Consolidated Statements of Comprehensive Income - USD ($) $ in Millions |
12 Months Ended | ||
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Dec. 31, 2020 |
Dec. 31, 2019 |
Dec. 31, 2018 |
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Consolidated Statements of Comprehensive Income | |||
Net income | $ 114.3 | $ 131.5 | $ 128.0 |
Other comprehensive income (loss) net of tax: | |||
Foreign currency translation adjustments | 31.4 | (5.0) | (23.7) |
Cash flow hedges | (0.6) | (4.7) | 1.7 |
Other comprehensive income (loss) | 30.8 | (9.7) | (22.0) |
Comprehensive income | $ 145.1 | $ 121.8 | $ 106.0 |
Consolidated Balance Sheets (Parenthetical) $ in Millions |
Dec. 31, 2020
USD ($)
$ / shares
shares
|
Dec. 31, 2019
USD ($)
$ / shares
shares
|
---|---|---|
Trade accounts receivable, reserve allowances | $ | $ 11.1 | $ 14.3 |
Preferred Stock, par value (in dollars per share) | $ / shares | $ 0.10 | $ 0.10 |
Preferred Stock, shares authorized | 5,000,000 | 5,000,000 |
Preferred Stock, shares issued | 0 | 0 |
Preferred Stock, shares outstanding | 0 | 0 |
Class A | ||
Common Stock, par value (in dollars per share) | $ / shares | $ 0.10 | $ 0.10 |
Common Stock, shares authorized | 120,000,000 | 120,000,000 |
Common Stock, votes per share (Number of votes) | 1 | 1 |
Common Stock, issued shares | 27,478,512 | 27,586,416 |
Common Stock, outstanding shares | 27,478,512 | 27,586,416 |
Class B | ||
Common Stock, par value (in dollars per share) | $ / shares | $ 0.10 | $ 0.10 |
Common Stock, shares authorized | 25,000,000 | 25,000,000 |
Common Stock, votes per share (Number of votes) | 10 | 10 |
Common Stock, issued shares | 6,144,290 | 6,279,290 |
Common Stock, outstanding shares | 6,144,290 | 6,279,290 |
Description of Business |
12 Months Ended |
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Dec. 31, 2020 | |
Description of Business | |
Description of Business | (1) Description of Business Watts Water Technologies, Inc. (the Company) is a leading supplier of products, solutions and systems that manage and conserve the flow of fluids and energy into, through and out of buildings in the commercial and residential markets of the Americas, Europe, and Asia-Pacific, Middle East, and Africa (APMEA). For over 140 years, the Company has designed and produced valve systems that safeguard and regulate water systems, energy efficient heating and hydronic systems, drainage systems and water filtration technology that helps purify and conserve water. COVID-19 In March 2020, the World Health Organization categorized COVID-19 as a pandemic, and the President of the United States declared the COVID-19 outbreak a national emergency. The unprecedented and widespread impact of COVID-19 continues to affect the countries and markets in which the Company operates, and new and evolving government actions to address the COVID-19 pandemic continue to occur on a regular basis. For the year ended December 31, 2020, temporary closures, lockdowns and other restrictions mandated by various governmental authorities intended to combat the COVID-19 pandemic negatively impacted the Company’s revenue at varying levels within each of the Company’s business segments. The Company’s operating response, cost management and capital preservation actions are discussed within Item. 7 “Management’s Discussion and Analysis of Financial Condition and Results of Operations”. Capital markets and economies worldwide continue to be negatively impacted by the protective measures taken by governments in response to the COVID-19 pandemic, and these measures resulted in a global economic recession. Such economic disruption may have a material adverse effect on the Company’s business if customers continue to curtail and reduce overall spending, which may not return to pre-pandemic levels. Policymakers around the globe have responded with fiscal policy actions to bolster their local economies. The magnitude and overall effectiveness of these actions remain uncertain. The severity of the impact of the COVID-19 pandemic on the Company's future business will depend on a number of factors, including, but not limited to, the duration and severity of the pandemic and the extent and severity of the impact on the Company's customers, operations, distributors and suppliers, all of which are uncertain and cannot be predicted. The Company's future results of operations and liquidity could be adversely impacted by delays in payments of outstanding receivable amounts beyond normal payment terms, supply chain disruptions and uncertain demand, and the impact of any initiatives or programs that the Company may undertake to address financial and operational challenges faced by its customers. However, the Company does not anticipate any adverse impacts on its ability to pay its debt obligations as they become due. As of the date of issuance of these consolidated financial statements, the extent to which the COVID-19 pandemic may materially impact the Company's financial condition, liquidity, or results of operations is uncertain. Due to the risks and uncertainties resulting from the COVID-19 pandemic, the full extent of the impact on the Company’s business remains difficult to predict as the pandemic and response to the pandemic continue to evolve. The Company intends to continue to assess the evolving impact of the COVID-19 pandemic and expects to continue to make adjustments to its responses to address the situation as it develops. |
Accounting Policies |
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Accounting Policies | ||||||||||||||||||||||||||||||||
Accounting Policies | (2) Accounting Policies
Principles of Consolidation The consolidated financial statements include the accounts of the Company and its majority and wholly-owned subsidiaries. Upon consolidation, all intercompany accounts and transactions are eliminated. Cash Equivalents Cash equivalents consist of instruments with remaining maturities of three months or less at the date of purchase and consist primarily of money market funds, for which the carrying amount is a reasonable estimate of fair value. Allowance for Credit Losses The allowance for credit losses is established to represent the Company’s best estimate of the net realizable value of the outstanding amount of receivables that it will be unable to collect. The Company developed financial asset pools that consist of business or legal entities with similar risk and economic characteristics, including types of products and customers, trade receivable characteristics, and history of credit losses on trade receivables. The development of the Company’s allowance for credit losses varies by asset pool but in general is based on a review of past due amounts, historical write-off experience, aging trends affecting specific accounts, changes in customer payment terms, general operational factors affecting all accounts and as applicable current economic conditions and reasonable and supportable forecasted economic conditions that affect collectability. In addition, factors are developed in certain regions utilizing historical trends of sales and returns and allowances and cash discount activities to derive a reserve for returns and allowances and cash discounts. The Company also monitors the creditworthiness of the Company’s largest customers and periodically reviews customer credit limits to reduce risk. The Company’s allowance for credit losses as of December 31, 2020 included an adjustment for the estimated impact of the COVID-19 pandemic on future collectability that was not material to our financial statements. If circumstances relating to specific customers change or unanticipated changes occur in the general business environment, the Company’s estimates of the recoverability of receivables could be further adjusted. Concentration of Credit The Company sells products to a diversified customer base and, therefore, has no significant concentrations of credit risk. In 2020, 2019 and 2018, no customer accounted for 10% or more of the Company’s total sales or accounts receivable. Inventories Inventories are stated at the lower of cost or market, using the first-in, first-out method. Market value is determined by replacement cost or net realizable value. The Company utilizes both specific product identification and historical product demand as the basis for determining its excess or obsolete inventory reserve. The Company identifies all inventories that exceed a range of to three years in sales. This is determined by comparing the current inventory balance against unit sales for the trailing twelve months. New products added to inventory within the past twelve months are excluded from this analysis. A portion of the Company’s products contain recoverable materials, therefore the excess and obsolete reserve is established net of any recoverable amounts. Changes in market conditions, lower-than-expected customer demand or changes in technology or features could result in additional obsolete inventory that is not saleable and could require additional inventory reserve provisions.Goodwill and Other Intangible Assets Goodwill is recorded when the consideration paid for acquisitions exceeds the fair value of net tangible and intangible assets acquired. Goodwill and other intangible assets with indefinite useful lives are not amortized, but rather are tested for impairment at least annually or more frequently if events or circumstances indicate that it is “more likely than not” that they might be impaired, such as from a change in business conditions. The Company performs its annual goodwill and indefinite-lived intangible assets impairment assessment in the fourth quarter of each year. Long-Lived Assets Intangible assets with estimable lives and other long-lived assets are reviewed for indicators of impairment at least quarterly or more frequently if events or changes in circumstances indicate that the carrying amount of an asset or asset