10-Q

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

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

For the quarterly period ended September 30, 2014.

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	39-0619790
(State or other jurisdiction of incorporation or organization)	(I.R.S. Employer Identification No.)
11270 West Park Place, Milwaukee, Wisconsin	53224-9508
(Address of principal executive office)	(Zip Code)

(414) 359-4000

(Registrant’s telephone number, including area code)

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.    x  Yes    ¨  No

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted 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 and post such files).    x  Yes    ¨  No

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

Large accelerated filer	x	Accelerated Filer	¨
Non-accelerated filer	¨  (Do not check if a smaller reporting company)	Smaller reporting company	¨

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

Class A Common Stock Outstanding as of October 28, 2014 — 13,163,850 shares

Common Stock Outstanding as of October 28, 2014 — 76,382,084 shares

Index

A. O. Smith Corporation

Part I. FINANCIAL INFORMATION
Item 1.	Financial Statements (Unaudited)
	Condensed Consolidated Statements of Earnings - Three and nine months ended September 30, 2014 and 2013	3
	Condensed Consolidated Statements of Comprehensive Earnings - Three and nine months ended September 30, 2014 and 2013	3
	Condensed Consolidated Balance Sheets - September 30, 2014 and December 31, 2013	4
	Condensed Consolidated Statements of Cash Flows - Nine months ended September 30, 2014 and 2013	5
	Notes to Condensed Consolidated Financial Statements - September 30, 2014	6-17
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	18-25
Item 3.	Quantitative and Qualitative Disclosures about Market Risk	25
Item 4.	Controls and Procedures	26
Part II. OTHER INFORMATION
Item 1.	Legal Proceedings	27
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	27
Item 5.	Other Information	27
Item 6.	Exhibits	27
Signatures		28
Index to Exhibits		29

2

PART I—FINANCIAL INFORMATION

ITEM 1—FINANCIAL STATEMENTS

A. O. SMITH CORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF EARNINGS

(dollars in millions, except per share data)

(unaudited)

	Three Months Ended September 30,						Nine Months Ended September 30,
	2014			2013			2014			2013
Net sales	$	581.6		$	536.2		$	1,729.2		$	1,594.9
Cost of products sold		366.3			339.6			1,101.8			1,021.0
Gross profit		215.3			196.6			627.4			573.9
Selling, general and administrative expenses		145.5			133.7			413.8			385.3
Restructuring, impairment and settlement expenses, net		—			1.3			—			7.2
Interest expense		1.5			1.4			4.3			4.5
Other income		(1.0	)		(1.1	)		(3.5	)		(2.8	)
		69.3			61.3			212.8			179.7
Provision for income taxes		18.7			15.1			58.2			52.4
Net Earnings	$	50.6		$	46.2		$	154.6		$	127.3
Net Earnings Per Share of Common Stock	$	0.56		$	0.50		$	1.71		$	1.38
Diluted Net Earnings Per Share of Common Stock	$	0.56		$	0.50		$	1.69		$	1.37
Dividends Per Share of Common Stock	$	0.15		$	0.12		$	0.45		$	0.34

A. O. SMITH CORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE EARNINGS

(dollars in millions)

(unaudited)

	Three Months Ended September 30,						Nine Months Ended September 30,
	2014			2013			2014			2013
Net earnings	$	50.6		$	46.2		$	154.6		$	127.3
Other comprehensive (loss) earnings
Foreign currency translation adjustments		(1.5	)		3.6			(9.2	)		(2.0	)
Unrealized net gain (loss) on cash flow derivative instruments, less related income tax (provision) benefit of $(0.4) and $- in 2014, $0.3 and $0.4 in 2013		0.7			(0.5	)		0.1			(0.7	)
Adjustment to pension liability gain, less related income tax provision of $(3.3) and $(9.9) in 2014 and $(4.0) and $(11.9) in 2013		5.2			6.3			13.7			13.9
Comprehensive Earnings	$	55.0		$	55.6		$	159.2		$	138.5

See accompanying notes to unaudited condensed consolidated financial statements.

3

PART I—FINANCIAL INFORMATION

ITEM 1—FINANCIAL STATEMENTS

A. O. SMITH CORPORATION

CONDENSED CONSOLIDATED BALANCE SHEETS

(dollars in millions, except share data)

	(unaudited) September 30, 2014			December 31, 2013
Assets
Current Assets
Cash and cash equivalents	$	400.5		$	380.7
Marketable securities		123.2			105.3
Receivables		474.3			458.7
Inventories		218.5			193.4
Deferred income taxes		40.1			40.1
Other current assets		38.2			27.4
Total Current Assets		1,294.8			1,205.6
Property, plant and equipment		802.8			758.7
Less accumulated depreciation		381.8			367.4
Net property, plant and equipment		421.0			391.3
Goodwill		430.7			433.5
Other intangibles		312.9			324.8
Other assets		27.4			36.3
Total Assets	$	2,486.8		$	2,391.5
Liabilities
Current Liabilities
Trade payables	$	374.8		$	387.1
Accrued payroll and benefits		61.8			61.7
Accrued liabilities		90.8			81.2
Product warranties		46.1			46.7
Long-term debt due within one year		13.8			14.2
Total Current Liabilities		587.3			590.9
Long-term debt		240.7			177.7
Pension liabilities		107.5			110.7
Other liabilities		176.1			183.5
Total Liabilities		1,111.6			1,062.8
Stockholders’ Equity
Class A Common Stock, $5 par value: authorized 14,000,000 shares; issued 13,229,929 and 13,288,516		66.2			66.4
Common Stock, $1 par value: authorized 120,000,000 shares; issued 82,123,867 and 82,065,280		82.1			82.1
Capital in excess of par value		599.4			589.7
Retained earnings		1,095.8			982.2
Accumulated other comprehensive loss		(254.5	)		(259.1	)
Treasury stock at cost		(213.8	)		(132.6	)
Total Stockholders’ Equity		1,375.2			1,328.7
Total Liabilities and Stockholders’ Equity	$	2,486.8		$	2,391.5

See accompanying notes to unaudited condensed consolidated financial statements.

4

PART I—FINANCIAL INFORMATION

ITEM 1—FINANCIAL STATEMENTS

A. O. SMITH CORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(dollars in millions)

(unaudited)

	Nine Months Ended September 30,
	2014			2013
Operating Activities
Net earnings	$	154.6		$	127.3
Adjustments to reconcile net earnings to cash provided by (used in) operating activities:
Depreciation and amortization		44.4			42.2
Pension expense		19.8			20.9
Loss on disposal of assets		0.2			0.2
Net changes in operating assets and liabilities, net of acquisitions:
Current assets and liabilities		(53.8	)		(2.7	)
Noncurrent assets and liabilities		0.1			1.9
Cash Provided by Operating Activities—continuing operations		165.3			189.8
Cash Used in Operating Activities—discontinued operations		(1.5	)		(1.8	)
Cash Provided by Operating Activities		163.8			188.0
Investing Activities
Capital expenditures		(66.0	)		(65.7	)
Acquisition of business		—			(4.0	)
Investments in marketable securities		(149.1	)		(63.8	)
Net proceeds from sale of securities		129.7			158.4
Cash (Used in) Provided by Investing Activities		(85.4	)		24.9
Financing Activities
Long-term debt incurred (retired)		64.3			(16.5	)
Common stock repurchases		(86.6	)		(66.5	)
Net proceeds from stock option activity		4.7			8.9
Dividends paid		(41.0	)		(31.6	)
Cash Used in Financing Activities		(58.6	)		(105.7	)
Net increase in cash and cash equivalents		19.8			107.2
Cash and cash equivalents—beginning of period		380.7			266.9
Cash and Cash Equivalents—End of Period	$	400.5		$	374.1

See accompanying notes to unaudited condensed consolidated financial statements.

5

PART I—FINANCIAL INFORMATION

ITEM 1—FINANCIAL STATEMENTS

A. O. SMITH CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

September 30, 2014

(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 nine months ended September 30, 2014 are not necessarily indicative of the results expected for the full year. It is suggested that the accompanying condensed consolidated financial statements be read in conjunction with the audited consolidated financial statements and the notes thereto included in the company’s latest Annual Report on Form 10-K filed with the SEC on February 20, 2014.

On April 15, 2013, the company’s stockholders approved a proposal to increase the company’s authorized shares of Common Stock and the company’s board of directors declared a two-for-one stock split of the company’s Class A Common Stock and Common Stock (including treasury shares) in the form of a 100 percent stock dividend to stockholders of record on April 30, 2013 and payable on May 15, 2013. All references in the financial statements and footnotes to the number of shares outstanding, price per share, per share amounts and stock based compensation data have been recast to reflect the split for all periods presented.

Recent Accounting Pronouncements

In May 2014, the Financial Accounting Standards Board issued Accounting Standards Codification (ASC) 606-10, Revenue from Contracts with Customers (issued under Accounting Standards Update No. 2014-09).

ASC 606-10 will replace all existing revenue recognition guidance when effective. ASC 606-10 is effective for the year beginning January 1, 2017. Either full retrospective adoption or modified retrospective adoption is allowed under ASC 606-10. The company is in the process of determining whether the adoption of ASC 606-10 will have an impact on the company’s consolidated financial condition, results of operations or cash flows.

2. Acquisition

On February 14, 2013, the company acquired 100 percent of the shares of MiM Isitma Sogutma Havalandirma ve Aritma Sistemleri San. Tic. A.S. (MiM), a privately-held Turkish water treatment company. The addition of MiM expanded the company’s product offerings and gave the company access to Eastern Europe and Black Sea region water treatment markets. MiM is included in the Rest of World segment.

The company paid an aggregate cash purchase price of $4.0 million, net of cash received of $1.9 million. In addition the company assumed debt of $1.7 million and recorded contingent consideration of $1.1 million, the fair value of the contingent payment due to the former owners of MiM if certain targets are met for growth in sales, gross profits and operating profits through 2017.

6

2. Acquisition (continued)

The fair value of the purchase price resulted in an allocation to acquired intangible assets totaling $4.3 million of which $2.4 million has been assigned to customer lists which are being amortized over ten years.

MiM’s results of operations have been included in the company’s financial statements from February 14, 2013, the date of acquisition. Revenues and pre-tax results associated with MiM included in results of operations for the three and nine months ended September 30, 2013 were not material to the company’s net sales or pre-tax earnings.

3. Restructuring, Impairment and Settlement Expenses - Net

In the first quarter of 2013, the company announced the move of manufacturing operations from its Fergus, Ontario facility to other North American facilities. During the three months ended September 30, 2013, the company recognized $1.3 million of pre-tax restructuring and impairment expenses, comprised of $1.3 million of equipment relocation costs and $0.3 million of inventory obsolescence reserves and a reduction in severance costs of $0.3 million, as well as a corresponding $0.3 million tax benefit related to the expenses. For the nine months ended September 30, 2013, the company recognized $18.2 million of pre-tax restructuring and impairment expenses, comprised of $7.5 million of severance costs, $1.9 million of inventory obsolescence reserves, impairment charges related to long-lived assets totaling $7.5 million and $1.3 million for equipment relocation costs, as well as a corresponding $4.6 million tax benefit related to the expenses. The majority of the consolidation of operations occurred in the second quarter of 2013.

In the first quarter of 2013, the company entered into a settlement agreement with a former supplier of a North American subsidiary regarding previous overcharges and warranty costs. The terms of the settlement agreement resulted in an $11.0 million cash payment to the company, a pre-tax gain of $11.0 million and a related $4.2 million income tax expense.

The following table presents an analysis of the company’s restructuring and impairment reserves:

(dollars in millions)	Inventory Obsolescence			Severance Costs			Equipment Relocation Costs			Total
Balance at December 31, 2013	$	1.7		$	1.5		$	0.4		$	3.6
Cash payments/disposals		(0.4	)		(0.5	)		(0.2	)		(1.1	)
Balance at March 31, 2014	$	1.3		$	1.0		$	0.2		$	2.5
Reserve adjustments		(0.4	)		0.4			—			—
Cash payments/disposals		(0.4	)		(0.2	)		(0.2	)		(0.8	)
Balance at June 30, 2014	$	0.5		$	1.2		$	—		$	1.7
Cash payments/disposals		(0.2	)		(0.2	)		—			(0.4	)
Balance at September 30, 2014	$	0.3		$	1.0		$	—		$	1.3

7

4. Inventories

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

(dollars in millions)	September 30, 2014			December 31, 2013
Finished products	$	106.6		$	88.8
Work in process		11.1			12.3
Raw materials		122.0			113.6
		239.7			214.7
LIFO reserve		(21.2	)		(21.3	)
	$	218.5		$	193.4

5. Long-Term Debt

The company has a $400 million multi-currency revolving credit agreement with eight banks, which expires on December 12, 2017. The facility has an accordion provision which allows it to be increased up to $500 million if certain conditions (including lender approval) are satisfied. Borrowings under bank credit lines and commercial paper borrowings are supported by the $400 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 September 30, 2014.

6. Product Warranties

The company offers warranties on the sales of certain of its products and records an accrual for the estimated future claims. The following table presents the company’s warranty liability activity.

	Three Months Ended September 30,
(dollars in millions)	2014			2013
Balance at July 1,	$	136.4		$	129.8
Expense		14.6			15.5
Claims settled		(14.8	)		(13.6	)
Balance at September 30,	$	136.2		$	131.7
	Nine Months Ended September 30,
(dollars in millions)	2014			2013
Balance at January 1,	$	136.6		$	129.6
Expense		46.9			47.2
Claims settled		(47.3	)		(45.1	)
Balance at September 30,	$	136.2		$	131.7

8

7. 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 September 30,				Nine Months Ended September 30,
	2014		2013		2014		2013
Denominator for basic earnings per share – weighted average shares		89,945,464		92,050,932		90,559,459		92,417,352
Effect of dilutive stock options and share units		660,286		677,129		680,671		629,201
Denominator for diluted earnings per share		90,605,750		92,728,061		91,240,130		93,046,553

8. Stock Based Compensation

The company adopted the A. O. Smith Combined Incentive Compensation Plan (the “plan”) effective January 1, 2007. Stockholders reapproved the plan on April 16, 2012. The plan is a continuation of the A. O. Smith Combined Executive Incentive Compensation Plan which was originally approved by stockholders in 2002. The number of shares available for granting of options, restricted stock or share units under the plan at September 30, 2014 was 2,321,641. Upon stock option exercise or share unit vesting, shares are issued from treasury stock.

Total stock based compensation cost recognized in the three months ended September 30, 2014 and 2013 was $1.8 million and $2.3 million, respectively. Total stock based compensation cost recognized in the nine months ended September 30, 2014 and 2013 was $9.6 million and $8.8 million, respectively.

