	0.6			0.6
Other comprehensive gain (loss) before reclassifications	2.1			(1.9)
Realized (gains) losses on derivatives reclassified to cost of products sold (net of income tax provision (benefit) of $0.2 and $(0.3) in 2022 and 2021, respectively)	(0.6)			0.8
Balance at end of period	2.1			(0.5)
Pension liability
Balance at beginning of period	(287.3)			(273.7)
Amounts reclassified from accumulated other comprehensive loss:(1)	7.5			7.6
Balance at end of period	(279.8)			(266.1)
Accumulated other comprehensive loss, end of period	$	(346.4)		$	(311.2)
(1) Amortization of pension items:
Actuarial losses	$	10.2	(2)	$	10.4	(2)
Prior year service cost	(0.2)		(2)	(0.2)		(2)
	10.0			10.2
Income tax benefit	(2.5)			(2.6)
Reclassification net of income tax benefit	$	7.5		$	7.6

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

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Revenue Recognition - Narrative (Details) $ in Millions	6 Months Ended
	Jun. 30, 2022 USD ($) segment distributor	Dec. 31, 2021 USD ($)
Disaggregation of Revenue [Line Items]
Customer deposits liability	$ 100.7	$ 155.2
Allowance for credit losses	$ 10.6	$ 9.5
Number of reporting segments | segment	2
Water Heaters | North America
Disaggregation of Revenue [Line Items]
Number of wholesale distributors (more than) | distributor	1,100
Minimum
Disaggregation of Revenue [Line Items]
Payment terms	30 days
Maximum
Disaggregation of Revenue [Line Items]
Payment terms	90 days

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Revenue Recognition - Segment Sales Disaggregated by Major Product Line (Details) - USD ($) $ in Millions	3 Months Ended		6 Months Ended
	Jun. 30, 2022	Jun. 30, 2021	Jun. 30, 2022	Jun. 30, 2021
Disaggregation of Revenue [Line Items]
Net sales	$ 965.9	$ 859.8	$ 1,943.6	$ 1,628.8
Operating Segments | North America
Disaggregation of Revenue [Line Items]
Net sales	744.1	603.6	1,474.2	1,156.5
Operating Segments | Rest of World
Disaggregation of Revenue [Line Items]
Net sales	229.9	263.2	485.9	485.5
Operating Segments | Rest of World | China
Disaggregation of Revenue [Line Items]
Net sales	201.5	238.8	429.8	438.0
Operating Segments | Rest of World | All other Rest of World
Disaggregation of Revenue [Line Items]
Net sales	28.4	24.4	56.1	47.5
Operating Segments | Water heaters and related parts | North America
Disaggregation of Revenue [Line Items]
Net sales	613.9	498.1	1,229.7	955.8
Operating Segments | Boilers and related parts | North America
Disaggregation of Revenue [Line Items]
Net sales	70.4	55.5	127.9	102.0
Operating Segments | Water treatment products | North America
Disaggregation of Revenue [Line Items]
Net sales	59.8	50.0	116.6	98.7
Inter-segment
Disaggregation of Revenue [Line Items]
Net sales	$ (8.1)	$ (7.0)	$ (16.5)	$ (13.2)

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Acquisitions - Narrative (Details) - USD ($) $ in Millions		3 Months Ended	6 Months Ended
	Oct. 19, 2021	Jun. 30, 2022	Jun. 30, 2022	Jun. 30, 2021
Business Acquisition [Line Items]
Aggregate cash purchase price, net of cash acquired			$ 8.0	$ 0.0
Giant Factories, Inc.
Business Acquisition [Line Items]
Percentage of interest acquired	100.00%
Aggregate cash purchase price, net of cash acquired	$ 198.6
Additional payments to acquire businesses		$ 2.5
Transaction costs	1.3
Escrow to satisfy any potential obligations to the former owners	8.0
Decrease to goodwill due to net impact of measurement period adjustment		2.3
Acquired intangible assets	53.8
Giant Factories, Inc. | Customer relationships
Business Acquisition [Line Items]
Acquired intangible assets subject to amortization	$ 9.2
Acquired intangible assets, amortization period, in years	22 years
Giant Factories, Inc. | Non-compete agreements
Business Acquisition [Line Items]
Acquired intangible assets subject to amortization	$ 0.7
Acquired intangible assets, amortization period, in years	5 years
Giant Factories, Inc. | Trademarks
Business Acquisition [Line Items]
Acquired intangible assets not subject to amortization	$ 43.9
Privately-Held Water Treatment Company
Business Acquisition [Line Items]
Aggregate cash purchase price, net of cash acquired		$ 5.5