group may not be recoverable. Property, Plant and Equipment Property, plant and equipment are recorded at cost. Depreciation is provided on a straight-line basis over the estimated useful lives of the assets, which range from 10 to 40 years for buildings and improvements and 3 to 15 years for machinery and equipment. Leasehold improvements are depreciated over the lesser of the economic useful life of the asset or the remaining lease term. Leases The Company has leases for the following classes of underlying assets: real estate, automobiles, manufacturing equipment, facility equipment, office equipment and certain service arrangements that are dependent on an identified asset. The Company determines if an arrangement qualifies as a lease at its inception. The Company, as the lessee, recognizes in the statement of financial position a liability to make lease payments and a right-of-use asset (“ROU”) representing the right to use the underlying asset for both finance and operating leases with a lease term longer than twelve months. The Company elected the short-term lease recognition exemption for all leases that qualify and does not recognize ROU assets or lease liabilities for short-term leases. The Company recognizes short-term lease payments on a straight-line basis over the lease term in the consolidated statement of operations. The Company determines the initial classification and measurement of its ROU assets and lease liabilities at the lease commencement date and thereafter if modified. For operating leases, the lease liability is initially and subsequently measured at the present value of the unpaid lease payments at the lease commencement date. For finance leases, the lease liability is initially measured in the same manner and date as operating leases and is subsequently measured at amortized cost using the effective interest method. Measuring the lease liability requires certain estimates and judgments. These estimates and judgments include how the Company determines 1) the discount rate it uses to discount the unpaid lease payments to present value; 2) lease term; and 3) lease payments.
The ROU asset is initially measured at cost, which comprises the initial amount of the lease liability adjusted for the lease payments made at or before the lease commencement date, plus any initial direct costs incurred less any lease incentives received. For operating leases, the ROU asset is subsequently measured throughout the lease term at the carrying amount of the lease liability, plus initial direct costs, plus (minus) any prepaid (accrued) lease payments, less the unamortized balance of lease incentives received. Lease expense for operating leases is recognized on a straight-line basis over the reasonably assured lease term based on the total lease payments and is included in cost of goods sold or within selling, general and administrative expenses in the consolidated statements of operations, based on the primary use of the ROU asset. For finance leases, the Company recognizes the amortization of the ROU asset on a straight-line basis from the lease commencement date to the earlier of the end of the useful life or the end of the lease term unless the lease transfers ownership of the underlying asset to the Company or the Company is reasonably certain to exercise an option to purchase the underlying asset. In those cases, the ROU asset is amortized over the useful life of the underlying asset. Amortization of the ROU asset is recognized in depreciation in the consolidated statements of operations. The interest expense related to finance leases is recognized using the effective interest method and is included within interest expense. Variable lease payments associated with the Company’s leases are recognized in the period when the event, activity, or circumstance in the lease agreement on which those payments are assessed occurs and are included in cost of goods sold or within selling, general and administrative expenses in the consolidated statements of operations, based on the primary use of the ROU asset. ROU assets for operating and finance leases are periodically assessed for impairment. The Company uses the long-lived assets impairment guidance in ASC Subtopic 360-10, Property, Plant, and Equipment- Overall, to determine whether an ROU asset is impaired, and if so, the amount of the impairment loss to recognize. The Company monitors for events or changes in circumstances that require a reassessment of one of its leases. When a reassessment results in a remeasurement of a lease liability, a corresponding adjustment is made to the carrying amount of the corresponding ROU asset unless doing so would reduce the carrying amount of the ROU asset to an amount less than zero. In that case, the amount of the adjustment that would result in a negative ROU asset balance is recorded in the statement of operations. Taxes, Other than Income Taxes Taxes assessed by governmental authorities on sale transactions are recorded on a net basis and excluded from sales in the Company’s consolidated statements of operations. Income Taxes Income taxes are accounted for under the asset and liability method. Deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases and operating loss and tax credit carry forwards. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the enactment date. The Company recognizes tax benefits when the item in question meets the more–likely–than-not (greater than 50% likelihood of being sustained upon examination by the taxing authorities) threshold. Foreign Currency Translation The functional currency for most of the Company’s foreign subsidiaries is their local currency. For non-U.S. subsidiaries that transact in a functional currency other than the U.S. dollar, assets and liabilities are translated at current rates of exchange at the balance sheet date. Income and expense items are translated at the average foreign currency exchange rates for the period. Adjustments resulting from the translation of the financial statements of foreign operations into U.S. dollars are excluded from the determination of net income and are recorded in accumulated other comprehensive income, a separate component of equity. Transaction gains and losses are included in other (income) expense, net in the consolidated statements of operations. For subsidiaries where the functional currency of the assets and liabilities differs from the local currency, non-monetary assets and liabilities are translated at the rate of exchange in effect on the date assets were acquired while monetary assets and liabilities are translated at current rates of exchange as of the balance sheet date. Income and expense items are translated at the average foreign currency rates for the period. Translation adjustments for these subsidiaries are included in other (income) expense, net in the consolidated statements of operations. Stock-Based Compensation The Company records compensation expense in the financial statements for share-based awards based on the grant date fair value of those awards for restricted stock awards and deferred stock awards. Stock-based compensation expense for restricted stock awards and deferred stock awards is recognized over the requisite service periods of the awards on a straight-line basis, which is generally commensurate with the vesting term. The performance stock units offered by the Company to employees are amortized to expense over the vesting period, and based on the Company’s performance relative to the performance goals, may be adjusted. Changes to the estimated shares expected to vest will result in adjustments to the related share-based compensation expense that will be recorded in the period of change. The Company accounts for forfeitures as they occur, rather than estimate expected forfeitures over the vesting period of the respective grant. The Company does not reclassify the benefits associated with tax deductions in excess of recognized compensation cost from operating activities to financing activities in the Consolidated Statement of Cash Flows. Financial Instruments In the normal course of business, the Company manages risks associated with commodity prices, foreign exchange rates and interest rates through a variety of strategies, including the use of hedging transactions, executed in accordance with the Company’s policies. The Company’s hedging transactions include, but are not limited to, the use of various derivative financial and commodity instruments. As a matter of policy, the Company does not use derivative instruments unless there is an underlying exposure. Any change in value of the derivative instruments would be substantially offset by an opposite change in the value of the underlying hedged items. The Company does not use derivative instruments for trading or speculative purposes. Derivative instruments may be designated and accounted for as either a hedge of a recognized asset or liability (fair value hedge) or a hedge of a forecasted transaction (cash flow hedge). For a fair value hedge, both the effective and ineffective portions of the change in fair value of the derivative instrument, along with an adjustment to the carrying amount of the hedged item for fair value changes attributable to the hedged risk, are recognized in earnings. For a cash flow hedge, changes in the fair value of the derivative instrument that are highly effective are deferred in accumulated other comprehensive income or loss until the underlying hedged item is recognized in earnings. The Company had two interest rate swaps as of December 31, 2020. Prior to executing the Amended and Restated Credit Agreement (the “New Credit Agreement”) on April 24, 2020, the effective portion of the fair value of these interest rate swaps was recorded to other comprehensive income. As a result of entering the New Credit Agreement the critical terms of the New Credit Agreement no longer matched the hedged