Stock Options

The stock options granted in the nine months ended September 30, 2014 and 2013 have three year pro-rata vesting from the date of grant. Stock options are issued at exercise prices equal to the fair value of Common Stock on the date of grant. For active employees, all options granted in 2014 and 2013 expire ten years after date of grant. Options are expensed ratably over the three-year vesting period; however, included in the stock option expense for the three and nine months ended September 30, 2014 and 2013 is 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 cost attributable to stock options in the three months ended September 30, 2014 and 2013 was $0.8 million and $1.1 million, respectively. Stock based compensation expense attributable to stock options in the nine months ended September 30, 2014 and 2013 was $4.5 million and $4.1 million, respectively.

9

8. Stock Based Compensation (continued)

Changes in option awards, all of which relate to Common Stock, were as follows for the nine months ended September 30, 2014:

	Weighted- Average Per Share Exercise Price		Nine Months Ended September 30, 2014			Average Remaining Contractual Life		Aggregate Intrinsic Value (dollars in millions)
Outstanding at January 1, 2014	$	22.37		1,440,623
Granted		46.50		298,750
Exercised		14.87		(133,002	)
Forfeited		42.13		(4,119	)
Outstanding at September 30, 2014		27.42		1,602,252			8 years	$	27.6
Exercisable at September 30, 2014	$	20.09		951,732			7 years	$	24.5

The weighted-average fair value per option at the date of grant during the nine months ended September 30, 2014 and 2013 using the Black-Scholes option-pricing model was $16.55 and $12.48, respectively. Assumptions were as follows:

	Nine Months Ended September 30,
	2014			2013
Expected life (years)		6.0			6.1
Risk-free interest rate		2.7	%		2.0	%
Dividend yield		1.1	%		1.1	%
Expected volatility		36.6	%		38.4	%

The expected life is based on historical exercise behavior and the projected exercise of unexercised stock options. The risk free interest rate is based on the U.S. Treasury yield curve in effect on the date of grant for the expected life of the option. The actual dividend yield is based on the actual annual dividends divided by the grant date market value of the company’s common stock. The expected volatility is based on the historical volatility of the company’s common stock.

Restricted Stock and Share Units

Participants may also be awarded shares of restricted stock or share units under the plan. The company granted 110,605 and 142,900 share units under the plan in the nine months ended September 30, 2014 and 2013, respectively. The share units were valued at $5.1 million and $4.9 million at the dates of issuance in 2014 and 2013, respectively, based on the company’s stock price at the dates of grant. The company’s share units are recognized as compensation expense ratably over the three year vesting period; however, included in share unit expense in the three and nine months ended September 30, 2014 and 2013 is expense associated with accelerated vesting of share unit awards for certain employees who either are retirement eligible or will become retirement eligible during the vesting period. Share based compensation expense attributable to share units of $1.0 million and $1.2 million was recognized in the three months ended September 30, 2014 and 2013, respectively. Share based compensation expense attributable to share units of $5.1 million and $4.7 million was recognized in the nine months ended September 30, 2014 and 2013, respectively.

10

8. Stock Based Compensation (continued)

A summary of share unit activity under the plan is as follows:

	Number of Units			Weighted-Average Grant Date Value
Issued and unvested at January 1, 2014		446,036		$	26.14
Granted		110,605			46.50
Vested		(144,476	)		21.63
Forfeited		(1,462	)		42.15
Issued and unvested at September 30, 2014		410,703		$	33.21

9. Pensions

The following table presents the components of the company’s net pension expense:

	Three Months Ended September 30,						Nine Months Ended September 30,
(dollars in millions)	2014			2013			2014			2013
Service cost	$	2.0		$	2.3		$	5.9		$	6.8
Interest cost		11.2			9.9			33.6			29.6
Expected return on plan assets		(15.1	)		(15.5	)		(45.3	)		(46.3	)
Amortization of unrecognized loss		8.8			10.6			26.4			31.5
Amortization of prior service cost		(0.3	)		(0.3	)		(0.8	)		(0.7	)
Defined benefit plan expense	$	6.6		$	7.0		$	19.8		$	20.9

The company did not make a contribution to its U.S. pension plan in 2013. The company is not required to make a contribution and does not intend to make a voluntary contribution in 2014.

10. Operations by Segment

The company is comprised of two reporting segments: North America and Rest of World. Both segments manufacture and market comprehensive lines of residential and commercial gas, gas tankless and electric water heaters. Both segments primarily manufacture and market in their respective regions of the world. The Rest of World segment is primarily comprised of China, Europe and India. The North America segment also manufactures and globally markets specialty commercial water heating equipment, condensing and non-condensing boilers and water system tanks. The Rest of World segment also manufactures and markets water treatment products, primarily in Asia.

11

10. Operations by Segment (continued)

The company’s operations by segment are as follows:

	Three Months Ended September 30,						Nine Months Ended September 30,
(dollars in millions)	2014			2013			2014			2013
Net sales
North America	$	392.4		$	370.1		$	1,191.0		$	1,137.8
Rest of World		198.5			175.2			564.9			483.0
Inter-segment sales		(9.3	)		(9.1	)		(26.7	)		(25.9	)
	$	581.6		$	536.2		$	1,729.2		$	1,594.9
Operating earnings
North America (1) (3) (4)	$	53.0		$	51.5		$	171.5		$	160.6
Rest of World		30.0			26.9			84.3			67.6
Inter-segment earnings elimination		—			(0.1	)		—			(0.1	)
		83.0			78.3			255.8			228.1
Corporate expense (2)		(12.2	)		(15.6	)		(38.7	)		(43.9	)
Interest expense		(1.5	)		(1.4	)		(4.3	)		(4.5	)
Earnings before income taxes		69.3			61.3			212.8			179.7
Provision for income taxes		18.7			15.1			58.2			52.4
Net earnings	$	50.6		$	46.2		$	154.6		$	127.3
(1) Includes non-operating pension costs of:	$	(3.3	)	$	(3.9	)	$	(11.0	)	$	(11.1	)
(2) Includes non-operating pension costs of:		(1.6	)		(1.3	)		(3.7	)		(3.7	)
(3) Includes restructuring and impairment expenses of:		—			(1.3	)		—			(18.2	)
(4) Includes settlement income of:		—			—			—			11.0

11. Fair Value Measurements

ASC 820, Fair Value Measures and Disclosures, 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.

12

11. Fair Value Measurements (continued)

Assets and liabilities measured at fair value on a recurring basis are as follows:

(dollars in millions) Fair Value Measurement Using	September 30, 2014			December 31, 2013
Quoted prices in active markets for identical assets (Level 1)	$	125.0		$	107.0
Significant other observable inputs (Level 2)		(0.1	)		—
Total assets measured at fair value	$	124.9		$	107.0

There were no changes in the company’s valuation techniques used to measure fair values on a recurring basis during the nine months ended September 30, 2014.

12. Derivative Instruments

ASC 815 Derivatives and Hedging as amended, requires that all derivative instruments be recorded on the balance sheet at fair value and establishes criteria for designation and effectiveness of the hedging relationships. The accounting for changes in the fair value of a derivative instrument depends on whether it has been designated and qualifies as a part of a hedging relationship and, further, on the type of hedging relationship. For those derivative instruments that are designated and qualify as hedging instruments, the company must designate the hedging instrument, based upon the exposure hedged, as a fair value hedge, cash flow hedge, or a hedge of a net investment in a foreign operation.

The company designates that all of its hedging instruments are cash flow hedges. For derivative instruments that are designated and qualify as a cash flow hedge (i.e., hedging the exposure to variability in expected future cash flows that is attributable to a particular risk), the effective portion of the gain or loss on the derivative instrument is reported as a component of other comprehensive loss, net of tax, and is 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. The amount by which the cumulative change in the value of the hedge more than offsets the cumulative change in the value of the hedged item (i.e., the ineffective portion) is recorded in earnings, net of tax, in the period the ineffectiveness occurs.

The company utilizes certain derivative instruments to enhance its ability to manage currency 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.

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. Currencies for which the company utilizes foreign currency forward contracts include the British pound, Canadian dollar, Euro, Indian rupee and Mexican peso.

13

12. Derivative Instruments (continued)

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 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 is expected to be reclassified into earnings within one year and all of the hedges will be reclassified into earnings no later than December 31, 2015.

The following table summarizes, by currency, the contractual amounts of the company’s foreign currency forward contracts:

	September 30,
	2014				2013
(dollars in millions)	Buy		Sell		Buy		Sell
British pound	$	—	$	1.3	$	—	$	1.9
Canadian dollar		—		85.9		—		67.1
Euro		17.0		1.4		14.8		2.2
Indian rupee		—		—		1.5		—
Mexican peso		11.5		—		15.3		—
Total	$	28.5	$	88.6	$	31.6	$	71.2

Commodity Futures Contracts

In addition to entering into supply arrangements in the normal course of business, the company also enters into futures contracts to fix the cost of certain raw material purchases, principally copper, with the objective of minimizing changes in cost due to market price fluctuations. The hedging strategy for achieving this objective is to purchase commodity futures contracts on the open market of the London Metals Exchange (LME) or over the counter contracts based on the LME.

The minimal after-tax gain on the effective portion of the contracts as of September 30, 2014 was recorded in accumulated other comprehensive loss and will be reclassified into cost of products sold in the period in which the underlying transaction is recorded in earnings. The effective portion of the contracts will be reclassified within one year. Commodity hedges outstanding at September 30, 2014 involve a total of approximately 1.0 million pounds of copper.

The impact of derivative contracts on the company’s financial statements is as follows:

Fair value of derivatives designated as hedging instruments under:

(dollars in millions)	Balance Sheet Location	September 30, 2014			December 31, 2013
Foreign currency contracts	Other current assets	$	2.9		$	1.9
	Accrued liabilities		(1.2	)		(0.2	)
Total derivatives designated as hedging instruments		$	1.7		$	1.7

14

12. Derivative Instruments (continued)

The effect of derivatives designated as hedging instruments on the statement of earnings is as follows:

Three Months Ended September 30 (dollars in millions):
Derivatives in ASC 815 cash flow hedging relationships	Amount of gain (loss) recognized in OCI on derivative (effective portion)					Location of gain (loss) reclassified from accumulated OCI into earnings (effective portion)	Amount of gain (loss) reclassified from accumulated OCI into earnings (effective portion)					Location of gain (loss) recognized in earnings on derivative (ineffective portion)	Amount of gain (loss) recognized in earnings on a derivative (ineffective portion)
	2014		2013				2014		2013				2014		2013
Foreign currency contracts	$	1.8	$	(0.8	)	Cost of products sold	$	0.7	$	0.3		N/A	$	—	$	—
Commodities contracts		—		—		Cost of products sold		—		(0.1	)	Cost of products sold		—		—
	$	1.8	$	(0.8	)		$	0.7	$	0.2			$	—	$	—
Nine Months Ended September 30 (dollars in millions):
Derivatives in ASC 815 cash flow hedging relationships	Amount of gain (loss) recognized in OCI on derivative (effective portion)					Location of gain (loss) reclassified from accumulated OCI into earnings (effective portion)	Amount of gain (loss) reclassified from accumulated OCI into earnings (effective portion)					Location of gain (loss) recognized in earnings on derivative (ineffective portion)	Amount of gain (loss) recognized in earnings on a derivative (ineffective portion)
	2014		2013				2014		2013				2014		2013
Foreign currency contracts	$	2.6	$	0.8		Cost of products sold	$	2.5	$	1.8		N/A	$	—	$	—
Commodities contracts		—		(0.1	)	Cost of products sold		—		(0.1	)	Cost of products sold		—		—
	$	2.6	$	0.7			$	2.5	$	1.7			$	—	$	—

13. Income Taxes

The effective tax rate for the three and nine months ended September 30, 2014 was 27.0 percent and 27.3 percent, respectively. The company estimates that its annual effective tax rate for the full year of 2014 will be between 27.0 and 28.0 percent. The full year effective tax rate in 2013 was 28.2 percent.

As of September 30, 2014, the company had $1.3 million of unrecognized tax benefits of which $0.9 million would affect its effective tax rate if recognized. The company recognizes potential interest and penalties related to unrecognized tax benefits as a component of tax expense.

The U.S. federal tax returns for 2011—2013 are subject to audit. The company is subject to state and local audits for tax years 2000—2013. The company is also subject to non-U.S. income tax examinations for years 2006—2013.

15

14. Changes in Accumulated Other Comprehensive Loss by Component

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

	Three Months Ended September 30,
(dollars in millions)	2014			2013
Cumulative Foreign Currency Translation
Balance at beginning of period	$	12.2		$	13.9
Other comprehensive (loss) gain before reclassifications		(1.5	)		3.6
Balance at end of period		10.7			17.5
Unrealized Net Gain on Cash Flow Derivatives
Balance at beginning of period		0.4			0.5
Other comprehensive gain (loss) before reclassifications		1.1			(0.4	)
Realized gains on derivatives reclassified to cost of products sold (net of tax provision of $0.3 and $0.3 in 2014 and 2013, respectively)		(0.4	)		(0.1	)
Balance at end of period		1.1			—
Pension Liability
Balance at beginning of period		(271.5	)		(333.1	)
Other comprehensive loss before reclassifications		(0.1	)		—
Amounts reclassified from accumulated other comprehensive loss: (1)		5.3			6.3
Balance at end of period		(266.3	)		(326.8	)
Accumulated other comprehensive loss, end of period	$	(254.5	)	$	(309.3	)
(1)  Amortization of pension items:
Actuarial losses	$	8.8	(2)	$	10.6	(2)
Prior year service cost		(0.3	) (2)		(0.3	) (2)
		8.5			10.3
Tax benefit		(3.2	)		(4.0	)
Reclassification net of tax	$	5.3		$	6.3

⁽²⁾  These accumulated other comprehensive loss components are included in the computation of net periodic pension cost. See Note 9—Pensions for additional details

16

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

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

	Nine Months Ended September 30,
(dollars in millions)	2014			2013
Cumulative Foreign Currency Translation
Balance at beginning of period	$	19.9		$	19.5
Other comprehensive loss before reclassifications		(9.2	)		(2.0	)
Balance at end of period		10.7			17.5
Unrealized Net Gain on Cash Flow Derivatives
Balance at beginning of period		1.0			0.7
Other comprehensive earnings before reclassifications		1.6			0.4
Realized gains on derivatives reclassified to cost of products sold (net of tax provision of $0.7 and $0.5 in 2014 and 2013, respectively)		(1.5	)		(1.1	)
Balance at end of period		1.1			—
Pension Liability
Balance at beginning of period		(280.0	)		(340.7	)
Other comprehensive loss before reclassifications		(2.1	)		(5.0	)
Amounts reclassified from accumulated other comprehensive loss: (1)		15.8			18.9
Balance at end of period		(266.3	)		(326.8	)
Accumulated other comprehensive loss, end of period	$	(254.5	)	$	(309.3	)
(1) Amortization of pension items:
Actuarial losses	$	26.4	(2)	$	31.5	(2)
Prior year service cost		(0.8	) (2)		(0.7	) (2)
		25.6			30.8
Tax benefit		(9.8	)		(11.9	)
Reclassification net of tax	$	15.8		$	18.9

⁽²⁾  These accumulated other comprehensive loss components are included in the computation of net periodic pension cost. See Note 9—Pensions for additional details

17

PART I—FINANCIAL INFORMATION

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

OVERVIEW

We are a leading manufacturer of water heaters and boilers, serving a diverse mix of residential and commercial end markets principally in the U.S. with a strong and growing international presence. Our company is comprised of two reporting segments: North America and Rest of World. Both segments manufacture and market comprehensive lines of residential and commercial gas, gas tankless and electric water heaters. Both segments primarily manufacture and market in their respective region of the world. Our Rest of World segment is primarily comprised of China, Europe and India. The North America segment also manufactures and globally markets specialty commercial water heating equipment, condensing and non-condensing boilers and water systems tanks. The Rest of World segment also manufactures and markets water treatment products, primarily for Asia.