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Acquisitions - Summary of Allocation of Fair Value of Assets Acquired and Liabilities Assumed at Date of Acquisition (Details) - USD ($) $ in Millions	Jun. 30, 2022	Dec. 31, 2021	Oct. 19, 2021
Business Acquisition [Line Items]
Goodwill	$ 627.4	$ 627.8
Giant Factories, Inc.
Business Acquisition [Line Items]
Current assets, net of cash acquired			$ 60.1
Property, plant and equipment			55.8
Intangible assets			53.8
Goodwill			77.6
Total assets acquired			247.3
Current liabilities			(39.2)
Long Term liabilities			(9.5)
Net assets acquired			$ 198.6

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Leases - Narrative (Details)	6 Months Ended
	Jun. 30, 2022
Lessee, Lease, Description [Line Items]
Operating lease termination period	1 year
Minimum
Lessee, Lease, Description [Line Items]
Operating lease renewal term	1 year
Maximum
Lessee, Lease, Description [Line Items]
Operating lease renewal term	5 years

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Leases - Supplemental Balance Sheet (Details) - USD ($) $ in Millions	Jun. 30, 2022	Dec. 31, 2021
Liabilities
Current operating lease liability, statement of financial position [Extensible List]	Accrued liabilities	Accrued liabilities
Short term: Accrued liabilities	$ 9.7	$ 11.7
Long term: Operating lease liabilities	23.0	22.3
Total operating lease liabilities	32.7	34.0
Less: Rent incentives and deferrals	(1.6)	(1.5)
Assets
Operating lease assets	$ 31.1	$ 32.5
Lease Term and Discount Rate
Weighted-average remaining lease term	6 years 8 months 12 days
Weighted-average discount rate	2.87%

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Leases - Components of Lease Expense (Details) - USD ($) $ in Millions	3 Months Ended		6 Months Ended
	Jun. 30, 2022	Jun. 30, 2021	Jun. 30, 2022	Jun. 30, 2021
Lessee, Lease, Description [Line Items]
Short-term lease expenses	$ 0.6	$ 0.5	$ 1.1	$ 1.0
Variable lease expenses	0.9	0.6	1.7	1.2
Cost of products sold
Lessee, Lease, Description [Line Items]
Operating lease expense	1.0	1.0	2.0	2.0
Selling, general and administrative expenses
Lessee, Lease, Description [Line Items]
Operating lease expense	$ 4.4	$ 4.1	$ 8.3	$ 8.1

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Leases - Maturities of Lease Liabilities (Details) - USD ($) $ in Millions	Jun. 30, 2022	Dec. 31, 2021
Leases [Abstract]
2022	$ 5.9
2023	8.1
2024	6.6
2025	4.5
2026	2.8
After 2026	9.2
Total lease payments	37.1
Less: Imputed interest	(4.4)
Present value of operating lease liabilities	$ 32.7	$ 34.0

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Inventories (Details) - USD ($) $ in Millions	Jun. 30, 2022	Dec. 31, 2021
Inventory Disclosure [Abstract]
Finished products	$ 174.3	$ 190.2
Work in process	50.0	42.0
Raw materials	346.3	286.3
Inventories, at FIFO cost	570.6	518.5
LIFO reserve	(77.6)	(70.8)
Inventories	$ 493.0	$ 447.7