item and therefore, these two interest rate swaps no longer qualified for cash flow hedge accounting. The Company subsequently began recognizing the mark-to-market fair value adjustments on a monthly basis into earnings within interest expense. Also, the balance outstanding on the Company’s Revolving Credit Facility as of December 31, 2020 was below the notional amount of the interest rate swaps. Therefore, as of December 31, 2020, the balance of the previously effective portion of the fair value of the interest rate swaps recorded in other comprehensive income was reclassified into earnings within interest expense. These two interest rate swaps were effective cash flow hedges as of December 31, 2019. The Company also has foreign exchange hedges designated as cash flow hedges as of December 31, 2020 and 2019. Refer to Note 16 for further details. If a fair value or cash flow hedge were to cease to qualify for hedge accounting or be terminated, it would continue to be carried on the balance sheet at fair value until settled, but hedge accounting would be discontinued prospectively. If a forecasted transaction were no longer probable of occurring, amounts previously deferred in accumulated other comprehensive income would be recognized immediately in earnings. On occasion, the Company may enter into a derivative instrument that does not qualify for hedge accounting because it is entered into to offset changes in the fair value of an underlying transaction which is required to be recognized in earnings (natural hedge). These instruments are reflected in the Consolidated Balance Sheets at fair value with changes in fair value recognized in earnings.
Portions of the Company’s outstanding debt are exposed to interest rate risks. The Company monitors its interest rate exposures on an ongoing basis to maximize the overall effectiveness of its interest rates. Fair Value Measurements Fair value is defined as the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. An entity is required to maximize the use of observable inputs, where available, and minimize the use of unobservable inputs when measuring fair value. The Company has certain financial assets and liabilities that are measured at fair value on a recurring basis and certain nonfinancial assets and liabilities that may be measured at fair value on a nonrecurring basis. The fair value disclosures of these assets and liabilities are based on a three-level hierarchy, which is defined as follows:
Assets and liabilities subject to this hierarchy are classified in their entirety based on the lowest level of input that is significant to the fair value measurement. The Company’s assessment of the significance of a particular input to the fair value measurement in its entirety requires judgment and considers factors specific to the asset or liability. Refer to Note 16 for further details. Shipping and Handling Shipping and handling costs included in selling, general and administrative expense amounted to $55.0 million, $57.6 million and $56.3 million for the years ended December 31, 2020, 2019 and 2018, respectively. Research and Development Research and development costs included in selling, general, and administrative expense amounted to $42.2 million, $39.6 million and $34.5 million for the years ended December 31, 2020, 2019 and 2018, respectively. Revenue Recognition The Company recognizes revenue under the core principle to depict the transfer of control to the Company’s customers in an amount reflecting the consideration to which the Company expects to be entitled. In order to achieve that core principle, the Company applies the following five-step approach: (1) identify the contract with a customer, (2) identify the performance obligations in the contract, (3) determine the transaction price, (4) allocate the transaction price to the performance obligations in the contract, and (5) recognize revenue when a performance obligation is satisfied. The Company’s revenue for product sales is recognized on a point in time model, at the point control transfers to the customer, which is generally when products are shipped from the Company’s manufacturing or distribution facilities or when delivered to the customer’s named location. Sales tax, value-added tax, or other taxes collected concurrent with revenue producing activities are excluded from revenue. Freight costs billed to customers for shipping and handling activities are included in revenue with the related cost included in selling, general and administrative expenses. See Note 4 for further disclosures and detail regarding revenue recognition. Estimates The preparation of financial statements in conformity with accounting principles generally accepted in the United States requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. The worldwide spread of COVID-19 has created significant uncertainty in the global economy. There have been no comparable recent events that provide guidance as to the effect COVID-19 as a global pandemic may have, and, as a result, the ultimate impact of COVID-19 and the extent to which COVID-19 continues to impact the Company’s business, results of operations and financial condition will depend on future developments, which are highly uncertain and difficult to predict. The use of estimates in specific accounting policies is described further below as appropriate. Actual results could differ from those estimates. Recently Adopted Accounting Standards In August 2018, the Financial Accounting Standards Board (“FASB”) issued ASU 2018-15, “Intangibles-Goodwill and Other-Internal-Use Software (Subtopic 350-40)-Customer’s Accounting for Implementation Costs Incurred in a Cloud Computing Arrangement that is a Service Contract.” ASU 2018-15 aligns the requirements for capitalizing implementation costs incurred in a hosting arrangement that is a service contract with the requirements for capitalizing implementation costs incurred to develop or obtain internal-use software. This guidance requires an entity in a hosting arrangement that is a service contract to follow the guidance in Subtopic 350-40 to determine which implementation costs to capitalize as an asset related to the service contract and which costs to expense. This standard is effective for fiscal years beginning after December 15, 2019, including interim periods within that reporting period. The Company adopted this standard in the first quarter of 2020, and it did not have a material impact on the Company’s financial statements. In August 2018, the FASB issued ASU 2018-13, “Fair Value Measurement (Topic 820)-Disclosure Framework- Changes to the Disclosure Requirements for Fair Value Measurement.” ASU 2018-13 modifies the disclosure requirements on fair value measurements under Topic 820. This standard is effective for fiscal years beginning after December 15, 2019, including interim periods within that reporting period. The Company adopted this standard in the first quarter of 2020, and it did not have a material impact on the Company’s financial statements. In June 2016, the FASB issued ASU 2016-13, “Financial Instruments - Credit Losses (Topic 326).” ASU 2016-13 replaces the incurred loss impairment methodology under previous United States Generally Accepted Accounting Principles (“GAAP”) with a methodology that reflects expected credit losses and requires the use of a forward-looking expected credit loss model for accounts receivable, loans, and other financial instruments. The financial assets for which this standard is applicable on the Company’s balance sheet are accounts receivable and contract assets. The standard requires the Company to pool financial assets based on similar risk and economic characteristics and estimate expected credit losses over the contractual life of the asset. This standard is effective for reporting periods beginning after December 15, 2019. The standard requires a modified retrospective approach through a cumulative-effect adjustment to retained earnings as of the beginning of the first reporting period in which the guidance is effective. The Company adopted this standard in the first quarter of 2020, and it did not have a material impact on the Company’s financial statements. In February 2016, the FASB issued ASU 2016-02, “Leases (Topic 842).” ASU 2016-02 requires a lessee to recognize in the statement of financial position a liability to make lease payments and an ROU asset representing the right to use the underlying asset for the lease term for both finance and operating leases with a term longer than twelve months. Topic 842 was subsequently amended by ASU 2018-01, “Land Easement Practical Expedient for Transition to Topic 842,” ASU 2018-10, “Codification Improvements to Topic 842, Leases,” and ASU 2018-11 “Targeted Improvements.” ASU 2016-02 was effective for financial statements issued for fiscal years beginning after December 15, 2018, including interim periods within those fiscal years. Under ASC 842, leases are classified as finance or operating, with the classification determining the pattern and classification of expense recognition in the income statement. A modified retrospective transition approach was required, applying the new standard to all leases existing at the date of initial application. The Company could choose to use either 1) the effective date of the standard or 2) the beginning of the earliest comparable period presented in the financial statements as the date of initial application. The Company adopted the new standard on January 1, 2019 and used the effective date of the standard as the date of the Company’s initial application. Under this approach, the financial information and the disclosures required under the new standard are not provided for dates and periods before January 1, 2019. The Company designed the necessary changes to its existing processes and configured all system requirements that were necessary to implement this new standard.