Sales in our North America segment grew approximately six percent in the third quarter of 2014 due to higher sales of U.S. residential water heaters and Lochinvar branded products. As a result of new home construction and expansion of the replacement market, we expect the residential water heater industry’s unit shipments to grow approximately four percent in 2014. We expect the commercial water heater industry’s growth in units shipped to be approximately five percent in 2014. Driven by a continued transition in the boiler industry from non-condensing boilers to condensing boilers, we expect sales of Lochinvar branded products to grow approximately ten percent in 2014.

Sales in our Rest of World segment grew approximately 13 percent in the third quarter of 2014, primarily as a result of a 16 percent growth in sales in China. We expect 2014 sales in China to grow over 17 percent as consumer demand for water heaters and water treatment products contribute to our growth.

RESULTS OF OPERATIONS

THIRD QUARTER AND FIRST NINE MONTHS OF 2014 COMPARED TO 2013

Sales in the third quarter of 2014 were $581.6 million or 8.5 percent higher than sales of $536.2 million in the third quarter of 2013. Sales in the first nine months of 2014 were $1,729.2 million or 8.4 percent higher than sales of $1,594.9 million in the same period last year. The increase in sales in both the third quarter and first nine months of the year is primarily due to higher sales in China as well as higher sales of water heaters and boilers in the U.S. Sales in China grew 16 percent and 19 percent in the third quarter and first nine months of 2014, respectively, compared to the same periods of 2013.

Gross profit margin increased slightly in the third quarter of 2014 to 37.0 percent from 36.7 percent in the third quarter of 2013. Gross profit margin in the first nine months of 2014 also increased slightly to 36.3 percent from 36.0 percent in the first nine months of 2013.

Selling, general and administrative (SG&A) expenses in the third quarter and first nine months of 2014 increased by $11.8 million and $28.5 million, respectively, as compared to the same periods last year. The increases in SG&A expenses in both periods in 2014 were primarily due to higher selling and advertising costs in support of increased volumes in China. The increased costs in third quarter of 2014 also included $6 million of planned incremental costs associated with the implementation of our enterprise resource planning system (ERP).

18

On March 28, 2013, our board of directors approved a plan to transfer residential water heater production from our Fergus, Ontario plant to our other North American facilities. The majority of our production was consolidated in the second quarter of 2013. As a result of the capacity reduction, we incurred pre-tax restructuring and impairment expenses of $1.3 million and $18.2 million in the third quarter and first nine months of 2013, respectively, related to employee severance costs, impairment of assets and equipment move costs.

In addition, included in operating earnings in the first nine months of 2013 is a pre-tax gain of $11.0 million from a first quarter settlement with a former supplier related to previous overcharges and warranty costs.

Interest expense in the third quarter of 2014 was $1.5 million compared to $1.4 million in the same period last year. Interest expense in the first nine months of 2014 was $4.3 million compared to $4.5 million in the same period last year.

Other income was $1.0 million in the third quarter of 2014, essentially unchanged from $1.1 million in the same period last year. Other income in the first nine months of 2014 was $3.5 million, up from $2.8 million in the first nine months of 2013. The increase in other income in the first nine months of 2014 was primarily due to increased interest income as compared to the same period last year.

Our effective tax rates for the third quarter and first nine months of 2014 were 27.0 percent and 27.3 percent, respectively. Our effective tax rates for the third quarter and first nine months of 2013 were 24.6 percent and 29.2 percent, respectively. The effective tax rate for the first nine months of 2014 benefitted from a revised domestic manufacturers’ deduction related to a prior year resulting in an increased income tax benefit on an amended prior year tax return filed in the second quarter of 2014. The lower effective tax rate in the third quarter of 2013 was primarily due to the recognition of higher income tax benefits related to U.S. manufacturing and research and development activities.

Our pension costs and credits are developed from actuarial valuations. The valuations reflect key assumptions regarding, among other things, discount rates, expected return on 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 7.75 percent in 2014 compared to 8.00 percent in 2013. The discount rate used to determine net periodic pension costs increased from 4.05 percent in 2013 to 4.90 percent in 2014. Pension expense for the first nine months of 2014 was $19.8 million compared to $20.9 million in the first nine months of 2013. Total pension expense for 2014 is expected to be $28.6 million. Our pension costs are reflected in cost of products sold and SG&A expense.

We are providing non-generally accepted accounting principles (GAAP) measures (adjusted earnings, adjusted earnings per share, adjusted segment operating earnings and adjusted segment operating margins) that exclude certain items as well as non-operating pension costs consisting of interest cost, expected return on plan assets, amortization of actuarial gains (losses) and curtailments. Prior year results are provided on a comparable basis. Reconciliations to measures on a GAAP basis are provided later in this section.

North America

Sales in our North America segment were $392.4 million in the third quarter of 2014 or $22.3 million higher than sales of $370.1 million in the third quarter of 2013. Sales for the first nine months of 2014 were $1,191.0 million or $53.2 million higher than sales of $1,137.8 million in the same period last year. The increased sales in the third quarter and first nine months of 2014 were primarily due to higher sales of residential water heaters in the U.S., higher sales of commercial boilers and a price increase effective on May 1, 2014. The first nine months of 2014 also benefitted from higher sales of commercial water heaters in the U.S.

19

North America operating earnings were $53.0 million in the third quarter of 2014 or approximately three percent higher than operating earnings of $51.5 million in the same period of 2013. Operating earnings in the first nine months of 2014 were $171.5 million or approximately seven percent higher than operating earnings of $160.6 million in the first nine months of 2013. Adjusted segment operating earnings were $56.3 million in the third quarter of 2014 compared to $56.7 million in the third quarter of 2013. Adjusted segment operating earnings were $182.5 million in the first nine months of 2014 compared to $178.9 million in the first nine months of last year. Adjusted operating margin of 14.3 percent in the third quarter of 2014 was lower than 15.3 percent in the same period last year. Adjusted operating margin of 15.3 percent in the first nine months of 2014 percent was lower than 15.7 percent in the same period in 2013. Operating earnings in the third quarter and first nine months of 2014 benefitted from increased sales of water heaters and boilers in the U.S. and a May 1, 2014 price increase. The favorable impact of increased sales was more than offset by higher steel prices and planned costs associated with our ERP implementation, contributing to lower adjusted operating earnings in the third quarter of 2014 and lower adjusted operating margins in the third quarter and first nine months of 2014.

Adjusted segment operating earnings exclude non-operating pension costs in all periods presented. Adjusted segment operating earnings in the third quarter of 2013 also exclude $1.3 million of pre-tax restructuring and impairment charges associated with the transfer of production from Fergus, Ontario. Adjusted segment operating earnings in the first nine months of 2013 also exclude $18.2 million of pre-tax restructuring and impairment charges associated with the transfer of production from Fergus, Ontario and an $11.0 million pre-tax gain on the settlement with a former supplier.

Rest of World

Sales in the Rest of World segment were $198.5 million in the third quarter of 2014 or $23.3 million higher than sales of $175.2 million in the third quarter of 2013. Sales in the first nine months of 2014 were $564.9 million or $81.9 million higher than sales of $483.0 million in the first nine months of 2013. Sales of water heaters and water treatment products in China grew 16 percent and 19 percent in the third quarter and first nine months of 2014, respectively, as compared to the same periods in 2013. The increases in sales in the third quarter and first nine months of 2014 were primarily due to greater demand for our water heating and water treatment products in China. Sales in China in the third quarter of 2014 also benefitted from higher customer inventory levels in advance of the fall holiday.

Rest of World operating earnings were $30.0 million in the third quarter of 2014 or approximately 12 percent higher than operating earnings of $26.9 million in the third quarter of 2013. Operating earnings in the first nine months of 2014 were $84.3 million or approximately 25 percent higher than operating earnings of $67.6 million in the first nine months of 2013. Operating margin in the third quarter of 2014 of 15.1 percent declined slightly from operating margin of 15.4 percent in the same period last year. Operating margin of 14.9 percent in the first nine months of 2014 was higher than operating margin of 14.0 percent in the same period last year. The third quarter year over year decline in operating margin was a result of higher sales in China offset by higher selling and advertising costs as percentage of sales in China in 2014. The improved operating earnings and operating margin in the first nine months of 2014 were due to higher sales in China and improvements in profitability associated with water treatment products in China.

20

Outlook

We continue to expect strong, profitable growth in China, and we expect over 17 percent revenue growth in the country in 2014. We expect Lochinvar branded sales to grow approximately ten percent in 2014, well ahead of GDP growth in the U.S., as we expect the Lochinvar brand to continue to benefit from the transition from lower efficiency, non-condensing boilers to high efficiency, condensing boilers. We are cautiously optimistic about the developing recovery in U.S. housing and the strength in demand for commercial water heaters driven by replacement and retrofit activity. Given these factors, we have increased our guidance for 2014. We believe A. O. Smith Corporation will achieve full-year GAAP earnings of between $2.23 and $2.27 per share with adjusted earnings of between $2.37 and $2.41 per share. These estimates do not include the potential impact from future acquisitions.

Liquidity & Capital Resources

Working capital of $707.5 million at September 30, 2014 was $92.8 million higher than at December 31, 2013. Higher cash balances in China, higher inventory balances in North America and lower accounts payable balances in China account for the majority of the increase. As of September 30, 2014, almost all of the $523.7 million of cash, cash equivalents and marketable securities was held by our foreign subsidiaries. We would incur a cost to repatriate these funds to the U.S. and have accrued $54.8 million for the repatriation of a portion of these funds.

Cash provided by continuing operating activities in the first nine months of 2014 was $165.3 million compared with $189.8 million during the same period last year. The reduced operating cash flows were primarily related to larger working capital requirements, which were partially offset by higher earnings. For the full year 2014, we expect total cash provided by continuing operating activities to be $225 to $235 million.

Capital expenditures totaled $66.0 million in the first nine months of 2014, compared with $65.7 million spent in the year ago period. We are projecting 2014 capital expenditures to be $80 million to $90 million, including approximately $30 million to support our ERP system implementation. We expect full year depreciation and amortization to be approximately $65 million.

In December 2012, we completed a $400 million multi-currency credit facility with a group of eight banks which expires in December 2017. The facility has an accordion provision which allows it to be increased up to $500 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 September 30, 2014.

The facility backs up commercial paper and credit line borrowings. As a result of the long-term nature of this facility, our commercial paper and credit line borrowings, as well as drawings under the facility, are classified as long-term debt. At September 30, 2014, we had available borrowing capacity of $189.5 million under this facility. We believe the combination of available borrowing capacity and operating cash flow will provide sufficient funds to finance our existing operations for the foreseeable future.

Our total debt increased $62.6 million from $191.9 million at December 31, 2013 to $254.5 million at September 30, 2014, primarily due to costs incurred in the share repurchase program in 2014. Our leverage, as measured by the ratio of total debt to total capitalization, was 15.6 percent at September 30, 2014, compared with 12.6 percent at December 31, 2013.

21

Our pension plan continues to meet all funding requirements under ERISA regulations. We are not required to make contributions and do not intend to make a voluntary contribution to the plan in 2014.

In July 2013, our board of directors approved a stock repurchase program authorizing the purchase of 2,000,000 shares of our common stock. On April 7, 2014 our board of directors approved adding an additional 1,500,000 shares of common stock to the existing discretionary share repurchase authority. During the first nine months of 2014, we repurchased approximately 1,811,000 shares at a total cost of $86.6 million. A total of approximately 840,000 shares remained of the existing repurchase authority at September 30, 2014. Depending on factors such as stock price, working capital requirements and alternative investment opportunities, we expect to repurchase approximately 490,000 of the remainder of the authorized shares in 2014 and spend an aggregate of approximately $110 million in 2014 for share repurchases.

On October 13, 2014, our board of directors declared a regular cash dividend of $.15 per share on our common stock and Class A common stock. The dividend is payable on November 17, 2014 to shareholders of record on October 31, 2014.

Non-GAAP Financial Information

We provide non-GAAP measures (adjusted earnings, adjusted earnings per share (EPS) and adjusted segment operating earnings) that exclude certain items as well as non-operating pension costs consisting of interest cost, expected returns on assets, amortization of actuarial gains (losses) and curtailments.

We believe that the measures of adjusted earnings, adjusted EPS and adjusted segment operating earnings provide useful information to investors about our operating performance and allow management and our investors to compare our performance period over period.