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Product Warranties (Details) - USD ($) $ in Millions	3 Months Ended		6 Months Ended
	Jun. 30, 2022	Jun. 30, 2021	Jun. 30, 2022	Jun. 30, 2021
Movement in Standard and Extended Product Warranty Accrual, Increase (Decrease) [Roll Forward]
Balance at beginning of year	$ 182.9	$ 141.6	$ 184.4	$ 142.3
Expense	14.7	15.3	28.6	27.9
Claims settled	(17.6)	(12.0)	(33.0)	(25.3)
Balance at end of year	$ 180.0	$ 144.9	$ 180.0	$ 144.9

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Debt (Details) $ in Millions	Dec. 31, 2021 USD ($) covenant
Debt Disclosure [Abstract]
Multi-currency revolving credit agreement, maximum borrowing capacity	$ 500
Accordion feature, higher borrowing capacity option	$ 850
Number of required financial covenants | covenant	2

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Earnings per Share of Common Stock (Details) - shares	3 Months Ended		6 Months Ended
	Jun. 30, 2022	Jun. 30, 2021	Jun. 30, 2022	Jun. 30, 2021
Earnings Per Share [Abstract]
Denominator for basic earnings per share - weighted average shares (in shares)	155,692,240	160,241,814	156,351,739	160,880,724
Effect of dilutive stock options and share units (in shares)	939,432	1,490,159	1,118,514	1,374,828
Denominator for diluted earnings per share (in shares)	156,631,672	161,731,973	157,470,253	162,255,552

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Stock Based Compensation - Narrative (Details) - USD ($) $ / shares in Units, $ in Millions	3 Months Ended		6 Months Ended
	Jun. 30, 2022	Jun. 30, 2021	Jun. 30, 2022	Jun. 30, 2021
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Stock based compensation expense	$ 1.4	$ 1.5	$ 9.0	$ 8.9
Weighted-average fair value per option at the date of grant (in USD per share)			$ 17.58	$ 14.03
Employee Stock Option
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Stock based compensation expense	0.6	0.5	$ 4.5	$ 4.1
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
Number of units granted (in shares)			93,211	100,676
Value of units share units granted			$ 6.9	$ 6.1
Share based compensation expense attributable to share units	$ 0.8	$ 1.0	$ 4.5	$ 4.8
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 or share units (in shares)	7,144,796		7,144,796

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Stock Based Compensation - Changes in Options (Details) $ / shares in Units, $ in Millions	6 Months Ended
	Jun. 30, 2022 USD ($) $ / shares shares
Weighted- Avg. Per Share Exercise Price
Beginning balance (in USD per share) | $ / shares	$ 47.73
Granted (in USD per share) | $ / shares	74.14
Exercised (in USD per share) | $ / shares	35.80
Forfeited (in USD per share) | $ / shares	58.09
Ending balance (in USD per share) | $ / shares	$ 51.16
Number of Options
Beginning balance (in shares) | shares	2,252,498
Granted (in shares) | shares	321,600
Exercised (in shares) | shares	(25,638)
Forfeited (in shares) | shares	(10,094)
Ending balance (in shares) | shares	2,538,366
Stock option activity, additional disclosures
Outstanding, Average Remaining Contractual Life	7 years
Outstanding, Aggregate Intrinsic Value | $	$ 19.2
Exercisable, Weighted-Avg. Per Share Exercise Price (in USD per share) | $ / shares	$ 46.82
Exercisable, Number of Options (in shares) | shares	1,716,451
Exercisable, Average Remaining Contractual Life	6 years
Exercisable, Aggregate Intrinsic Value | $	$ 16.0

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Stock Based Compensation - Schedule of Weighted-average Fair Value per Option at Date of Grant (Details) - Employee Stock Option	6 Months Ended
	Jun. 30, 2022	Jun. 30, 2021
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Expected life (years)	5 years 8 months 12 days	5 years 9 months 18 days
Risk-free interest rate	1.90%	1.20%
Dividend yield	1.50%	1.60%
Expected volatility	26.80%	27.40%