The new standard provides a number of optional practical expedients throughout the transition. The Company elected the “package of practical expedients,” which permitted the Company to not reassess under the new standard the Company’s prior conclusions about lease identification, lease classification, and initial direct costs. The Company did not elect the use-of-hindsight or the practical expedient pertaining to land easements, the latter not being applicable to the Company. The Company also elected the practical expedient to not separate lease and non-lease components for all of the Company’s leases. As a result of adopting ASC 842, the Company recorded operating ROU assets of $33.6 million and operating lease liabilities of $33.9 million as of January 1, 2019 on the consolidated balance sheet. The difference between the ROU assets and lease liabilities related to the impact of eliminating deferred and prepaid lease payments recognized under the previous lease accounting standard. The Company’s adoption of ASC 842 did not result in a change to the Company’s recognition of its existing finance leases as of January 1, 2019. The adoption of the new lease accounting standard did not have a material impact on either the consolidated statement of operations or the consolidated statement of cash flows. However, ASU 2016-02 has significantly affected the Company’s disclosures about noncash activities related to leases. See Note 5 to the consolidated financial statements. Accounting Standards Updates In March 2020, the FASB issued ASU 2020-04, "Reference Rate Reform (Topic 848): Facilitation of the Effects of Reference Rate Reform on Financial Reporting." The amendments provide optional guidance for a limited time to ease the potential burden in accounting for reference rate reform. The new guidance provides optional expedients and exceptions for applying GAAP to contracts, hedging relationships and other transactions affected by reference rate reform if certain criteria are met. The amendments apply only to contracts and hedging relationships that reference LIBOR or another reference rate expected to be discontinued due to reference rate reform. These amendments are effective immediately and may be applied prospectively to contract modifications made and hedging relationships entered into or evaluated on or before December 31, 2022. The Company is currently evaluating its contracts and the optional expedients provided by the new standard. In December 2019, the FASB issued ASU No. 2019-12, "Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes.” This ASU simplifies the accounting for income taxes by clarifying and amending existing guidance related to the recognition of franchise tax, the evaluation of a step up in the tax basis of goodwill, and the effects of enacted changes in tax laws or rates in the effective tax rate computation, among other clarifications. The effective date for adoption of this ASU is the calendar year beginning January 1, 2021 with early adoption permitted. The Company is currently evaluating the impact of this guidance on the Company’s financial statements, and does not expect the adoption of this guidance to have a material impact on the Company’s financial statements. |
Restructuring and Other Charges, Net |
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Restructuring and Other Charges, Net | (3) Restructuring and Other Charges, Net The Company’s Board of Directors approves all major restructuring programs that may involve the discontinuance of significant product lines or the shutdown of significant facilities. From time to time, the Company takes additional restructuring actions, including involuntary terminations that are not part of a major program. The Company accounts for these costs in the period that the liability is incurred. These costs are included in restructuring charges in the Company’s consolidated statements of operations. A summary of the pre-tax cost by restructuring program is as follows:
The Company recorded pre-tax restructuring in its business segments as follows:
Other Actions The Company periodically initiates other actions which are not part of a major program. Total “Other Actions” pre-tax restructuring expense was $9.9 million, $4.3 million and $3.4 million for the years ended December 31, 2020, 2019 and 2018, respectively. Included in “Other Actions” for the year ended December 31, 2020 were actions taken in the Americas, Europe and APMEA segments and Corporate primarily in response to the COVID-19 pandemic. Also included in “Other Actions” for the years ended 2019 and 2018 were European restructuring activities that were initiated in 2018 and extended through 2019, as discussed below. “Other Actions” also include certain minor initiatives for which the Company incurred restructuring expenses or adjusted prior restructuring reserves in the years ended December 31, 2020, 2019 and 2018. 2020 Other Actions In the second quarter of 2020, management initiated certain restructuring actions with respect to the Company’s Americas and APMEA segments as well as at Corporate, and in the third quarter of 2020 initiated additional restructuring actions within the Company’s Europe and Americas segments. These actions were primarily in response to the economic challenges related to the COVID-19 pandemic. The restructuring actions included costs mainly for severance benefits due to reductions in force, as well as costs relating to asset write-offs, facility exit and other exit costs. The total pre-tax charge for the 2020 restructuring initiatives is expected to be approximately $10.7 million, of which $10.3 million has been incurred through December 31, 2020. Through December 31, 2020, the Company paid approximately $5.0 million of severance benefits and other related costs. As of December 31, 2020, the restructuring reserve associated with these actions was approximately $4.6 million and primarily related to severance benefits. The remaining expected costs relate to asset write off, facility exit and other exit costs and are expected to be completed in the first half of 2021. The following table summarizes total expected, incurred and remaining pre-tax restructuring costs for the 2020 restructuring actions:
2018 Other Actions In the third quarter of 2018, management initiated restructuring actions primarily associated with the European headquarters as well as cost savings initiatives at certain European manufacturing facilities. These actions included reductions in force and other related costs. Total pre-tax charges for the program were reduced through the twelve months ended December 31, 2020 by approximately $0.3 million due primarily to decreased severance costs. This resulted in total program restructuring charges of approximately $8.0 million, which have been fully incurred. The pre-tax charges for the year ended December 31, 2019 and 2018 were approximately $4.3 million and $4.0 million, respectively and primarily included severance benefits. The restructuring reserve associated with these actions as of December 31, 2020 was approximately $0.5 million, and primarily relates to severance benefits. 2017 Other Actions In the fourth quarter of 2017, management initiated certain restructuring actions related to reductions in force within the Company’s Europe segment. The restructuring activities primarily included severance benefits. The total pre-tax charges associated with the Europe restructuring activities were initially expected to be approximately $4.1 million with costs being fully incurred in 2017. The company reduced its total pre-tax charges for the program to approximately $3.4 million as of September 30, 2018, primarily related to reduced severance costs. As of December 31, 2019, these actions had been completed and no amounts were reserved associated with these actions. |
Revenue Recognition |
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Revenue Recognition | (4) Revenue Recognition The Company is a leading supplier of products that manage and conserve the flow of fluids and energy into, through and out of buildings in the commercial and residential markets. For over 140 years, the Company has designed and produced valve systems that safeguard and regulate water systems, energy efficient heating and hydronic systems, drainage systems and water filtration technology that helps purify and conserve water. The Company distributes products through four primary distribution channels: wholesale, original equipment manufacturers (OEMs), specialty, and do-it-yourself (DIY). The Company operates in three geographic segments: Americas, Europe, and APMEA. Each of these segments sells similar products, which are comprised of the following principal product lines:
The following table disaggregates revenue, which is presented as net sales in the financial statements, for each reportable segment, by distribution channel and principal product line:
The Company generally considers customer purchase orders, which in some cases are governed by master sales agreements, to represent the contract with a customer. The Company’s contracts with customers are generally for products only and typically do not include other performance obligations such as professional services, extended warranties, or other material rights. In situations where sales are to a distributor, the Company has concluded that its contracts are with the distributor as the Company holds a contract bearing enforceable rights and obligations only with the distributor. As part of its consideration of the contract, the Company evaluates certain factors including the customer’s ability to pay (or credit risk). For each contract, the Company considers the promise to transfer products, each of which is distinct, to be the identified performance obligation. In determining the transaction price, the Company evaluates whether the price is subject to refund or adjustment to determine the net consideration to which the Company expects to be entitled. As the Company’s standard payment terms are less than one year, the Company has elected not to assess whether a contract has a significant financing component. The Company allocates the transaction price to each distinct product based on its relative standalone selling price. The product price as specified on the purchase order is considered the standalone selling price as it is an observable input which depicts the price as if sold to a similar customer in similar circumstances. Revenue is recognized when control of the product is transferred to the customer (i.e., when the Company’s performance obligation is satisfied), which typically occurs at shipment from the Company’s manufacturing site or distribution center, or delivery to the customer’s named location. In certain circumstances, revenue from shipments to retail customers is recognized only when the product is consumed by the customer, as based on the terms of the arrangement, transfer of control is not satisfied until that point in time. In determining whether control has transferred, the Company considers if there is a present right to payment, physical possession and legal title, along with risks and rewards of ownership having transferred to the customer. In certain circumstances, the Company manufactures customized product without alternative use for its customers. However, as these arrangements do not entitle the Company to a right to payment of cost plus a profit for work completed, the Company has concluded that control transfers at the point in time and not over time. At times, the Company receives orders for products to be delivered over multiple dates that may extend across reporting periods. The Company invoices for each delivery upon shipment and recognizes revenues for each distinct product delivered, assuming transfer of control has occurred. As scheduled delivery dates are within one year, under the optional exemption provided by the guidance, revenues allocated to future shipments of partially completed contracts are not disclosed. The Company generally provides an assurance warranty that its products will substantially conform to the published specification. The Company’s liability is limited to either a credit equal to the purchase price or replacement of the defective part. Returns under warranty have historically been immaterial. The Company does not consider activities related to such warranty, if any, to be a separate performance obligation. For certain of its products, the Company will separately sell extended warranty and service policies to its customers. The Company considers the sale of these as separate performance obligations. These policies typically are for periods ranging from to three years. Payments received are deferred and recognized over the policy period. For all periods presented, the revenue recognized and the revenue deferred under these policies is not material to the consolidated financial statements.The timing of revenue recognition, billings and cash collections from the Company’s contracts with customers can vary based on the payment terms and conditions in the customer contracts. In some cases, customers will partially prepay for their goods; in other cases, after appropriate credit evaluations, payment is due in arrears. In addition, there are constraints which cause variability in the ultimate consideration to be recognized. These constraints typically include early payment discounts, volume rebates, rights of return, cooperative advertising, and market development funds. The Company includes these constraints in the estimated transaction price when there is a basis to reasonably estimate the amount of variable consideration. These estimates are based on historical experience, anticipated future performance and the Company’s best judgment at the time. When the timing of the Company’s recognition of revenue is different from the timing of payments made by the customer, the Company recognizes either a contract asset (performance precedes contractual due date) or a contract liability (customer payment precedes performance). Contracts with payment in arrears are recognized as receivables. The opening and closing balances of the Company’s contract assets and contract liabilities are as follows:
The amount of revenue recognized that was included in the opening contract liability balance was $9.9 million and $11.8 million for the years ended December 31, 2020 and 2019, respectively. This revenue consists primarily of revenue recognized for shipments of product which had been prepaid as well as the amortization of extended warranty and service policy revenue. The Company did not recognize any material revenue from obligations satisfied in prior periods. There were no impairment losses related to Contract Assets for the years ended December 31, 2020 and 2019. The Company incurs costs to obtain and fulfill a contract; however, the Company has elected to recognize all incremental costs to obtain a contract as an expense when incurred if the amortization period is one year or less. The Company has elected to treat shipping and handling activities performed after the customer has obtained control of the related goods as a fulfillment cost and the related cost is accrued for in conjunction with the recording of revenue for the goods. |
Leases |
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Leases | (5) Leases The Company adopted ASC 842 effective January 1, 2019. The Company has a variety of categories of lease arrangements, including real estate, automobiles, manufacturing equipment, facility equipment, office equipment and certain service arrangements that are dependent on an identified asset. The Company’s real estate leases, which consist primarily of manufacturing facilities, office space and warehouses, represent approximately 90% of the Company’s operating lease liabilities and generally have a between 2 and 15 years. The remaining leases primarily consist of automobiles, machinery and equipment used in the manufacturing processes (e.g., forklifts and pallets), general office equipment and certain service arrangements, each with various lease terms. The Company’s automobile leases typically have terms ranging from 3 to 5 years. The Company’s remaining population of have ranging from 2 to 15 years. Certain lease arrangements may renewal terms 1 to 5 years. The majority of the Company’s real estate, automobile, and equipment leases consist of fixed and variable lease payments. For the Company’s real estate leases, variable payments include those for common area maintenance, property taxes, and insurance. For automobile leases, variable payments primarily include maintenance, taxes, and insurance. For equipment leases, variable payments include maintenance and payments based on usage. The Company has elected to account for lease and non-lease components as a single component for all leases. Therefore, all fixed costs within a lease arrangement are included in thefixed lease payments for the single, combined lease component and used to measure the lease liability. Variable lease costs are recognized in the period when the event, activity, or circumstance in the lease agreement occurs. Some of the Company’s lease agreements include Company options to either extend and/or early terminate the lease, the costs of which are included in the Company’s lease liability to the extent that such options are reasonably certain of being exercised. Renewal options are generally not included in the lease term for the Company’s existing leases because the Company is not reasonably certain to exercise these renewal options. The Company does not generally enter into leases involving the construction or design of the underlying asset, and nearly all of the assets the Company leases are not specialized in nature. The Company’s leases generally do not include termination options for either party to the lease or restrictive financial or other covenants. The Company’s lease agreements generally do not include residual value guarantees. Right-of-use asset amounts reported in the consolidated balance sheet by asset category as of December 31, 2020 and 2019 were as follows:
The maturity of the Company’s operating and finance lease liabilities as of December 31, 2020 was as follows:
The total lease cost consisted of the following amounts:
The following information represents supplemental disclosure for the statement of cash flows related to operating and finance leases:
The following summarizes additional information related to operating and finance leases:
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Goodwill & Intangibles |
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Goodwill & Intangibles | (6) Goodwill & Intangibles Goodwill The Company performs its annual goodwill impairment testing for each reporting unit as of fiscal October month end or earlier if there is a triggering event or circumstance that indicates an impairment loss may have occurred. As of the October 25, 2020 testing date, the Company had $590.8 million of goodwill on its balance sheet. In 2020, the Company had seven reporting units. One of these reporting units, Water Quality, had no goodwill. The Company performed a qualitative analysis for each of the six remaining reporting units, which include Blücher, US Drains, Fluid Solutions-Europe, Fluid Solutions-Americas, Heating and Hot Water Solutions (“HHWS”) and APMEA. As a result of the qualitative analyses, the Company determined that the fair values of the reporting units were more likely than not greater than the carrying amounts. In 2020 and 2019, the Company did not need to proceed beyond the qualitative analysis, and no goodwill impairments were recorded. In addition to the annual impairment test performed as of October 25, 2020, and as a result of the impact of the COVID-19 global pandemic, the Company continued to review the guidance outlined in ASC 350 to determine if there was an event or change in circumstance to indicate it was more likely than not that an impairment loss had been incurred during the twelve months ended December 31, 2020. The Company concluded a triggering event had not occurred as of December 31, 2020 and it was not “more likely than not” that the Company’s reporting units might be impaired. Additionally, the Company noted the HHWS reporting unit had a goodwill balance of $218.9 million as of December 31, 2020, which holds the greatest amount of goodwill and the least amount of excess of fair value over carrying value based on the most recent quantitative assessment. While the Company concluded that a triggering event did not occur during the year ended December 31, 2020 and performed a qualitative analysis for its annual impairment test, the impact of a prolonged COVID-19 pandemic could impact the results of operations due to changes to assumptions utilized in the determination of the estimated fair values of the HHWS reporting unit that may be significant enough to trigger an impairment determination. The Company completed two acquisitions during the year ended December 31, 2020 which were not considered material to its consolidated financial statements. In the third quarter of 2020, the Company completed an acquisition within the APMEA segment resulting in $3.9 million of goodwill. Additionally, in the fourth quarter of 2020, the Company completed an acquisition within the Americas segment resulting in $5.5 million of goodwill. The changes in the carrying amount of goodwill by geographic segment were as follows:
Long-Lived Assets Indefinite-lived intangibles are tested for impairment at least annually or more frequently if events or circumstances, such as a change in business conditions, indicate that it is “more likely than not” that an intangible asset might be impaired. The Company performs its annual indefinite-lived intangibles impairment assessment in the fourth quarter of each year. In 2020 and 2019, the Company performed a qualitative assessment for certain tradenames where the fair value significantly exceeded the carrying value in the most recent quantitative assessment, and no other indicators of impairment were present. For the remaining tradenames in 2020 and 2019, the Company performed a quantitative assessment. For the 2018 impairment assessments, the Company performed quantitative assessments for all indefinite-lived intangible assets. The methodology employed for quantitative assessments was the relief from royalty method, a subset of the income approach. Based on the results of the assessments, the Company did not recognize an impairment on any indefinite-lived intangibles in 2020, 2019 or 2018. Intangible assets with estimable lives and other long-lived assets are reviewed for impairment at least quarterly or more frequently if events or changes in circumstances indicate that the carrying amount of an asset or asset group may not be recoverable. Recoverability of intangible assets with estimable lives and other long-lived assets is measured by a comparison of the carrying amount of an asset or asset group to future net undiscounted pre-tax cash flows expected to be generated by the asset or asset group. If these comparisons indicate that an asset is not recoverable, the impairment loss recognized is the amount by which the carrying amount of the asset or asset group exceeds the related estimated fair value. Estimated fair value is based on either discounted future pre-tax operating cash flows or appraised values, depending on the nature of the asset. The Company determines the discount rate for this analysis based on the weighted average cost of capital using the market and guideline public companies for the related businesses and does not allocate interest charges to the asset or asset group being measured. Judgment is required to estimate future operating cash flows. In 2020, the Company recognized a $1.0 million impairment charge for a long-lived asset and $0.4 million impairment charge for an amortizable technology asset, both within the Americas segment, as changes in market expectations indicated the carrying amount of these assets were no longer recoverable. In 2019 and 2018, there were no indications of the carrying amounts of intangible assets with estimable lives not being recoverable. Intangible assets include the following:
Aggregate amortization expense for amortized intangible assets for 2020, 2019 and 2018 was $15.2 million, $15.6 million and $19.6 million, respectively. Additionally, future amortization expense on amortizable intangible assets is expected to be $13.5 million for 2021, $12.1 million for 2022, $11.9 million for 2023, $11.7 million for 2024 and $10.2 million for 2025. Amortization expense is provided on a straight-line basis over the estimated useful lives of the intangible assets. The weighted-average remaining life of total amortizable intangible assets is 8.4 years. Patents, customer relationships, technology, trade names and other amortizable intangibles have weighted-average remaining lives of 0.5 years, 8.8 years, 5.0 years, 11.9 years and 16.5 years, respectively. Indefinite-lived intangible assets include trade names and trademarks. |
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Inventories, net | (7) Inventories, net Inventories consist of the following:
Raw materials, work-in-process and finished goods are net of valuation reserves of $37.3 million and $27.9 million as of December 31, 2020 and 2019, respectively. Finished goods of $16.3 million and $16.7 million as of December 31, 2020 and 2019, respectively, were consigned. |
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Property, Plant and Equipment | (8) Property, Plant and Equipment Property, plant and equipment consist of the following:
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Income Taxes |
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Income Taxes | (9) Income Taxes The significant components of the Company’s deferred income tax liabilities and assets are as follows:
The provision for income taxes is based on the following pre-tax income:
The provision for income taxes consists of the following:
The 2017 Tax Cuts and Jobs Act (“2017 Tax Act”) was enacted on December 22, 2017 and resulted in significant changes to the U.S. corporate income tax system. These changes included lowering the U.S. Corporate income tax rate from 35% to 21% and the elimination or reduction of certain domestic deductions and credits. The 2017 Tax Act also transitioned international taxation from a worldwide system to a modified territorial system creating new taxes on certain foreign-sourced earnings and certain related party payments, which are referred to as the Global Intangible Low-taxed Income Tax (“GILTI”) and the Annual Anti-Base Erosion Tax, respectively. The 2017 Tax Act also imposed a one-time mandatory deemed repatriation tax (“Toll Tax”) on foreign subsidiaries’ previously untaxed accumulated foreign earnings. Changes in tax rates and tax laws are accounted for in the period of enactment. Therefore, the Company recorded a provisional tax expense of $25.1 million related to the 2017 Tax Act, as of December 31, 2017. During the year ended December 31, 2018, the Company finalized the impact of the 2017 Tax Act and recorded a benefit of $3.7 million, reducing the net impact to $21.4 million. Included in the 2018 adjustment was a $10.6 million benefit related to the determination of our foreign tax credits and partial release of a related valuation allowance, partially offset by additional Toll Tax of $10.2 million. In 2020, final tax regulations were released with respect to the GILTI tax regime. These regulations permit an exclusion from GILTI for items of foreign income subject to a high effective tax rate, referred to as the GILTI High Tax Exclusion (“HTE”). Under the new regulations, the Company was allowed to review its GILTI income for the 2018 and 2019 tax years. The Company elected the exclusion for both the 2018 and 2019 tax years resulting in a total tax benefit of $2.1 million which was recorded in 2020. Toll Tax The 2017 Tax Act imposed a one-time Toll Tax which required the Company to pay U.S. income taxes on accumulated foreign subsidiary earnings not previously subject to U.S. income tax at a rate of 15.5% to the extent of foreign cash and cash equivalents and 8% on the remaining earnings. For the year ended December 31, 2017, the Company recorded a provisional amount of $23.3 million related to the Toll Tax. As of December 31, 2018, the Company recorded tax expense based on final guidance on the 2017 Tax Act of $10.2 million, which resulted in a total Toll Tax charge of $33.5 million which is being paid over eight years beginning in 2018 and will not accrue interest. Deferred Tax Remeasurement As the Company’s deferred tax liabilities exceeded the balance of the Company’s deferred tax assets, for the year ended December 31, 2017, the Company recorded a provisional amount of tax benefit of $12 million, and as of December 31, 2018, the Company recorded a final tax benefit of $2 million, for a net $14 million benefit, reflecting the decrease in the U.S. Corporate income tax rate. Tax on Foreign Earnings As a result of the 2017 Tax Act, the Company can repatriate its cumulative undistributed foreign earnings through that date back to the U.S. with minimal U.S. income tax consequences other than the one-time Toll Tax. The Company recorded a provisional amount of deferred tax expense of $14.6 million, and as of December 31, 2018, the Company recorded a final tax benefit of $2 million, for a net deferred tax expense of $12.6 million for the future repatriation of foreign earnings. Actual income taxes reported are different than what would have been computed by applying the federal statutory tax rate to income before income taxes. The reasons for these differences are as follows:
At December 31, 2020, the Company had foreign and domestic net operating loss carry forwards of $27.2 million and $3.8 million, respectively, for income tax purposes before considering valuation allowances; $27.2 million of the losses can be carried forward indefinitely, $2.5 million of the domestic losses expire between 2035 and 2040 and $1.3 million can be carried forward indefinitely. The net operating losses consist of $27.2 million related to Austrian operations and $3.8 million related to United States operations. At December 31, 2020, a new U.S. capital loss carry forward of $1.0 million before considering valuation allowances was generated and will expire in 2025. At December 31, 2020 and December 31, 2019, the Company had foreign tax credit carry forwards of $34.4 million and $32.7 million, respectively, for income tax purposes before considering valuation allowances. The foreign tax credit carryforwards expire between 2027 and 2030. At December 31, 2020 and December 31, 2019, the Company had valuation allowances of $42.1 million and $28.6 million, respectively. At December 31, 2020, $34.4 million related to foreign tax credits, $6.7 million related to Austrian net operating losses, and $1.0 million related to the domestic capital loss carry forward. At December 31, 2019, $22.3 million related to foreign tax credits and $6.3 million related to Austrian and Korean net operating losses. The $12.1 million increase from December 31, 2019 to December 31, 2020 in the valuation allowance related to foreign tax credits was due to recently issued final tax regulations which changed certain requirements for determining foreign source income and the realizability of the foreign tax credits. Management believes that the ability of the Company to use such foreign tax credits and losses within the applicable carry forward period does not rise to the level of the more likely than not threshold. The Company does not have a valuation allowance on other deferred tax assets, as management believes that it is more likely than not that the Company will recover the net deferred tax assets. Management believes it is more likely than not that the future reversals of the deferred tax liabilities, together with forecasted income, will be sufficient to fully recover the deferred tax assets. After December 31, 2017, the Company considered all of its foreign earnings to be permanently reinvested outside of the U.S. and has no plans to repatriate these foreign earnings to the U.S. Unrecognized Tax Benefits As of December 31, 2020, the Company had gross unrecognized tax benefits of approximately $11.7 million, approximately $5.1 million of which, if recognized, would affect the effective tax rate. The difference between the amount of unrecognized tax benefits and the amount that would affect the effective tax rate consists of allowable correlative adjustments that are available for certain jurisdictions. A reconciliation of the beginning and ending amount of unrecognized tax is as follows:
The Company estimates that it is reasonably possible that the balance of unrecognized tax benefits as of December 31, 2020 may decrease by $3.1 million to $5.6 million in the next twelve months, as a result of lapses in statutes of limitations and settlements and $2.3 million to $2.9 million of which, if recognized, would affect the effective tax rate. In February 2018, the United States Internal Revenue Service concluded an audit of the Company’s 2016 and 2015 tax years. There were no material adjustments as a result of the audit. The Company conducts business in a variety of locations throughout the world resulting in tax filings in numerous domestic and foreign jurisdictions. The Company is subject to tax examinations regularly as part of the normal course of business. The Company’s major jurisdictions are the U.S., France, Germany, Italy and Canada. The statute of limitations in the U.S. is subject to tax examination for 2017 and later; France, Germany, Italy and Canada are subject to tax examination for 2016 and later. All other jurisdictions, with few exceptions, are no longer subject to tax examinations in state, local or international jurisdictions for tax years before 2013. The Company accounts for interest and penalties related to uncertain tax positions as a component of income tax expense. |
Accrued Expenses and Other Liabilities |
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Accrued Expenses and Other Liabilities | (10) Accrued Expenses and Other Liabilities Accrued expenses and other liabilities consist of the following:
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Financing Arrangements |
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Debt | (11) Financing Arrangements The Company’s debt consists of the following:
Principal payments during each of the next two years are due as follows (in millions): 2021—$0; and 2022—$200.0. In February 2016, the Company entered into a Credit Agreement (the “Prior Credit Agreement”) among the Company, certain subsidiaries of the Company who become borrowers under the Prior Credit Agreement, JPMorgan Chase Bank, N.A., as Administrative Agent, Swing Line Lender and Letter of Credit Issuer, and the other lenders referred to therein. The Prior Credit Agreement provided for a $500 million, five-year, senior unsecured revolving credit facility (the “Prior Revolving Credit Facility”) with a sublimit of up to $100 million in letters of credit. The Prior Credit Agreement also provided for a $300 million, five-year, term loan facility (the “Term Loan Facility”) available to the Company in a single draw, of which the entire $300 million had been drawn in February 2016. On April 24, 2020, the Company entered into an Amended and Restated Credit Agreement (the "New Credit Agreement") among the Company, certain subsidiaries of the Company who become borrowers thereunder, JPMorgan Chase Bank, N.A., as Administrative Agent, Swing Line Lender and Letter of Credit Issuer, and the other lenders referred to therein. The New Credit Agreement amends and restates the Prior Credit Agreement in its entirety while increasing the amount of revolving credit available from $500 million to $800 million, and extending the maturity by additional year to February 2022. This senior unsecured revolving credit facility (the "Revolving Credit Facility") also includes sublimits of $100 million for letters