22

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 earnings per share (EPS) to adjusted earnings (non-GAAP) and adjusted EPS (non-GAAP):

	Three Months Ended September 30,						Nine Months Ended September 30,
	2014			2013			2014			2013
Net Earnings (GAAP)	$	50.6		$	46.2		$	154.6		$	127.3
Non-operating pension costs, before tax		4.9			5.2			14.7			14.8
Tax effect of non-operating pension costs		(2.0	)		(2.0	)		(5.8	)		(5.7	)
Restructuring and impairment expenses, before tax		—			1.3			—			18.2
Tax effect of restructuring and impairment expenses		—			(0.3	)		—			(4.6	)
Settlement income, before tax		—			—			—			(11.0	)
Tax effect of settlement income		—			—			—			4.2
Adjusted Earnings	$	53.5		$	50.4		$	163.5		$	143.2
Diluted EPS (GAAP)	$	0.56		$	0.50		$	1.69		$	1.37
Non-operating pension costs per diluted share, before tax		0.05			0.05			0.16			0.16
Tax effect of non-operating pension costs per diluted share		(0.02	)		(0.02	)		(0.06	)		(0.06	)
Restructuring and impairment expenses per diluted share, before tax		—			0.01			—			0.19
Tax effect of restructuring and impairment expense per diluted share		—			—			—			(0.05	)
Settlement income per diluted share, before tax		—			—			—			(0.12	)
Tax effect of settlement income per diluted share		—			—			—			0.05
Adjusted EPS	$	0.59		$	0.54		$	1.79		$	1.54

23

A. O. SMITH CORPORATION

Adjusted Segment Operating Earnings

(dollars in millions)

(unaudited)

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

	Three Months Ended September 30,					Nine Months Ended September 30,
	2014		2013			2014		2013
Segment Operating Earnings (GAAP)
North America	$	53.0	$	51.5		$	171.5	$	160.6
Rest of World		30.0		26.9			84.3		67.6
Inter-segment earnings elimination		—		(0.1	)		—		(0.1	)
Total Segment Operating Earnings (GAAP)	$	83.0	$	78.3		$	255.8	$	228.1
Adjustments
North America	$	3.3	$	5.2		$	11.0	$	18.3
Rest of World		—		—			—		—
Total Adjustments	$	3.3	$	5.2		$	11.0	$	18.3
Adjusted Segment Operating Earnings
North America	$	56.3	$	56.7		$	182.5	$	178.9
Rest of World		30.0		26.9			84.3		67.6
Inter-segment earnings elimination		—		(0.1	)		—		(0.1	)
Total Adjusted Segment Operating Earnings	$	86.3	$	83.5		$	266.8	$	246.4
Additional information:
	Three Months Ended September 30,					Nine Months Ended September 30,
	2014		2013			2014		2013
Adjustments: North America Segment
Non-operating pension costs	$	3.3	$	3.9		$	11.0	$	11.1
Restructuring and impairment expenses		—		1.3			—		18.2
Settlement income		—		—			—		(11.0	)
Total North America Segment Adjustments	$	3.3	$	5.2		$	11.0	$	18.3

24

A. O. SMITH CORPORATION

Adjusted 2014 EPS Guidance and Adjusted 2013 EPS

(unaudited)

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

	2014 Guidance		2013
Diluted EPS (GAAP)	$	2.23 - 2.27	$	1.83
Non-operating pension costs per diluted share		0.14		0.13
Restructuring and impairment expenses per diluted share		—		0.17
Settlement income per diluted share		—		(0.07	)
Adjusted EPS	$	2.37 - 2.41	$	2.06

Critical Accounting Policies

The preparation of our consolidated financial statements is 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, 2013. We believe that as of September 30, 2014 there has been no material change to this information.

Recent Accounting Pronouncements

In May 2014, the Financial Accounting Standards Board issued Accounting Standards Codification (ASC) 606-10, Revenue from Contracts with Customers (issued under Accounting Standards Update No. 2014-09).

ASC 606-10 will replace all existing revenue recognition guidance when effective. ASC 606-10 is effective for the year beginning January 1, 2017. We are in the process of determining whether the adoption of ASC 606-10 will have an impact on our consolidated financial condition, results of operations or cash flows.

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, 2013, 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.

25

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 Rule 13a-15(e) promulgated under the Securities Exchange Act of 1934, as amended (Exchange Act). Based upon their evaluation of these disclosure controls and procedures, the principal executive officer and principal financial officer concluded that the disclosure controls and procedures were effective as of September 30, 2014 to ensure that information required to be disclosed by the Company in the reports it files or submits under the Exchange Act is recorded, processed, summarized and reported, within the time period specified in the SEC rules and forms, and to ensure that information required to be disclosed by the Company in the reports it files or submits under the Exchange Act is accumulated and communicated to the Company’s management, including its principal executive and principal financial officers, as appropriate, to allow timely decisions regarding disclosure.

Changes in internal control over financial reporting

In the third quarter of 2014, we began the implementation of a new global enterprise resource planning system. This multi-year initiative is being conducted in phases and includes modifications to the design and operation of controls over financial reporting. We are testing internal controls over financial reporting for design effectiveness prior to implementation of each phase, and we have monitoring controls in place over the implementation of these changes.

Except as described above, there have been no other changes in our internal control over financial reporting (as such term is defined in Rules 13a-15(f) and 15d-15(f) under the Securities and Exchange Act) during the quarter ended September 30, 2014 that have materially affected, or are reasonable likely to materially affect, our internal control over financial reporting.

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,” “guidance” or words of similar meaning. All statements regarding 2015 outlook are forward-looking statements. 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: uncertain costs, savings and timeframes associated with the implementation of the new enterprise resource planning system; potential weakening in the high efficiency boiler segment in the U.S.; the ability to execute our acquisition strategy; significant volatility in raw material prices; competitive pressures on the company’s businesses; inability to implement pricing actions; instability in the company’s replacement markets; strength or duration of any recoveries in U.S. residential or commercial construction; a slowdown in the growth of the Chinese economy; foreign currency fluctuations; and adverse general economic conditions and capital market deterioration.

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.

26

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 15 of the Notes to Consolidated Financial Statements in our Annual Report on Form 10-K for the year ended December 31, 2013.

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

On July 8, 2013, our board of directors approved a stock repurchase program authorizing the purchase of 2,000,000 shares of our common stock. On April 7, 2014, our board of directors approved adding 1,500,000 shares of common stock to the existing discretionary share repurchase authority. Under the share repurchase program, the company’s 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 third quarter of 2014, we repurchased 531,283 shares at an average price of $48.56 per share and at a total cost of $25.8 million. As of September 30, 2014, there were 841,293 shares remaining on the existing repurchase authority.

ISSUER PURCHASES OF EQUITY SECURITIES
Period	(a) Total Number of Shares Purchased		(b) Average Price Paid per Share		(c) Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs		(d) Maximum Number of Shares that may yet be Purchased Under the Plans or Programs
July 1 – July 31, 2014		191,295	$	48.52		191,295		1,181,281
August 1 – August 31, 2014		177,400		48.04		177,400		1,003,881
September 1 – September 30, 2014		162,588		49.17		162,588		841,293

ITEM 5—OTHER INFORMATION

None.

ITEM 6—EXHIBITS

Refer to the Exhibit Index on page 29 of this report.

27

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
November 3, 2014	/s/ Daniel L. Kempken
	Daniel L. Kempken
	Vice President and Controller
November 3, 2014	/s/ John J. Kita
	John J. Kita
	Executive Vice President
	and Chief Financial Officer

28

INDEX TO EXHIBITS

Exhibit Number	Description
31.1	Certification of Periodic Report by the Chief Executive Officer pursuant to Rule 13a-14(a) of the Securities Exchange Act of 1934.
31.2	Certification of Periodic Report by 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 nine months ended September 30, 2014 are filed herewith, formatted in XBRL (Extensive Business Reporting Language): (i) the Condensed Consolidated Statements of Earnings for the three and nine months ended September 30, 2014 and 2013, (ii) the Condensed Consolidated Statements of Comprehensive Earnings for the three and nine months ended September 30, 2014 and 2013, (iii) the Condensed Consolidated Balance Sheets as of September 30, 2014, and December 31, 2013, (iv) the Condensed Consolidated Statements of Cash Flows for the nine months ended September 30, 2014 and 2013 (v) the Notes to Condensed Consolidated Financial Statements

29

EX-31.1

Exhibit 31.1

CERTIFICATION

I, Ajita G. Rajendra, 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 changes 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.

November 3, 2014

/s/ Ajita G. Rajendra

Ajita G. Rajendra

President and Chief Executive Officer

EX-31.2

Exhibit 31.2

CERTIFICATION

I, John J. Kita, 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 changes 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.

November 3, 2014

/s/ John J. Kita

John J. Kita

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 three months ended September 30, 2014 (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.

November 3, 2014

/s/ Ajita G. Rajendra

Ajita G. Rajendra

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 three months ended September 30, 2014 (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.

November 3, 2014

/s/ John J. Kita

John J. Kita

Executive Vice President and Chief Financial Officer

XML

Schedule of Computation of Basic and Diluted Weighted-Average Shares Used in Earnings per Share Calculations (Detail)	3 Months Ended		9 Months Ended
	Sep. 30, 2014	Sep. 30, 2013	Sep. 30, 2014	Sep. 30, 2013
Earnings Per Share Of Common Stock
Denominator for basic earnings per share - weighted average shares	89,945,464	92,050,932	90,559,459	92,417,352
Effect of dilutive stock options and share units	660,286	677,129	680,671	629,201
Denominator for diluted earnings per share	90,605,750	92,728,061	91,240,130	93,046,553

XML

Changes in Accumulated Other Comprehensive Loss by Component (Detail) (USD $) In Millions, unless otherwise specified	3 Months Ended				9 Months Ended
	Sep. 30, 2014		Sep. 30, 2013		Sep. 30, 2014		Sep. 30, 2013
Schedule of Amounts in Accumulated Other Comprehensive Income Loss [Line Items]
Accumulated Other Comprehensive Income loss Beginning Balance					$ (259.1)
Realized gains on derivatives reclassified to cost of products sold (net of tax provision of $0.3 and $0.3 in 2014 and 2013, respectively)	0.7		0.2		2.5		1.7
Accumulated Other Comprehensive Income loss Ending Balance	(254.5)		(309.3)		(254.5)		(309.3)
Cumulative Foreign Currency Translation
Schedule of Amounts in Accumulated Other Comprehensive Income Loss [Line Items]
Accumulated Other Comprehensive Income loss Beginning Balance	12.2		13.9		19.9		19.5
Other comprehensive (loss) earnings before reclassifications	(1.5)		3.6		(9.2)		(2.0)
Accumulated Other Comprehensive Income loss Ending Balance	10.7		17.5		10.7		17.5
Unrealized Net Gain on Cash Flow Derivatives
Schedule of Amounts in Accumulated Other Comprehensive Income Loss [Line Items]
Accumulated Other Comprehensive Income loss Beginning Balance	0.4		0.5		1.0		0.7
Other comprehensive (loss) earnings before reclassifications	1.1		(0.4)		1.6		0.4
Realized gains on derivatives reclassified to cost of products sold (net of tax provision of $0.3 and $0.3 in 2014 and 2013, respectively)	(0.4)		(0.1)		(1.5)		(1.1)
Accumulated Other Comprehensive Income loss Ending Balance	1.1				1.1
Pension Liability
Schedule of Amounts in Accumulated Other Comprehensive Income Loss [Line Items]
Accumulated Other Comprehensive Income loss Beginning Balance	(271.5)		(333.1)		(280.0)		(340.7)
Other comprehensive (loss) earnings before reclassifications	(0.1)				(2.1)		(5.0)
Amounts reclassified from accumulated other comprehensive loss:	5.3	[1]	6.3	[1]	15.8	[2]	18.9	[2]
Accumulated Other Comprehensive Income loss Ending Balance	$ (266.3)		$ (326.8)		$ (266.3)		$ (326.8)

[1] Amortization of pension items: Actuarial losses $ 8.8 (2) $ 10.6 (2) Prior year service cost (0.3 ) (2) (0.3 ) (2) 8.5 10.3 Tax benefit (3.2 ) (4.0 ) Reclassification net of tax $ 5.3 $ 6.3

[2] Amortization of pension items: Actuarial losses $ 26.4 (2) $ 31.5 (2) Prior year service cost (0.8 ) (2) (0.7 ) (2) 25.6 30.8 Tax benefit (9.8 ) (11.9 ) Reclassification net of tax $ 15.8 $ 18.9

XML

Assets and Liabilities Measured at Fair Value on Recurring Basis (Detail) (USD $) In Millions, unless otherwise specified	Sep. 30, 2014	Dec. 31, 2013
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Assets measured at fair value on recurring basis	$ 124.9	$ 107.0
Quoted Prices In Active Markets For Identical Assets (Level 1)
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Assets measured at fair value on recurring basis	125.0	107.0
Significant Other Observable Inputs (Level 2)
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Assets measured at fair value on recurring basis	$ (0.1)

XML

Changes in Accumulated Other Comprehensive Loss by Component (Parenthetical) (Detail) (USD $) In Millions, unless otherwise specified	3 Months Ended				9 Months Ended
	Sep. 30, 2014		Sep. 30, 2013		Sep. 30, 2014		Sep. 30, 2013
Schedule of Amounts in Accumulated Other Comprehensive Income Loss [Line Items]
Amortization of actuarial losses	$ (8.8)		$ (10.6)		$ (26.4)		$ (31.5)
Amortization of prior year service cost	0.3		0.3		0.8		0.7
Reclassification net of tax	5.2		6.3		13.7		13.9
Reclassification out of Accumulated Other Comprehensive Income
Schedule of Amounts in Accumulated Other Comprehensive Income Loss [Line Items]
Amortization of actuarial losses	8.8	[1]	10.6	[1]	26.4	[1]	31.5	[1]
Amortization of prior year service cost	(0.3)	[1]	(0.3)	[1]	(0.8)	[1]	(0.7)	[1]
Other Comprehensive Income Defined Benefit Plans Adjustment Change In Period	8.5		10.3		25.6		30.8
Tax benefit	(3.2)		(4.0)		(9.8)		(11.9)
Reclassification net of tax	5.3		6.3		15.8		18.9
Unrealized Net Gain on Cash Flow Derivatives
Schedule of Amounts in Accumulated Other Comprehensive Income Loss [Line Items]
Realized losses on derivatives reclassified to cost of products sold, tax effect	$ 0.3		$ 0.3		$ 0.7		$ 0.5

[1] These accumulated other comprehensive loss components are included in the computation of net periodic pension cost. See Note 9-Pensions for additional details

XML

Schedule of Operating Earnings (Detail) (USD $) In Millions, unless otherwise specified	3 Months Ended					9 Months Ended
	Sep. 30, 2014		Sep. 30, 2013		Mar. 31, 2013	Sep. 30, 2014		Sep. 30, 2013
Segment Reporting Information [Line Items]
Net sales	$ 581.6		$ 536.2			$ 1,729.2		$ 1,594.9
Operating earnings	83.0		78.3			255.8		228.1
Other income (expense)	1.0		1.1			3.5		2.8
Interest expense	(1.5)		(1.4)			(4.3)		(4.5)
Earnings before income taxes	69.3		61.3			212.8		179.7
Provision for income taxes	18.7		15.1		4.2	58.2		52.4
Net earnings	50.6		46.2			154.6		127.3
Operating Segments | North America
Segment Reporting Information [Line Items]
Net sales	392.4		370.1			1,191.0		1,137.8
Operating earnings	53.0	[1],[2],[3]	51.5	[1],[2],[3]		171.5	[1],[2],[3]	160.6	[1],[2],[3]
Operating Segments | Rest of World
Segment Reporting Information [Line Items]
Net sales	198.5		175.2			564.9		483.0
Operating earnings	30.0		26.9			84.3		67.6
Inter-segment elimination
Segment Reporting Information [Line Items]
Net sales	(9.3)		(9.1)			(26.7)		(25.9)
Operating earnings			(0.1)					(0.1)
Corporate
Segment Reporting Information [Line Items]
Other income (expense)	$ (12.2)	[4]	$ (15.6)	[4]		$ (38.7)	[4]	$ (43.9)	[4]