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Stock Based Compensation - Summary of Share Unit Activity Under Plan (Details) - Restricted Stock and Share Units - $ / shares	6 Months Ended
	Jun. 30, 2022	Jun. 30, 2021
Number of Units
Beginning balance (in shares)	421,138
Granted (in shares)	93,211	100,676
Vested (in shares)	(126,631)
Forfeited (in shares)	(6,777)
Ending balance (in shares)	380,941
Weighted-Average Grant Date Value
Beginning balance (in USD per share)	$ 47.28
Granted (in USD per share)	73.70
Vested (in USD per share)	49.49
Forfeited (in USD per share)	53.93
Ending balance (in USD per share)	$ 52.98

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Pensions - Components of Net Pension Income (Details) - Pension Plan - USD ($) $ in Millions	3 Months Ended		6 Months Ended
	Jun. 30, 2022	Jun. 30, 2021	Jun. 30, 2022	Jun. 30, 2021
Defined Benefit Plan Disclosure [Line Items]
Service cost	$ 0.3	$ 0.4	$ 0.7	$ 0.8
Interest cost	3.7	3.6	7.3	7.2
Expected return on plan assets	(5.3)	(12.0)	(10.7)	(24.0)
Amortization of unrecognized loss	5.1	5.2	10.2	10.4
Amortization of prior service cost	(0.1)	(0.1)	(0.2)	(0.2)
Defined benefit plan expense (income)	$ 3.7	$ (2.9)	$ 7.3	$ (5.8)

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Pensions - Narrative (Details) - Pension Plan - USD ($)	3 Months Ended	12 Months Ended
	Dec. 31, 2022	Dec. 31, 2021	Jun. 30, 2022
Defined Benefit Plan Disclosure [Line Items]
Employer contributions		$ 0
Expected current year employer contributions			$ 0
Defined Benefit Pension Plan
Defined Benefit Plan Disclosure [Line Items]
Percentage of the pension plan liability (over)		95.00%
Defined Benefit Pension Plan | Forecast
Defined Benefit Plan Disclosure [Line Items]
Pension expenses accelerated	$ 445,000,000

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Segment Results (Details) $ in Millions	3 Months Ended		6 Months Ended
	Jun. 30, 2022 USD ($)	Jun. 30, 2021 USD ($)	Jun. 30, 2022 USD ($) segment	Jun. 30, 2021 USD ($)
Segment Reporting [Abstract]
Number of reporting segments | segment			2
Segment Reporting Information [Line Items]
Net sales	$ 965.9	$ 859.8	$ 1,943.6	$ 1,628.8
Segment earnings	178.0	164.0	354.5	306.2
Corporate expense	(0.3)	3.9	(4.0)	8.9
Interest expense	(2.1)	(0.9)	(3.6)	(1.9)
Earnings before income taxes	165.3	151.3	321.9	277.4
Provision for income taxes	39.1	33.1	75.9	61.5
Net Earnings	126.2	118.2	246.0	215.9
Pension Plan
Segment Reporting Information [Line Items]
Pension expense (income)	3.7	(2.9)	7.3	(5.8)
Inter-segment
Segment Reporting Information [Line Items]
Net sales	(8.1)	(7.0)	(16.5)	(13.2)
Segment earnings	0.0	0.0	(0.1)	0.0
Corporate
Segment Reporting Information [Line Items]
Corporate expense	(10.6)	(11.8)	(29.0)	(26.9)
Corporate | Pension Plan
Segment Reporting Information [Line Items]
Pension expense (income)	0.4	(0.5)	0.7	(1.1)
North America | Pension Plan
Segment Reporting Information [Line Items]
Pension expense (income)	2.6	(2.6)	5.2	(5.2)
North America | Operating Segments
Segment Reporting Information [Line Items]
Net sales	744.1	603.6	1,474.2	1,156.5
Segment earnings	159.9	141.7	311.7	272.1
Rest of World | Operating Segments
Segment Reporting Information [Line Items]
Net sales	229.9	263.2	485.9	485.5
Segment earnings	$ 18.1	$ 22.3	$ 42.9	$ 34.1