[1] Includes non-operating pension costs of: $ (3.3 ) $ (3.9 ) $ (11.0 ) $ (11.1 )

[2] Includes restructuring and impairment expenses of: - (1.3 ) - (18.2 )

[3] Includes settlement income of: - - - 11.0

[4] Includes non-operating pension costs of: (1.6 ) (1.3 ) (3.7 ) (3.7 )

XML

Acquisitions - Additional Information (Detail) (USD $) In Millions, unless otherwise specified	9 Months Ended	0 Months Ended		0 Months Ended
	Sep. 30, 2013	Feb. 14, 2013 MiM Isitma Sogutma Havalandirma ve Aritma Sistemleri San. Tic. A.S.	Feb. 14, 2013 MiM Isitma Sogutma Havalandirma ve Aritma Sistemleri San. Tic. A.S.	Feb. 14, 2013 Customer Lists	Feb. 14, 2013 Customer Lists MiM Isitma Sogutma Havalandirma ve Aritma Sistemleri San. Tic. A.S.
Business Acquisition [Line Items]
Percentage of shares acquired			100.00%
Cash received from acquisition		$ 1.9
Aggregate cash purchase price, net of cash received	4.0	4.0
Recorded contingent consideration			1.1
Debt assumed			1.7
Acquired intangible assets			4.3
Acquired intangible assets subject to amortization					$ 2.4
Acquired intangible assets, amortization period, in years				10 years

XML

Earnings Per Share of Common Stock (Tables)

9 Months Ended

Sep. 30, 2014

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 September 30,				Nine Months Ended September 30,
	2014		2013		2014		2013
Denominator for basic earnings per share – weighted average shares		89,945,464		92,050,932		90,559,459		92,417,352
Effect of dilutive stock options and share units		660,286		677,129		680,671		629,201
Denominator for diluted earnings per share		90,605,750		92,728,061		91,240,130		93,046,553

XML

Derivative Instruments - Additional Information (Detail) (Commodity Futures Contracts)	9 Months Ended
	Sep. 30, 2014 lb
Commodity Futures Contracts
Trading Activity, Gains and Losses, Net [Line Items]
Reclassification period for effective portion of contract, in years	1 year
Commodity hedges outstanding, total weight of metals, in pounds	1,000,000

XML

Schedule of Weighted-Average Fair Value per Option at Date of Grant (Detail)	9 Months Ended
	Sep. 30, 2014	Sep. 30, 2013
Stock Based Compensation [Abstract]
Expected life (years)	6 years	6 years 1 month 6 days
Risk-free interest rate	2.70%	2.00%
Dividend yield	1.10%	1.10%
Expected volatility	36.60%	38.40%

XML

Long-Term Debt - Additional Information (Detail) (USD $) In Millions, unless otherwise specified	9 Months Ended
	Sep. 30, 2014 lender
Debt Instrument [Line Items]
Multi-currency revolving credit agreement	$ 400
Number of banks involved in multi-year multi-currency revolving credit agreement	8
Revolving credit facility, expiration date	Dec. 12, 2017
Multi-currency revolving credit agreement, maximum amount	$ 500

XML

Effect of Derivative Designated as Hedging Instruments on Statement of Earnings (Detail) (USD $) In Millions, unless otherwise specified	3 Months Ended		9 Months Ended
	Sep. 30, 2014	Sep. 30, 2013	Sep. 30, 2014	Sep. 30, 2013
Derivative [Line Items]
Amount of gain/(loss) recognized in OCI on derivative (effective portion)	$ 1.8	$ (0.8)	$ 2.6	$ 0.7
Amount of gain/(loss) reclassified from accumulated OCI into earnings (effective portion)	0.7	0.2	2.5	1.7
Amount of gain/(loss) recognized in earnings on a derivative (ineffective portion)
Foreign Currency Contracts
Derivative [Line Items]
Amount of gain/(loss) recognized in OCI on derivative (effective portion)	1.8	(0.8)	2.6	0.8
Amount of gain/(loss) recognized in earnings on a derivative (ineffective portion)
Foreign Currency Contracts | Cost Of Products Sold
Derivative [Line Items]
Amount of gain/(loss) reclassified from accumulated OCI into earnings (effective portion)	0.7	0.3	2.5	1.8
Commodities Contracts
Derivative [Line Items]
Amount of gain/(loss) recognized in OCI on derivative (effective portion)				(0.1)
Commodities Contracts | Cost Of Products Sold
Derivative [Line Items]
Amount of gain/(loss) reclassified from accumulated OCI into earnings (effective portion)		(0.1)		(0.1)
Amount of gain/(loss) recognized in earnings on a derivative (ineffective portion)

XML

Schedule of Operating Earnings (Parenthetical) (Detail) (USD $) In Millions, unless otherwise specified	3 Months Ended		9 Months Ended	3 Months Ended		9 Months Ended		3 Months Ended		9 Months Ended
	Sep. 30, 2013	Mar. 31, 2013	Sep. 30, 2013	Sep. 30, 2014 Operating Segments North America	Sep. 30, 2013 Operating Segments North America	Sep. 30, 2014 Operating Segments North America	Sep. 30, 2013 Operating Segments North America	Sep. 30, 2014 Corporate	Sep. 30, 2013 Corporate	Sep. 30, 2014 Corporate	Sep. 30, 2013 Corporate
Segment Reporting Information [Line Items]
Non-operating pension costs				$ (3.3)	$ (3.9)	$ (11.0)	$ (11.1)	$ (1.6)	$ (1.3)	$ (3.7)	$ (3.7)
Restructuring and impairment expenses	1.3		7.2		(1.3)		(18.2)
Settlement income		$ 11.0					$ 11.0

XML

Acquisition

9 Months Ended

Sep. 30, 2014

Acquisition

2. Acquisition

On February 14, 2013, the company acquired 100 percent of the shares of MiM Isitma Sogutma Havalandirma ve Aritma Sistemleri San. Tic. A.S. (MiM), a privately-held Turkish water treatment company. The addition of MiM expanded the company’s product offerings and gave the company access to Eastern Europe and Black Sea region water treatment markets. MiM is included in the Rest of World segment.

The company paid an aggregate cash purchase price of $4.0 million, net of cash received of $1.9 million. In addition the company assumed debt of $1.7 million and recorded contingent consideration of $1.1 million, the fair value of the contingent payment due to the former owners of MiM if certain targets are met for growth in sales, gross profits and operating profits through 2017.

The fair value of the purchase price resulted in an allocation to acquired intangible assets totaling $4.3 million of which $2.4 million has been assigned to customer lists which are being amortized over ten years.

MiM’s results of operations have been included in the company’s financial statements from February 14, 2013, the date of acquisition. Revenues and pre-tax results associated with MiM included in results of operations for the three and nine months ended September 30, 2013 were not material to the company’s net sales or pre-tax earnings.

XML

Summary of Share Unit Activity Under Plan (Detail) (Restricted Stock And Share Units, USD $)	9 Months Ended
	Sep. 30, 2014	Sep. 30, 2013
Restricted Stock And Share Units
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Number of Units Issued and unvested, Beginning of Period	446,036
Number of Units - Granted	110,605	142,900
Number of Units - Vested	(144,476)
Number of Units - Forfeited	(1,462)
Number of Units Issued and unvested, End of Period	410,703
Weighted-Average Grant Date Value, Beginning of Period	$ 26.14
Weighted-Average Grant Date Value - Granted	$ 46.50
Weighted-Average Grant Date Value - Vested	$ 21.63
Weighted-Average Grant Date Value - Forfeited	$ 42.15
Weighted-Average Grant Date Value, End of Period	$ 33.21

XML

Fair Value Measurements (Tables)

9 Months Ended

Sep. 30, 2014

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

Assets and liabilities measured at fair value on a recurring basis are as follows:

(dollars in millions) Fair Value Measurement Using	September 30, 2014			December 31, 2013
Quoted prices in active markets for identical assets (Level 1)	$	125.0		$	107.0
Significant other observable inputs (Level 2)		(0.1	)		—
Total assets measured at fair value	$	124.9		$	107.0

XML

Operations by Segment (Tables)

9 Months Ended

Sep. 30, 2014

Schedule of Operating Earnings

The company’s operations by segment are as follows:

	Three Months Ended September 30,						Nine Months Ended September 30,
(dollars in millions)	2014			2013			2014			2013
Net sales
North America	$	392.4		$	370.1		$	1,191.0		$	1,137.8
Rest of World		198.5			175.2			564.9			483.0
Inter-segment sales		(9.3	)		(9.1	)		(26.7	)		(25.9	)
	$	581.6		$	536.2		$	1,729.2		$	1,594.9
Operating earnings
North America (1) (3) (4)	$	53.0		$	51.5		$	171.5		$	160.6
Rest of World		30.0			26.9			84.3			67.6
Inter-segment earnings elimination		—			(0.1	)		—			(0.1	)
		83.0			78.3			255.8			228.1
Corporate expense (2)		(12.2	)		(15.6	)		(38.7	)		(43.9	)
Interest expense		(1.5	)		(1.4	)		(4.3	)		(4.5	)
Earnings before income taxes		69.3			61.3			212.8			179.7
Provision for income taxes		18.7			15.1			58.2			52.4
Net earnings	$	50.6		$	46.2		$	154.6		$	127.3
(1) Includes non-operating pension costs of:	$	(3.3	)	$	(3.9	)	$	(11.0	)	$	(11.1	)
(2) Includes non-operating pension costs of:		(1.6	)		(1.3	)		(3.7	)		(3.7	)
(3) Includes restructuring and impairment expenses of:		—			(1.3	)		—			(18.2	)
(4) Includes settlement income of:		—			—			—			11.0

XML

Components of Company's Net Pension Expense (Detail) (USD $) In Millions, unless otherwise specified	3 Months Ended		9 Months Ended
	Sep. 30, 2014	Sep. 30, 2013	Sep. 30, 2014	Sep. 30, 2013
Pensions [Abstract]
Service cost	$ 2.0	$ 2.3	$ 5.9	$ 6.8
Interest cost	11.2	9.9	33.6	29.6
Expected return on plan assets	(15.1)	(15.5)	(45.3)	(46.3)
Amortization of unrecognized loss	8.8	10.6	26.4	31.5
Amortization of prior service cost	(0.3)	(0.3)	(0.8)	(0.7)
Defined benefit plan expense	$ 6.6	$ 7.0	$ 19.8	$ 20.9

XML

Derivative Instruments (Tables)

9 Months Ended

Sep. 30, 2014

Schedule of Effect of Derivative Designated as Hedging Instruments on Statement of Earnings

The effect of derivatives designated as hedging instruments on the statement of earnings is as follows:

Three Months Ended September 30 (dollars in millions):
Derivatives in ASC 815 cash flow hedging relationships	Amount of gain (loss) recognized in OCI on derivative (effective portion)					Location of gain (loss) reclassified from accumulated OCI into earnings (effective portion)	Amount of gain (loss) reclassified from accumulated OCI into earnings (effective portion)					Location of gain (loss) recognized in earnings on derivative (ineffective portion)	Amount of gain (loss) recognized in earnings on a derivative (ineffective portion)
	2014		2013				2014		2013				2014		2013
Foreign currency contracts	$	1.8	$	(0.8	)	Cost of products sold	$	0.7	$	0.3		N/A	$	—	$	—
Commodities contracts		—		—		Cost of products sold		—		(0.1	)	Cost of products sold		—		—
	$	1.8	$	(0.8	)		$	0.7	$	0.2			$	—	$	—
Nine Months Ended September 30 (dollars in millions):
Derivatives in ASC 815 cash flow hedging relationships	Amount of gain (loss) recognized in OCI on derivative (effective portion)					Location of gain (loss) reclassified from accumulated OCI into earnings (effective portion)	Amount of gain (loss) reclassified from accumulated OCI into earnings (effective portion)					Location of gain (loss) recognized in earnings on derivative (ineffective portion)	Amount of gain (loss) recognized in earnings on a derivative (ineffective portion)
	2014		2013				2014		2013				2014		2013
Foreign currency contracts	$	2.6	$	0.8		Cost of products sold	$	2.5	$	1.8		N/A	$	—	$	—
Commodities contracts		—		(0.1	)	Cost of products sold		—		(0.1	)	Cost of products sold		—		—
	$	2.6	$	0.7			$	2.5	$	1.7			$	—	$	—

Designated as Hedging Instrument

Schedule of Summary by Currency of Foreign Currency Forward Contracts

The following table summarizes, by currency, the contractual amounts of the company’s foreign currency forward contracts:

	September 30,
	2014				2013
(dollars in millions)	Buy		Sell		Buy		Sell
British pound	$	—	$	1.3	$	—	$	1.9
Canadian dollar		—		85.9		—		67.1
Euro		17.0		1.4		14.8		2.2
Indian rupee		—		—		1.5		—
Mexican peso		11.5		—		15.3		—
Total	$	28.5	$	88.6	$	31.6	$	71.2

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

The impact of derivative contracts on the company’s financial statements is as follows:

Fair value of derivatives designated as hedging instruments under:

(dollars in millions)	Balance Sheet Location	September 30, 2014			December 31, 2013
Foreign currency contracts	Other current assets	$	2.9		$	1.9
	Accrued liabilities		(1.2	)		(0.2	)
Total derivatives designated as hedging instruments		$	1.7		$	1.7

XML

Changes in Accumulated Other Comprehensive Loss by Component (Tables)

9 Months Ended

Sep. 30, 2014

Changes to Accumulated Other Comprehensive Loss by Component

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

	Three Months Ended September 30,
(dollars in millions)	2014			2013
Cumulative Foreign Currency Translation
Balance at beginning of period	$	12.2		$	13.9
Other comprehensive (loss) gain before reclassifications		(1.5	)		3.6
Balance at end of period		10.7			17.5
Unrealized Net Gain on Cash Flow Derivatives
Balance at beginning of period		0.4			0.5
Other comprehensive gain (loss) before reclassifications		1.1			(0.4	)
Realized gains on derivatives reclassified to cost of products sold (net of tax provision of $0.3 and $0.3 in 2014 and 2013, respectively)		(0.4	)		(0.1	)
Balance at end of period		1.1			—
Pension Liability
Balance at beginning of period		(271.5	)		(333.1	)
Other comprehensive loss before reclassifications		(0.1	)		—
Amounts reclassified from accumulated other comprehensive loss: (1)		5.3			6.3
Balance at end of period		(266.3	)		(326.8	)
Accumulated other comprehensive loss, end of period	$	(254.5	)	$	(309.3	)
(1)  Amortization of pension items:
Actuarial losses	$	8.8	(2)	$	10.6	(2)
Prior year service cost		(0.3	) (2)		(0.3	) (2)
		8.5			10.3
Tax benefit		(3.2	)		(4.0	)
Reclassification net of tax	$	5.3		$	6.3

⁽²⁾  These accumulated other comprehensive loss components are included in the computation of net periodic pension cost. See Note 9—Pensions for additional details

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

	Nine Months Ended September 30,
(dollars in millions)	2014			2013
Cumulative Foreign Currency Translation
Balance at beginning of period	$	19.9		$	19.5
Other comprehensive loss before reclassifications		(9.2	)		(2.0	)
Balance at end of period		10.7			17.5
Unrealized Net Gain on Cash Flow Derivatives
Balance at beginning of period		1.0			0.7
Other comprehensive earnings before reclassifications		1.6			0.4
Realized gains on derivatives reclassified to cost of products sold (net of tax provision of $0.7 and $0.5 in 2014 and 2013, respectively)		(1.5	)		(1.1	)
Balance at end of period		1.1			—
Pension Liability
Balance at beginning of period		(280.0	)		(340.7	)
Other comprehensive loss before reclassifications		(2.1	)		(5.0	)
Amounts reclassified from accumulated other comprehensive loss: (1)		15.8			18.9
Balance at end of period		(266.3	)		(326.8	)
Accumulated other comprehensive loss, end of period	$	(254.5	)	$	(309.3	)
(1) Amortization of pension items:
Actuarial losses	$	26.4	(2)	$	31.5	(2)
Prior year service cost		(0.8	) (2)		(0.7	) (2)
		25.6			30.8
Tax benefit		(9.8	)		(11.9	)
Reclassification net of tax	$	15.8		$	18.9

⁽²⁾  These accumulated other comprehensive loss components are included in the computation of net periodic pension cost. See Note 9—Pensions for additional details

XML

Basis of Presentation

9 Months Ended

Sep. 30, 2014

Basis of Presentation

1. Basis of Presentation

The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States (GAAP) for interim financial information and pursuant to the rules and regulations of the Securities and Exchange Commission (SEC). Accordingly, they do not include all of the information and footnotes required for complete financial statements. In the opinion of management, all adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation have been included. Operating results for the three and nine months ended September 30, 2014 are not necessarily indicative of the results expected for the full year. It is suggested that the accompanying condensed consolidated financial statements be read in conjunction with the audited consolidated financial statements and the notes thereto included in the company’s latest Annual Report on Form 10-K filed with the SEC on February 20, 2014.

On April 15, 2013, the company’s stockholders approved a proposal to increase the company’s authorized shares of Common Stock and the company’s board of directors declared a two-for-one stock split of the company’s Class A Common Stock and Common Stock (including treasury shares) in the form of a 100 percent stock dividend to stockholders of record on April 30, 2013 and payable on May 15, 2013. All references in the financial statements and footnotes to the number of shares outstanding, price per share, per share amounts and stock based compensation data have been recast to reflect the split for all periods presented.

Recent Accounting Pronouncements

In May 2014, the Financial Accounting Standards Board issued Accounting Standards Codification (ASC) 606-10, Revenue from Contracts with Customers (issued under Accounting Standards Update No. 2014-09).

ASC 606-10 will replace all existing revenue recognition guidance when effective. ASC 606-10 is effective for the year beginning January 1, 2017. Either full retrospective adoption or modified retrospective adoption is allowed under ASC 606-10. The company is in the process of determining whether the adoption of ASC 606-10 will have an impact on the company’s consolidated financial condition, results of operations or cash flows.

XML

Basis of Presentation - Additional Information (Detail)	0 Months Ended	9 Months Ended
	Apr. 15, 2013	Sep. 30, 2014
Organization And Summary Of Significant Accounting Policies [Line Items]
Stock split ratio	2
Percentage of stock dividend to stock holders		100.00%
Dividend payable date		May 15, 2013
Dividend date of record		Apr. 30, 2013

XML

Stock Based Compensation - Additional Information (Detail) (USD $) In Millions, except Share data, unless otherwise specified	3 Months Ended		9 Months Ended
	Sep. 30, 2014	Sep. 30, 2013	Sep. 30, 2014	Sep. 30, 2013
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Total stock based compensation expense recognized	$ 1.8	$ 2.3	$ 9.6	$ 8.8
Stock option compensation recognized	0.8	1.1	4.5	4.1
Weighted-average fair value per option at the date of grant			$ 16.55	$ 12.48
Share based compensation expense attributable to share units	1.0	1.2	5.1	4.7
Employee Stock Option
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Award vesting period			3 years	3 years
Award expiration period			10 years	10 years
Restricted Stock And Share Units
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Award vesting period			3 years	3 years
Number of Units - Granted			110,605	142,900
Value of share units at the date of issuance			$ 5.1	$ 4.9
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	2,321,641		2,321,641

XML

Income Taxes - Additional Information (Detail) (USD $) In Millions, unless otherwise specified	3 Months Ended	9 Months Ended	12 Months Ended	9 Months Ended		12 Months Ended		9 Months Ended
	Sep. 30, 2014	Sep. 30, 2014	Dec. 31, 2013	Sep. 30, 2014 U.S. federal Minimum	Sep. 30, 2014 U.S. federal Maximum	Dec. 31, 2014 Scenario, Forecast Minimum	Dec. 31, 2014 Scenario, Forecast Maximum	Sep. 30, 2014 State and local Minimum	Sep. 30, 2014 State and local Maximum	Sep. 30, 2014 Non-U.S. Minimum	Sep. 30, 2014 Non-U.S. Maximum
Income Tax Contingency [Line Items]
Effective tax rate	27.00%	27.30%	28.20%			27.00%	28.00%
Unrecognized tax benefits	$ 1.3	$ 1.3
Unrecognized tax benefits that would affect the effective tax rate, if recognized	$ 0.9	$ 0.9
Income tax examinations, years under examination				2011	2013			2000	2013	2006	2013

XML

CONDENSED CONSOLIDATED STATEMENTS OF EARNINGS (USD $) In Millions, except Per Share data, unless otherwise specified	3 Months Ended		9 Months Ended
	Sep. 30, 2014	Sep. 30, 2013	Sep. 30, 2014	Sep. 30, 2013
Net sales	$ 581.6	$ 536.2	$ 1,729.2	$ 1,594.9
Cost of products sold	366.3	339.6	1,101.8	1,021.0
Gross profit	215.3	196.6	627.4	573.9
Selling, general and administrative expenses	145.5	133.7	413.8	385.3
Restructuring, impairment and settlement expenses, net		1.3		7.2
Interest expense	1.5	1.4	4.3	4.5
Other income	(1.0)	(1.1)	(3.5)	(2.8)
Earnings before income taxes	69.3	61.3	212.8	179.7
Provision for income taxes	18.7	15.1	58.2	52.4
Net Earnings	$ 50.6	$ 46.2	$ 154.6	$ 127.3
Net Earnings Per Share of Common Stock	$ 0.56	$ 0.50	$ 1.71	$ 1.38
Diluted Net Earnings Per Share of Common Stock	$ 0.56	$ 0.50	$ 1.69	$ 1.37
Dividends Per Share of Common Stock	$ 0.15	$ 0.12	$ 0.45	$ 0.34

XML

Operations by Segment - Additional Information (Detail)	9 Months Ended
	Sep. 30, 2014 Segment
Segment Reporting Information [Line Items]
Number of reporting segments	2

XML

CONDENSED CONSOLIDATED BALANCE SHEETS (Parenthetical) (USD $)	Sep. 30, 2014	Dec. 31, 2013
Common Stock, par value	$ 1	$ 1
Common Stock, authorized	120,000,000	120,000,000
Common Stock, shares issued	82,123,867	82,065,280
Common Class A
Common Stock, par value	$ 5	$ 5
Common Stock, authorized	14,000,000	14,000,000
Common Stock, shares issued	13,229,929	13,288,516

XML

Schedule of Analysis of Company's Restructuring and Impairment Reserves (Detail) (USD $) In Millions, unless otherwise specified	3 Months Ended
	Sep. 30, 2014	Jun. 30, 2014	Mar. 31, 2014
Restructuring Cost and Reserve [Line Items]
Beginning Balance	$ 1.7	$ 2.5	$ 3.6
Cash payments/disposals	(0.4)	(0.8)	(1.1)
Ending Balance	1.3	1.7	2.5
Inventory Obsolescence
Restructuring Cost and Reserve [Line Items]
Beginning Balance	0.5	1.3	1.7
Reserve adjustments		(0.4)
Cash payments/disposals	(0.2)	(0.4)	(0.4)
Ending Balance	0.3	0.5	1.3
Severance Costs
Restructuring Cost and Reserve [Line Items]
Beginning Balance	1.2	1.0	1.5
Reserve adjustments		0.4
Cash payments/disposals	(0.2)	(0.2)	(0.5)
Ending Balance	1.0	1.2	1.0
Equipment Relocation
Restructuring Cost and Reserve [Line Items]
Beginning Balance		0.2	0.4
Cash payments/disposals		(0.2)	(0.2)
Ending Balance			$ 0.2

XML

Restructuring, Impairment and Settlement Expenses - Net (Tables)

9 Months Ended

Sep. 30, 2014

Schedule of Analysis of Company's Restructuring and Impairment Reserves

The following table presents an analysis of the company’s restructuring and impairment reserves:

(dollars in millions)	Inventory Obsolescence			Severance Costs			Equipment Relocation Costs			Total
Balance at December 31, 2013	$	1.7		$	1.5		$	0.4		$	3.6
Cash payments/disposals		(0.4	)		(0.5	)		(0.2	)		(1.1	)
Balance at March 31, 2014	$	1.3		$	1.0		$	0.2		$	2.5
Reserve adjustments		(0.4	)		0.4			—			—
Cash payments/disposals		(0.4	)		(0.2	)		(0.2	)		(0.8	)
Balance at June 30, 2014	$	0.5		$	1.2		$	—		$	1.7
Cash payments/disposals		(0.2	)		(0.2	)		—			(0.4	)
Balance at September 30, 2014	$	0.3		$	1.0		$	—		$	1.3

XML

Schedule of Inventories (Detail) (USD $) In Millions, unless otherwise specified	Sep. 30, 2014	Dec. 31, 2013
Inventories
Finished products	$ 106.6	$ 88.8
Work in process	11.1	12.3
Raw materials	122.0	113.6
Inventories, at FIFO cost	239.7	214.7
LIFO reserve	(21.2)	(21.3)
Net inventory	$ 218.5	$ 193.4

XML

Product Warranties (Tables)

9 Months Ended

Sep. 30, 2014

Schedule of Product Warranty Liability Activity

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

	Three Months Ended September 30,
(dollars in millions)	2014			2013
Balance at July 1,	$	136.4		$	129.8
Expense		14.6			15.5
Claims settled		(14.8	)		(13.6	)
Balance at September 30,	$	136.2		$	131.7
	Nine Months Ended September 30,
(dollars in millions)	2014			2013
Balance at January 1,	$	136.6		$	129.6
Expense		46.9			47.2
Claims settled		(47.3	)		(45.1	)
Balance at September 30,	$	136.2		$	131.7

XML

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (USD $) In Millions, unless otherwise specified	9 Months Ended
	Sep. 30, 2014	Sep. 30, 2013
Operating Activities
Net earnings	$ 154.6	$ 127.3
Adjustments to reconcile net earnings to cash provided by (used in) operating activities:
Depreciation and amortization	44.4	42.2
Pension expense	19.8	20.9
Loss on disposal of assets	0.2	0.2
Net changes in operating assets and liabilities, net of acquisitions:
Current assets and liabilities	(53.8)	(2.7)
Noncurrent assets and liabilities	0.1	1.9
Cash Provided by Operating Activities-continuing operations	165.3	189.8
Cash Used in Operating Activities-discontinued operations	(1.5)	(1.8)
Cash Provided by Operating Activities	163.8	188.0
Investing Activities
Capital expenditures	(66.0)	(65.7)
Acquisition of business		(4.0)
Investments in marketable securities	(149.1)	(63.8)
Net proceeds from sale of securities	129.7	158.4
Cash (Used in) Provided by Investing Activities	(85.4)	24.9
Financing Activities
Long-term debt incurred (retired)	64.3	(16.5)
Common stock repurchases	(86.6)	(66.5)
Net proceeds from stock option activity	4.7	8.9
Dividends paid	(41.0)	(31.6)
Cash Used in Financing Activities	(58.6)	(105.7)
Net increase in cash and cash equivalents	19.8	107.2
Cash and cash equivalents-beginning of period	380.7	266.9
Cash and Cash Equivalents-End of Period	$ 400.5	$ 374.1

XML

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE EARNINGS (USD $) In Millions, unless otherwise specified	3 Months Ended		9 Months Ended
	Sep. 30, 2014	Sep. 30, 2013	Sep. 30, 2014	Sep. 30, 2013
Net earnings	$ 50.6	$ 46.2	$ 154.6	$ 127.3
Other comprehensive (loss) earnings
Foreign currency translation adjustments	(1.5)	3.6	(9.2)	(2.0)
Unrealized net gain (loss) on cash flow derivative instruments, less related income tax (provision) benefit of $(0.4) and $- in 2014, $0.3 and $0.4 in 2013	0.7	(0.5)	0.1	(0.7)
Adjustment to pension liability gain, less related income tax provision of $(3.3) and $(9.9) in 2014 and $(4.0) and $(11.9) in 2013	5.2	6.3	13.7	13.9
Comprehensive Earnings	$ 55.0	$ 55.6	$ 159.2	$ 138.5

XML

Operations by Segment

9 Months Ended

Sep. 30, 2014

Operations by Segment

10. Operations by Segment

The company is comprised of two reporting segments: North America and Rest of World. Both segments manufacture and market comprehensive lines of residential and commercial gas, gas tankless and electric water heaters. Both segments primarily manufacture and market in their respective regions of the world. The Rest of World segment is primarily comprised of China, Europe and India. The North America segment also manufactures and globally markets specialty commercial water heating equipment, condensing and non-condensing boilers and water system tanks. The Rest of World segment also manufactures and markets water treatment products, primarily in Asia.