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Fair Value Measurements (Details) - USD ($) $ in Millions	Jun. 30, 2022	Dec. 31, 2021
Quoted prices in active markets for identical assets (Level 1)
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Assets (liabilities) measured at fair value	$ 100.0	$ 188.1
Significant other observable inputs (Level 2)
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Assets (liabilities) measured at fair value	$ 2.6	$ (0.7)

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Derivative Instruments - Schedule of Summary by Currency of Foreign Currency Forward Contracts (Details) - Foreign currency forward contracts - Designated as hedging instrument - Cash flow hedging - USD ($) $ in Millions	Jun. 30, 2022	Dec. 31, 2021
Buy
Derivative Instruments and Hedging Activities Disclosures [Line Items]
Total	$ 54.7	$ 48.0
Buy | Euro
Derivative Instruments and Hedging Activities Disclosures [Line Items]
Total	37.6	24.2
Buy | Mexican peso
Derivative Instruments and Hedging Activities Disclosures [Line Items]
Total	17.1	23.8
Sell
Derivative Instruments and Hedging Activities Disclosures [Line Items]
Total	145.5	113.4
Sell | Canadian dollar
Derivative Instruments and Hedging Activities Disclosures [Line Items]
Total	$ 145.5	$ 113.4

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Derivative Instruments - Narrative (Details) - USD ($) $ in Millions	3 Months Ended		6 Months Ended
	Jun. 30, 2022	Jun. 30, 2021	Jun. 30, 2022	Jun. 30, 2021	Dec. 31, 2021
Trading Activity, Gains and Losses, Net [Line Items]
After-tax gains (losses) associated with currency translation adjustment in other comprehensive income	$ (24.6)	$ 4.9	$ (24.0)	$ 3.5
Designated as hedging instrument | Foreign currency contracts | Accrued liabilities
Trading Activity, Gains and Losses, Net [Line Items]
Derivative liability	1.8		1.8		$ 1.6
Not Designated as Hedging Instrument | Foreign currency contracts | Accrued liabilities
Trading Activity, Gains and Losses, Net [Line Items]
Derivative liability	0.2		0.2		$ 0.8
Net Investment Hedges | Non-U.S. | Designated as hedging instrument | Foreign currency forward contracts
Trading Activity, Gains and Losses, Net [Line Items]
After-tax gains (losses) associated with currency translation adjustment in other comprehensive income	1.7	$ (0.1)	1.4	$ (0.1)
Contractual amounts	$ 0.0		$ 0.0

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Derivative Instruments - Impact of Derivative Contracts on Company's Financial Statements (Details) - Designated as hedging instrument - USD ($) $ in Millions	Jun. 30, 2022	Dec. 31, 2021
Derivatives, Fair Value [Line Items]
Total derivatives designated as hedging instruments	$ 2.8	$ 0.1
Foreign currency contracts | Other current assets
Derivatives, Fair Value [Line Items]
Fair value of derivative instruments, assets	4.6	1.7
Foreign currency contracts | Accrued liabilities
Derivatives, Fair Value [Line Items]
Fair value of derivative instruments, liabilities	$ (1.8)	$ (1.6)

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Derivative Instruments - Schedule of Effect of Cash Flow Hedges on Consolidated Statement of Earnings (Details) - Foreign currency contracts - USD ($) $ in Millions	3 Months Ended		6 Months Ended
	Jun. 30, 2022	Jun. 30, 2021	Jun. 30, 2022	Jun. 30, 2021
Derivative [Line Items]
Amount of gain (loss) recognized in other comprehensive loss on derivatives	$ 3.4	$ 0.4	$ 2.8	$ (2.5)
Cost of products sold
Derivative [Line Items]
Amount of gain (loss) reclassified from accumulated other comprehensive loss into earnings	$ 0.7	$ (0.8)	$ 0.8	$ (1.1)

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Derivative Instruments - Summary of Contractual Amounts for Balance Sheet Hedges (Details) - USD ($) $ in Millions	Jun. 30, 2022	Dec. 31, 2021
Canadian dollar | Foreign currency contracts | Fair Value Hedging | Designated as hedging instrument | Sell
Derivative Instruments and Hedging Activities Disclosures [Line Items]
Contractual amounts	$ 113.9	$ 125.6