The company’s operations by segment are as follows:

	Three Months Ended September 30,						Nine Months Ended September 30,
(dollars in millions)	2014			2013			2014			2013
Net sales
North America	$	392.4		$	370.1		$	1,191.0		$	1,137.8
Rest of World		198.5			175.2			564.9			483.0
Inter-segment sales		(9.3	)		(9.1	)		(26.7	)		(25.9	)
	$	581.6		$	536.2		$	1,729.2		$	1,594.9
Operating earnings
North America (1) (3) (4)	$	53.0		$	51.5		$	171.5		$	160.6
Rest of World		30.0			26.9			84.3			67.6
Inter-segment earnings elimination		—			(0.1	)		—			(0.1	)
		83.0			78.3			255.8			228.1
Corporate expense (2)		(12.2	)		(15.6	)		(38.7	)		(43.9	)
Interest expense		(1.5	)		(1.4	)		(4.3	)		(4.5	)
Earnings before income taxes		69.3			61.3			212.8			179.7
Provision for income taxes		18.7			15.1			58.2			52.4
Net earnings	$	50.6		$	46.2		$	154.6		$	127.3
(1) Includes non-operating pension costs of:	$	(3.3	)	$	(3.9	)	$	(11.0	)	$	(11.1	)
(2) Includes non-operating pension costs of:		(1.6	)		(1.3	)		(3.7	)		(3.7	)
(3) Includes restructuring and impairment expenses of:		—			(1.3	)		—			(18.2	)
(4) Includes settlement income of:		—			—			—			11.0

XML

Document and Entity Information	9 Months Ended
	Sep. 30, 2014	Oct. 28, 2014
Document Information [Line Items]
Document Type	10-Q
Amendment Flag	false
Document Period End Date	Sep. 30, 2014
Document Fiscal Year Focus	2014
Document Fiscal Period Focus	Q3
Trading Symbol	AOS
Entity Registrant Name	SMITH A O CORP
Entity Central Index Key	0000091142
Current Fiscal Year End Date	--12-31
Entity Filer Category	Large Accelerated Filer
Entity Common Stock, Shares Outstanding		76,382,084
Common Class A
Document Information [Line Items]
Entity Common Stock, Shares Outstanding		13,163,850

XML

Fair Value Measurements

9 Months Ended

Sep. 30, 2014

Fair Value Measurements

11. Fair Value Measurements

ASC 820, Fair Value Measures and Disclosures, 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.

Assets and liabilities measured at fair value on a recurring basis are as follows:

(dollars in millions) Fair Value Measurement Using	September 30, 2014			December 31, 2013
Quoted prices in active markets for identical assets (Level 1)	$	125.0		$	107.0
Significant other observable inputs (Level 2)		(0.1	)		—
Total assets measured at fair value	$	124.9		$	107.0

There were no changes in the company’s valuation techniques used to measure fair values on a recurring basis during the nine months ended September 30, 2014.

XML

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE EARNINGS (Parenthetical) (USD $) In Millions, unless otherwise specified	3 Months Ended		9 Months Ended
	Sep. 30, 2014	Sep. 30, 2013	Sep. 30, 2014	Sep. 30, 2013
Unrealized net gain (loss) on cash flow derivative instruments, related income tax (provision) benefit	$ (0.4)	$ 0.3		$ 0.4
Adjustment to pension liability gain, related income tax provision	$ (3.3)	$ (4.0)	$ (9.9)	$ (11.9)

XML

Long-Term Debt

9 Months Ended

Sep. 30, 2014

Long-Term Debt

5. Long-Term Debt

The company has a $400 million multi-currency revolving credit agreement with eight banks, which expires on December 12, 2017. The facility has an accordion provision which allows it to be increased up to $500 million if certain conditions (including lender approval) are satisfied. Borrowings under bank credit lines and commercial paper borrowings are supported by the $400 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 September 30, 2014.

XML

Inventories

9 Months Ended

Sep. 30, 2014

Inventories

4. Inventories

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

(dollars in millions)	September 30, 2014			December 31, 2013
Finished products	$	106.6		$	88.8
Work in process		11.1			12.3
Raw materials		122.0			113.6
		239.7			214.7
LIFO reserve		(21.2	)		(21.3	)
	$	218.5		$	193.4

XML

Inventories (Tables)

9 Months Ended

Sep. 30, 2014

Schedule of Inventories

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

(dollars in millions)	September 30, 2014			December 31, 2013
Finished products	$	106.6		$	88.8
Work in process		11.1			12.3
Raw materials		122.0			113.6
		239.7			214.7
LIFO reserve		(21.2	)		(21.3	)
	$	218.5		$	193.4

XML

Derivative Instruments

9 Months Ended

Sep. 30, 2014

Derivative Instruments

12. Derivative Instruments

ASC 815 Derivatives and Hedging as amended, requires that all derivative instruments be recorded on the balance sheet at fair value and establishes criteria for designation and effectiveness of the hedging relationships. The accounting for changes in the fair value of a derivative instrument depends on whether it has been designated and qualifies as a part of a hedging relationship and, further, on the type of hedging relationship. For those derivative instruments that are designated and qualify as hedging instruments, the company must designate the hedging instrument, based upon the exposure hedged, as a fair value hedge, cash flow hedge, or a hedge of a net investment in a foreign operation.

The company designates that all of its hedging instruments are cash flow hedges. For derivative instruments that are designated and qualify as a cash flow hedge (i.e., hedging the exposure to variability in expected future cash flows that is attributable to a particular risk), the effective portion of the gain or loss on the derivative instrument is reported as a component of other comprehensive loss, net of tax, and is 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. The amount by which the cumulative change in the value of the hedge more than offsets the cumulative change in the value of the hedged item (i.e., the ineffective portion) is recorded in earnings, net of tax, in the period the ineffectiveness occurs.

The company utilizes certain derivative instruments to enhance its ability to manage currency 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.

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. Currencies for which the company utilizes foreign currency forward contracts include the British pound, Canadian dollar, Euro, Indian rupee 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 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 is expected to be reclassified into earnings within one year and all of the hedges will be reclassified into earnings no later than December 31, 2015.

The following table summarizes, by currency, the contractual amounts of the company’s foreign currency forward contracts:

	September 30,
	2014				2013
(dollars in millions)	Buy		Sell		Buy		Sell
British pound	$	—	$	1.3	$	—	$	1.9
Canadian dollar		—		85.9		—		67.1
Euro		17.0		1.4		14.8		2.2
Indian rupee		—		—		1.5		—
Mexican peso		11.5		—		15.3		—
Total	$	28.5	$	88.6	$	31.6	$	71.2

Commodity Futures Contracts

In addition to entering into supply arrangements in the normal course of business, the company also enters into futures contracts to fix the cost of certain raw material purchases, principally copper, with the objective of minimizing changes in cost due to market price fluctuations. The hedging strategy for achieving this objective is to purchase commodity futures contracts on the open market of the London Metals Exchange (LME) or over the counter contracts based on the LME.

The minimal after-tax gain on the effective portion of the contracts as of September 30, 2014 was recorded in accumulated other comprehensive loss and will be reclassified into cost of products sold in the period in which the underlying transaction is recorded in earnings. The effective portion of the contracts will be reclassified within one year. Commodity hedges outstanding at September 30, 2014 involve a total of approximately 1.0 million pounds of copper.

The impact of derivative contracts on the company’s financial statements is as follows:

Fair value of derivatives designated as hedging instruments under:

(dollars in millions)	Balance Sheet Location	September 30, 2014			December 31, 2013
Foreign currency contracts	Other current assets	$	2.9		$	1.9
	Accrued liabilities		(1.2	)		(0.2	)
Total derivatives designated as hedging instruments		$	1.7		$	1.7

The effect of derivatives designated as hedging instruments on the statement of earnings is as follows:

Three Months Ended September 30 (dollars in millions):
Derivatives in ASC 815 cash flow hedging relationships	Amount of gain (loss) recognized in OCI on derivative (effective portion)					Location of gain (loss) reclassified from accumulated OCI into earnings (effective portion)	Amount of gain (loss) reclassified from accumulated OCI into earnings (effective portion)					Location of gain (loss) recognized in earnings on derivative (ineffective portion)	Amount of gain (loss) recognized in earnings on a derivative (ineffective portion)
	2014		2013				2014		2013				2014		2013
Foreign currency contracts	$	1.8	$	(0.8	)	Cost of products sold	$	0.7	$	0.3		N/A	$	—	$	—
Commodities contracts		—		—		Cost of products sold		—		(0.1	)	Cost of products sold		—		—
	$	1.8	$	(0.8	)		$	0.7	$	0.2			$	—	$	—
Nine Months Ended September 30 (dollars in millions):
Derivatives in ASC 815 cash flow hedging relationships	Amount of gain (loss) recognized in OCI on derivative (effective portion)					Location of gain (loss) reclassified from accumulated OCI into earnings (effective portion)	Amount of gain (loss) reclassified from accumulated OCI into earnings (effective portion)					Location of gain (loss) recognized in earnings on derivative (ineffective portion)	Amount of gain (loss) recognized in earnings on a derivative (ineffective portion)
	2014		2013				2014		2013				2014		2013
Foreign currency contracts	$	2.6	$	0.8		Cost of products sold	$	2.5	$	1.8		N/A	$	—	$	—
Commodities contracts		—		(0.1	)	Cost of products sold		—		(0.1	)	Cost of products sold		—		—
	$	2.6	$	0.7			$	2.5	$	1.7			$	—	$	—

XML

Stock Based Compensation

9 Months Ended

Sep. 30, 2014

Stock Based Compensation

8. Stock Based Compensation

The company adopted the A. O. Smith Combined Incentive Compensation Plan (the “plan”) effective January 1, 2007. Stockholders reapproved the plan on April 16, 2012. The plan is a continuation of the A. O. Smith Combined Executive Incentive Compensation Plan which was originally approved by stockholders in 2002. The number of shares available for granting of options, restricted stock or share units under the plan at September 30, 2014 was 2,321,641. Upon stock option exercise or share unit vesting, shares are issued from treasury stock.

Total stock based compensation cost recognized in the three months ended September 30, 2014 and 2013 was $1.8 million and $2.3 million, respectively. Total stock based compensation cost recognized in the nine months ended September 30, 2014 and 2013 was $9.6 million and $8.8 million, respectively.

Stock Options

The stock options granted in the nine months ended September 30, 2014 and 2013 have three year pro-rata vesting from the date of grant. Stock options are issued at exercise prices equal to the fair value of Common Stock on the date of grant. For active employees, all options granted in 2014 and 2013 expire ten years after date of grant. Options are expensed ratably over the three-year vesting period; however, included in the stock option expense for the three and nine months ended September 30, 2014 and 2013 is 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 cost attributable to stock options in the three months ended September 30, 2014 and 2013 was $0.8 million and $1.1 million, respectively. Stock based compensation expense attributable to stock options in the nine months ended September 30, 2014 and 2013 was $4.5 million and $4.1 million, respectively.

Changes in option awards, all of which relate to Common Stock, were as follows for the nine months ended September 30, 2014:

	Weighted- Average Per Share Exercise Price		Nine Months Ended September 30, 2014			Average Remaining Contractual Life		Aggregate Intrinsic Value (dollars in millions)
Outstanding at January 1, 2014	$	22.37		1,440,623
Granted		46.50		298,750
Exercised		14.87		(133,002	)
Forfeited		42.13		(4,119	)
Outstanding at September 30, 2014		27.42		1,602,252			8 years	$	27.6
Exercisable at September 30, 2014	$	20.09		951,732			7 years	$	24.5

The weighted-average fair value per option at the date of grant during the nine months ended September 30, 2014 and 2013 using the Black-Scholes option-pricing model was $16.55 and $12.48, respectively. Assumptions were as follows:

	Nine Months Ended September 30,
	2014			2013
Expected life (years)		6.0			6.1
Risk-free interest rate		2.7	%		2.0	%
Dividend yield		1.1	%		1.1	%
Expected volatility		36.6	%		38.4	%

The expected life is based on historical exercise behavior and the projected exercise of unexercised stock options. The risk free interest rate is based on the U.S. Treasury yield curve in effect on the date of grant for the expected life of the option. The actual dividend yield is based on the actual annual dividends divided by the grant date market value of the company’s common stock. The expected volatility is based on the historical volatility of the company’s common stock.

Restricted Stock and Share Units

Participants may also be awarded shares of restricted stock or share units under the plan. The company granted 110,605 and 142,900 share units under the plan in the nine months ended September 30, 2014 and 2013, respectively. The share units were valued at $5.1 million and $4.9 million at the dates of issuance in 2014 and 2013, respectively, based on the company’s stock price at the dates of grant. The company’s share units are recognized as compensation expense ratably over the three year vesting period; however, included in share unit expense in the three and nine months ended September 30, 2014 and 2013 is expense associated with accelerated vesting of share unit awards for certain employees who either are retirement eligible or will become retirement eligible during the vesting period. Share based compensation expense attributable to share units of $1.0 million and $1.2 million was recognized in the three months ended September 30, 2014 and 2013, respectively. Share based compensation expense attributable to share units of $5.1 million and $4.7 million was recognized in the nine months ended September 30, 2014 and 2013, respectively.

A summary of share unit activity under the plan is as follows:

	Number of Units			Weighted-Average Grant Date Value
Issued and unvested at January 1, 2014		446,036		$	26.14
Granted		110,605			46.50
Vested		(144,476	)		21.63
Forfeited		(1,462	)		42.15
Issued and unvested at September 30, 2014		410,703		$	33.21

XML

Product Warranties

9 Months Ended

Sep. 30, 2014

Product Warranties

6. Product Warranties

The company offers warranties on the sales of certain of its products and records an accrual for the estimated future claims. The following table presents the company’s warranty liability activity.

	Three Months Ended September 30,
(dollars in millions)	2014			2013
Balance at July 1,	$	136.4		$	129.8
Expense		14.6			15.5
Claims settled		(14.8	)		(13.6	)
Balance at September 30,	$	136.2		$	131.7
	Nine Months Ended September 30,
(dollars in millions)	2014			2013
Balance at January 1,	$	136.6		$	129.6
Expense		46.9			47.2
Claims settled		(47.3	)		(45.1	)
Balance at September 30,	$	136.2		$	131.7

XML

Earnings Per Share of Common Stock

9 Months Ended

Sep. 30, 2014

Earnings Per Share of Common Stock

7. 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 September 30,				Nine Months Ended September 30,
	2014		2013		2014		2013
Denominator for basic earnings per share – weighted average shares		89,945,464		92,050,932		90,559,459		92,417,352
Effect of dilutive stock options and share units		660,286		677,129		680,671		629,201
Denominator for diluted earnings per share		90,605,750		92,728,061		91,240,130		93,046,553

XML

Pensions

9 Months Ended

Sep. 30, 2014

Pensions

9. Pensions

The following table presents the components of the company’s net pension expense:

	Three Months Ended September 30,						Nine Months Ended September 30,
(dollars in millions)	2014			2013			2014			2013
Service cost	$	2.0		$	2.3		$	5.9		$	6.8
Interest cost		11.2			9.9			33.6			29.6
Expected return on plan assets		(15.1	)		(15.5	)		(45.3	)		(46.3	)
Amortization of unrecognized loss		8.8			10.6			26.4			31.5
Amortization of prior service cost		(0.3	)		(0.3	)		(0.8	)		(0.7	)
Defined benefit plan expense	$	6.6		$	7.0		$	19.8		$	20.9

The company did not make a contribution to its U.S. pension plan in 2013. The company is not required to make a contribution and does not intend to make a voluntary contribution in 2014.

XML

Restructuring, Impairment and Settlement Expenses-Net - Additional Information (Detail) (USD $) In Millions, unless otherwise specified	3 Months Ended			9 Months Ended
	Sep. 30, 2014	Sep. 30, 2013	Mar. 31, 2013	Sep. 30, 2014	Sep. 30, 2013
Restructuring Cost and Reserve [Line Items]
Restructuring and impairment expense		$ 1.3			$ 7.2
Equipment relocation costs		1.3			1.3
Severance costs and impairment expense					7.5
Reduction of severance costs		0.3
Inventory obsolescence reserves		0.3			1.9
Tax benefit related to expenses		0.3			4.6
Impairment charges related to long-lived assets					7.5
Recovery of costs and damages from vendors			11.0
Settlement income			11.0
Income tax expense	18.7	15.1	4.2	58.2	52.4
Restructuring and Impairment Charges
Restructuring Cost and Reserve [Line Items]
Restructuring and impairment expense					$ 18.2

XML

Impact of Derivative Contracts on Company's Financial Statements (Detail) (Designated as Hedging Instrument, USD $) In Millions, unless otherwise specified	Sep. 30, 2014	Dec. 31, 2013
Derivatives, Fair Value [Line Items]
Fair value of derivative instruments, total	$ 1.7	$ 1.7
Foreign Currency Contracts | Other Current Assets
Derivatives, Fair Value [Line Items]
Fair value of derivative instruments, liabilities	2.9	1.9
Foreign Currency Contracts | Accrued Liabilities
Derivatives, Fair Value [Line Items]
Fair value of derivative instruments, assets	$ (1.2)	$ (0.2)

XML

Changes in Accumulated Other Comprehensive Loss by Component

9 Months Ended

Sep. 30, 2014

Changes in Accumulated Other Comprehensive Loss by Component

14. Changes in Accumulated Other Comprehensive Loss by Component

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

	Three Months Ended September 30,
(dollars in millions)	2014			2013
Cumulative Foreign Currency Translation
Balance at beginning of period	$	12.2		$	13.9
Other comprehensive (loss) gain before reclassifications		(1.5	)		3.6
Balance at end of period		10.7			17.5
Unrealized Net Gain on Cash Flow Derivatives
Balance at beginning of period		0.4			0.5
Other comprehensive gain (loss) before reclassifications		1.1			(0.4	)
Realized gains on derivatives reclassified to cost of products sold (net of tax provision of $0.3 and $0.3 in 2014 and 2013, respectively)		(0.4	)		(0.1	)
Balance at end of period		1.1			—
Pension Liability
Balance at beginning of period		(271.5	)		(333.1	)
Other comprehensive loss before reclassifications		(0.1	)		—
Amounts reclassified from accumulated other comprehensive loss: (1)		5.3			6.3
Balance at end of period		(266.3	)		(326.8	)
Accumulated other comprehensive loss, end of period	$	(254.5	)	$	(309.3	)
(1)  Amortization of pension items:
Actuarial losses	$	8.8	(2)	$	10.6	(2)
Prior year service cost		(0.3	) (2)		(0.3	) (2)
		8.5			10.3
Tax benefit		(3.2	)		(4.0	)
Reclassification net of tax	$	5.3		$	6.3

⁽²⁾  These accumulated other comprehensive loss components are included in the computation of net periodic pension cost. See Note 9—Pensions for additional details

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

	Nine Months Ended September 30,
(dollars in millions)	2014			2013
Cumulative Foreign Currency Translation
Balance at beginning of period	$	19.9		$	19.5
Other comprehensive loss before reclassifications		(9.2	)		(2.0	)
Balance at end of period		10.7			17.5
Unrealized Net Gain on Cash Flow Derivatives
Balance at beginning of period		1.0			0.7
Other comprehensive earnings before reclassifications		1.6			0.4
Realized gains on derivatives reclassified to cost of products sold (net of tax provision of $0.7 and $0.5 in 2014 and 2013, respectively)		(1.5	)		(1.1	)
Balance at end of period		1.1			—
Pension Liability
Balance at beginning of period		(280.0	)		(340.7	)
Other comprehensive loss before reclassifications		(2.1	)		(5.0	)
Amounts reclassified from accumulated other comprehensive loss: (1)		15.8			18.9
Balance at end of period		(266.3	)		(326.8	)
Accumulated other comprehensive loss, end of period	$	(254.5	)	$	(309.3	)
(1) Amortization of pension items:
Actuarial losses	$	26.4	(2)	$	31.5	(2)
Prior year service cost		(0.8	) (2)		(0.7	) (2)
		25.6			30.8
Tax benefit		(9.8	)		(11.9	)
Reclassification net of tax	$	15.8		$	18.9

⁽²⁾  These accumulated other comprehensive loss components are included in the computation of net periodic pension cost. See Note 9—Pensions for additional details

XML

Stock Based Compensation (Tables)

9 Months Ended

Sep. 30, 2014

Schedule of Changes in Option Shares

Changes in option awards, all of which relate to Common Stock, were as follows for the nine months ended September 30, 2014:

	Weighted- Average Per Share Exercise Price		Nine Months Ended September 30, 2014			Average Remaining Contractual Life		Aggregate Intrinsic Value (dollars in millions)
Outstanding at January 1, 2014	$	22.37		1,440,623
Granted		46.50		298,750
Exercised		14.87		(133,002	)
Forfeited		42.13		(4,119	)
Outstanding at September 30, 2014		27.42		1,602,252			8 years	$	27.6
Exercisable at September 30, 2014	$	20.09		951,732			7 years	$	24.5

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

The weighted-average fair value per option at the date of grant during the nine months ended September 30, 2014 and 2013 using the Black-Scholes option-pricing model was $16.55 and $12.48, respectively. Assumptions were as follows:

	Nine Months Ended September 30,
	2014			2013
Expected life (years)		6.0			6.1
Risk-free interest rate		2.7	%		2.0	%
Dividend yield		1.1	%		1.1	%
Expected volatility		36.6	%		38.4	%

Schedule of Share Unit Activity Under Plan

A summary of share unit activity under the plan is as follows:

	Number of Units			Weighted-Average Grant Date Value
Issued and unvested at January 1, 2014		446,036		$	26.14
Granted		110,605			46.50
Vested		(144,476	)		21.63
Forfeited		(1,462	)		42.15
Issued and unvested at September 30, 2014		410,703		$	33.21

XML

Schedule of Summary by Currency of Foreign Currency Forward Contracts (Detail) (Foreign currency forward contracts, USD $) In Millions, unless otherwise specified	Sep. 30, 2014	Sep. 30, 2013
Buy
Derivative Instruments and Hedging Activities Disclosures [Line Items]
Contractual amounts of foreign currency forward contracts	$ 28.5	$ 31.6
Buy | Euro
Derivative Instruments and Hedging Activities Disclosures [Line Items]
Contractual amounts of foreign currency forward contracts	17.0	14.8
Buy | Indian Rupee
Derivative Instruments and Hedging Activities Disclosures [Line Items]
Contractual amounts of foreign currency forward contracts		1.5
Buy | Mexico, Pesos
Derivative Instruments and Hedging Activities Disclosures [Line Items]
Contractual amounts of foreign currency forward contracts	11.5	15.3
Sell
Derivative Instruments and Hedging Activities Disclosures [Line Items]
Contractual amounts of foreign currency forward contracts	88.6	71.2
Sell | British Pound
Derivative Instruments and Hedging Activities Disclosures [Line Items]
Contractual amounts of foreign currency forward contracts	1.3	1.9
Sell | Canadian Dollar
Derivative Instruments and Hedging Activities Disclosures [Line Items]
Contractual amounts of foreign currency forward contracts	85.9	67.1
Sell | Euro
Derivative Instruments and Hedging Activities Disclosures [Line Items]
Contractual amounts of foreign currency forward contracts	$ 1.4	$ 2.2

XML

Changes in Option Awards All of Which Related to Common Stock (Detail) (USD $) In Millions, except Share data, unless otherwise specified	9 Months Ended
	Sep. 30, 2014
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Weighted-Average Per Share Exercise Price, beginning period	$ 22.37
Weighted-Average Per Share Exercise Price - Granted	$ 46.50
Weighted-Average Per Share Exercise Price - Exercised	$ 14.87
Weighted- Average Per Share Exercise Price - Forfeited	$ 42.13
Weighted-Average Per Share Exercise Price, ending period	$ 27.42
Weighted-Average Per Share Exercise Price, Exercisable	$ 20.09
Number of Options Outstanding, Beginning Balance	1,440,623
Number of Options, Granted	298,750
Number of Options, Exercised	(133,002)
Number of Options, Forfeited	(4,119)
Number of Options Outstanding, Ending Balance	1,602,252
Number of Options, Exercisable at End of Period	951,732
Average Remaining Contractual Life, Outstanding at End of Period, Years	8 years
Average Remaining Contractual Life, Exercisable at End of Period, Years	7 years
Aggregate Intrinsic Value, Outstanding at End of Period	$ 27.6
Aggregate Intrinsic Value, Exercisable at End of Period	$ 24.5

XML

CONDENSED CONSOLIDATED BALANCE SHEETS (USD $) In Millions, unless otherwise specified	Sep. 30, 2014	Dec. 31, 2013
Assets
Cash and cash equivalents	$ 400.5	$ 380.7
Marketable securities	123.2	105.3
Receivables	474.3	458.7
Inventories	218.5	193.4
Deferred income taxes	40.1	40.1
Other current assets	38.2	27.4
Total Current Assets	1,294.8	1,205.6
Property, plant and equipment	802.8	758.7
Less accumulated depreciation	381.8	367.4
Net property, plant and equipment	421.0	391.3
Goodwill	430.7	433.5
Other intangibles	312.9	324.8
Other assets	27.4	36.3
Total Assets	2,486.8	2,391.5
Liabilities
Trade payables	374.8	387.1
Accrued payroll and benefits	61.8	61.7
Accrued liabilities	90.8	81.2
Product warranties	46.1	46.7
Long-term debt due within one year	13.8	14.2
Total Current Liabilities	587.3	590.9
Long-term debt	240.7	177.7
Pension liabilities	107.5	110.7
Other liabilities	176.1	183.5
Total Liabilities	1,111.6	1,062.8
Stockholders' Equity
Common Stock,value	82.1	82.1
Capital in excess of par value	599.4	589.7
Retained earnings	1,095.8	982.2
Accumulated other comprehensive loss	(254.5)	(259.1)
Treasury stock at cost	(213.8)	(132.6)
Total Stockholders' Equity	1,375.2	1,328.7
Total Liabilities and Stockholders' Equity	2,486.8	2,391.5
Common Class A
Stockholders' Equity
Common Stock,value	$ 66.2	$ 66.4

XML

Restructuring, Impairment and Settlement Expenses - Net

9 Months Ended

Sep. 30, 2014

Restructuring, Impairment and Settlement Expenses - Net

3. Restructuring, Impairment and Settlement Expenses - Net

In the first quarter of 2013, the company announced the move of manufacturing operations from its Fergus, Ontario facility to other North American facilities. During the three months ended September 30, 2013, the company recognized $1.3 million of pre-tax restructuring and impairment expenses, comprised of $1.3 million of equipment relocation costs and $0.3 million of inventory obsolescence reserves and a reduction in severance costs of $0.3 million, as well as a corresponding $0.3 million tax benefit related to the expenses. For the nine months ended September 30, 2013, the company recognized $18.2 million of pre-tax restructuring and impairment expenses, comprised of $7.5 million of severance costs, $1.9 million of inventory obsolescence reserves, impairment charges related to long-lived assets totaling $7.5 million and $1.3 million for equipment relocation costs, as well as a corresponding $4.6 million tax benefit related to the expenses. The majority of the consolidation of operations occurred in the second quarter of 2013.

In the first quarter of 2013, the company entered into a settlement agreement with a former supplier of a North American subsidiary regarding previous overcharges and warranty costs. The terms of the settlement agreement resulted in an $11.0 million cash payment to the company, a pre-tax gain of $11.0 million and a related $4.2 million income tax expense.

The following table presents an analysis of the company’s restructuring and impairment reserves:

(dollars in millions)	Inventory Obsolescence			Severance Costs			Equipment Relocation Costs			Total
Balance at December 31, 2013	$	1.7		$	1.5		$	0.4		$	3.6
Cash payments/disposals		(0.4	)		(0.5	)		(0.2	)		(1.1	)
Balance at March 31, 2014	$	1.3		$	1.0		$	0.2		$	2.5
Reserve adjustments		(0.4	)		0.4			—			—
Cash payments/disposals		(0.4	)		(0.2	)		(0.2	)		(0.8	)
Balance at June 30, 2014	$	0.5		$	1.2		$	—		$	1.7
Cash payments/disposals		(0.2	)		(0.2	)		—			(0.4	)
Balance at September 30, 2014	$	0.3		$	1.0		$	—		$	1.3

XML

Pensions (Tables)

9 Months Ended

Sep. 30, 2014

Schedule of Components of Net Pension Expense

The following table presents the components of the company’s net pension expense:

	Three Months Ended September 30,						Nine Months Ended September 30,
(dollars in millions)	2014			2013			2014			2013
Service cost	$	2.0		$	2.3		$	5.9		$	6.8
Interest cost		11.2			9.9			33.6			29.6
Expected return on plan assets		(15.1	)		(15.5	)		(45.3	)		(46.3	)
Amortization of unrecognized loss		8.8			10.6			26.4			31.5
Amortization of prior service cost		(0.3	)		(0.3	)		(0.8	)		(0.7	)
Defined benefit plan expense	$	6.6		$	7.0		$	19.8		$	20.9

XML

Company's Warranty Liability Activity (Detail) (USD $) In Millions, unless otherwise specified	3 Months Ended		9 Months Ended
	Sep. 30, 2014	Sep. 30, 2013	Sep. 30, 2014	Sep. 30, 2013
Product Warranties
Beginning balance	$ 136.4	$ 129.8	$ 136.6	$ 129.6
Expense	14.6	15.5	46.9	47.2
Claims settled	(14.8)	(13.6)	(47.3)	(45.1)
Ending balance	$ 136.2	$ 131.7	$ 136.2	$ 131.7

XML

Income Taxes

9 Months Ended

Sep. 30, 2014

Income Taxes

13. Income Taxes

The effective tax rate for the three and nine months ended September 30, 2014 was 27.0 percent and 27.3 percent, respectively. The company estimates that its annual effective tax rate for the full year of 2014 will be between 27.0 and 28.0 percent. The full year effective tax rate in 2013 was 28.2 percent.

As of September 30, 2014, the company had $1.3 million of unrecognized tax benefits of which $0.9 million would affect its effective tax rate if recognized. The company recognizes potential interest and penalties related to unrecognized tax benefits as a component of tax expense.

The U.S. federal tax returns for 2011—2013 are subject to audit. The company is subject to state and local audits for tax years 2000—2013. The company is also subject to non-U.S. income tax examinations for years 2006—2013.