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Derivative Instruments - Effect of Foreign Exchange Contracts on the Statement of Earnings (Details) - USD ($) $ in Millions	3 Months Ended		6 Months Ended
	Jun. 30, 2022	Jun. 30, 2021	Jun. 30, 2022	Jun. 30, 2021
Foreign currency contracts | Other (income) expense - net
Derivative Instruments and Hedging Activities Disclosures [Line Items]
Derivative loss	$ (0.2)	$ 0.0	$ 1.1	$ 0.0

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Income Taxes (Details) - USD ($) $ in Millions	3 Months Ended		6 Months Ended		12 Months Ended
	Jun. 30, 2022	Jun. 30, 2021	Jun. 30, 2022	Jun. 30, 2021	Dec. 31, 2022
Income Tax Contingency [Line Items]
Effective tax rate	23.70%	21.90%	23.60%	22.20%
Unrecognized tax benefits	$ 14.3		$ 14.3
Unrecognized tax benefits that would affect the effective tax rate, if recognized	$ 0.5		$ 0.5
Forecast | Minimum
Income Tax Contingency [Line Items]
Effective tax rate					23.50%
Forecast | Maximum
Income Tax Contingency [Line Items]
Effective tax rate					24.00%

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Commitment and Contingencies (Details) - USD ($) $ in Millions	Jun. 30, 2022	Dec. 31, 2021
Commitments and Contingencies [Line Items]
Distributor rebate accruals	$ 2.5	$ 3.9
Repurchase of inventory
Commitments and Contingencies [Line Items]
Other commitment	$ 3.5	$ 7.2

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Changes in Accumulated Other Comprehensive Loss by Component (Details) - USD ($) $ in Millions	3 Months Ended		6 Months Ended
	Jun. 30, 2022	Jun. 30, 2021	Jun. 30, 2022	Jun. 30, 2021
AOCI Attributable to Parent, Net of Tax [Roll Forward]
Balance at the beginning of period			$ 1,832.2
Balance at end of period	$ 1,792.5	$ 1,816.3	1,792.5	$ 1,816.3
Accumulated Other Comprehensive Loss
AOCI Attributable to Parent, Net of Tax [Roll Forward]
Balance at end of period	(346.4)	(311.2)	(346.4)	(311.2)
Cumulative foreign currency translation
AOCI Attributable to Parent, Net of Tax [Roll Forward]
Balance at the beginning of period	(44.1)	(49.5)	(44.7)	(48.1)
Other comprehensive income (loss) before reclassifications	(24.6)	4.9	(24.0)	3.5
Balance at end of period	(68.7)	(44.6)	(68.7)	(44.6)
Unrealized net gain (loss) on cash flow derivatives
AOCI Attributable to Parent, Net of Tax [Roll Forward]
Balance at the beginning of period	0.0	(1.4)	0.6	0.6
Other comprehensive income (loss) before reclassifications	2.6	0.3	2.1	(1.9)
Reclassifications, net of tax	(0.5)	0.6	(0.6)	0.8
Balance at end of period	2.1	(0.5)	2.1	(0.5)
Income tax provision (benefit)	0.2	(0.2)	0.2	(0.3)
Pension liability
AOCI Attributable to Parent, Net of Tax [Roll Forward]
Balance at the beginning of period	(283.5)	(269.9)	(287.3)	(273.7)
Reclassifications, net of tax	3.7	3.8	7.5	7.6
Balance at end of period	(279.8)	(266.1)	(279.8)	(266.1)
Reclassification, before income tax benefit	5.0	5.1	10.0	10.2
Income tax provision (benefit)	(1.3)	(1.3)	(2.5)	(2.6)
Actuarial losses
AOCI Attributable to Parent, Net of Tax [Roll Forward]
Reclassification, before income tax benefit	5.1	5.2	10.2	10.4
Prior year service cost
AOCI Attributable to Parent, Net of Tax [Roll Forward]
Reclassification, before income tax benefit	$ (0.1)	$ (0.1)	$ (0.2)	$ (0.2)