of credit and $15 million for swing line loans. As of December 31, 2020, the Company had drawn down $200.0 million on this line of credit and had $16.2 million in letters of credit outstanding, which resulted in $583.8 million of unused and available credit under the Revolving Credit Facility. The term loan facility under the Prior Credit Agreement was terminated and paid off effective April 24, 2020, with funds from the Revolving Credit Facility. Borrowings outstanding under the Revolving Credit Facility bear interest at a fluctuating rate per annum equal to an applicable percentage defined as (i) in the case of Eurocurrency rate loans, the adjusted British Bankers Association LIBOR rate (which at all times will not be less than 1.00%) plus an applicable percentage, ranging from 1.50% to 2.10%, determined by reference to the Company's consolidated leverage ratio, or (ii) in the case of alternate base rate loans and swing line loans, interest (which at all times will not be less than 2.00%) at the greatest of (a) the Prime Rate in effect on such day, (b) the FRBNY Rate in effect on such day plus 0.5% and (c) the adjusted LIBOR rate plus 1.0% for a one month interest period in dollars. The interest rate as of December 31, 2020 on the Revolving Credit Facility was 2.5%. As of December 31, 2020, the Company was in compliance with all covenants related to the New Credit Agreement.In addition to paying interest under the New Credit Agreement, the Company is also required to pay certain fees in connection with the Revolving Credit Facility, including, but not limited to, an unused facility fee and letter of credit fees. The New Credit Agreement matures on February 12, 2022, subject to extension under certain circumstances and subject to the terms of the New Credit Agreement. The Company may repay loans outstanding under the New Credit Agreement from time to time without premium or penalty, other than customary breakage costs, if any, and subject to the terms of the New Credit Agreement. The New Credit Agreement imposes various restrictions on the Company and its subsidiaries, including restrictions pertaining to: (i) the incurrence of additional indebtedness, (ii) limitations on liens, (iii) making distributions, dividends and other payments, (iv) mergers, consolidations and acquisitions, (v) dispositions of assets, (vi) certain consolidated leverage ratios and consolidated interest coverage ratios, (vii) transactions with affiliates, (viii) changes to governing documents, and (ix) changes in control. As a result of entering the New Credit Agreement, interest rate swaps as referred to in Note 16 of the Notes to the Consolidated Financial Statements were no longer effective in offsetting changes in the cash flow of the hedged item as the critical terms of the New Credit Agreement do not match to the hedged item. The Company subsequently began recognizing the mark-to-market fair value adjustments on a monthly basis in the consolidated statement of operations and continued to do so through the expiration date of the swaps, which was February 12, 2021. Also, the balance outstanding on the Company’s Revolving Credit Facility as of December 31, 2020 was below the notional amount of the interest rate swaps. Therefore, as of December 31, 2020, the balance of the previously effective portion of the fair value of the interest rate swaps recorded in other comprehensive income was reclassified into earnings within interest expense. The Company maintains letters of credit that guarantee its performance or payment to third parties in accordance with specified terms and conditions. Amounts outstanding were $16.2 million as of December 31, 2020 and $25.8 million as of December 31, 2019. The Company’s letters of credit are primarily associated with insurance coverage. The Company’s letters of credit generally expire within one year of issuance. These instruments may exist or expire without being drawn down. Therefore, they do not necessarily represent future cash flow obligations. On June 18, 2010, the Company entered into a note purchase agreement with certain institutional investors (the 2010 Note Purchase Agreement). Pursuant to the 2010 Note Purchase Agreement, the Company issued senior notes of $75.0 million in principal, due June 18, 2020. On June 18, 2020, the Company borrowed $40.0 million under the Revolving Credit Facility and used $35.0 million of the Company’s available cash to pay off all amounts outstanding under the 2010 Note Purchase Agreement. |
Earnings per Share and Stock Repurchase Program |
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Earnings per Share and Stock Repurchase Program | (12) Earnings per Share and Stock Repurchase Program The Class A common stock and Class B common stock have equal dividend and liquidation rights. Each share of the Company’s Class A common stock is entitled to one vote on all matters submitted to stockholders and each share of Class B common stock is entitled to ten votes on all such matters. Shares of Class B common stock are convertible into shares of Class A common stock on a one-to-one basis at the option of the holder. As of December 31, 2020, the Company had reserved a total of 2,252,875 shares of Class A common stock for issuance under its stock-based compensation plans and 6,144,290 shares for conversion of Class B common stock to Class A common stock. Basic net income per common share is calculated by dividing net income by the weighted average number of common shares outstanding. The calculation of diluted net income per share assumes the conversion of all dilutive securities. Net income and the number of shares used to compute net income per share, basic and assuming full dilution, are reconciled below:
Since July 27, 2015, the Company’s Board of Directors has authorized two stock repurchase programs. The first program approved the repurchase of up to $100 million and the second repurchase program up to $150 million of the Company’s Class A common stock, to be purchased from time to time on the open market or in privately negotiated transactions. For both stock repurchase programs, the Company has entered into a Rule 10b5-1 plan, which permits shares to be repurchased when the Company might otherwise be precluded from doing so under insider trading laws. The repurchase program may be suspended or discontinued at any time, subject to the terms of the Rule 10b5-1 plans the Company entered into with respect to the repurchase program. The Company temporarily suspended the stock repurchase program for a portion of the second quarter of 2020 as a measure to conserve cash in response to the business impact of the COVID-19 pandemic. The repurchase program was reinstated effective June 29, 2020 pursuant to the terms of a new 10b5-1 plan entered into as of June 12, 2020. The $100 million stock repurchase program was completely expended by August 2019. As of December 31, 2020, there was approximately $113.4 million remaining authorized for share repurchases under the $150 million program. The following table summarizes the cost and the number of shares of Class A common stock repurchased under the two repurchase programs for the years ended December 31, 2020 and 2019:
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Stock-Based Compensation |
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Stock-Based Compensation | (13) Stock-Based Compensation As of December 31, 2020, the Company maintains one stock incentive plan, the Second Amended and Restated 2004 Stock Incentive Plan (the “2004 Stock Incentive Plan”). At December 31, 2020, 1,083,096 shares of Class A common stock were authorized for future grants of new equity awards under this plan. The Company currently grants shares of deferred stock awards to key employees and stock awards to non-employee members of the Company’s Board of Directors under the 2004 Stock Incentive Plan. The Company also previously granted shares of restricted stock to key employees. Stock awards to non-employee members of the Company’s Board of Directors vest immediately. Employees’ restricted stock awards and deferred stock awards typically vest over a three-year period at the rate of per year. The restricted stock awards are outstanding upon grant whereas the deferred stock awards are outstanding upon vesting. The restricted stock awards and deferred stock awards are amortized to expense on a straight-line basis over the vesting period.The Company also grants performance stock units to key employees under the 2004 Stock Incentive Plan. Performance stock units cliff vest at the end of a performance period set by the Compensation Committee of the Board of Directors at the time of grant, which is currently three years. Upon vesting, the number of shares of the Company’s Class A common stock awarded to each performance stock unit recipient will be determined based on the Company’s performance relative to certain performance goals set at the time the performance stock units were granted. The recipient of a performance stock unit award may earn from zero shares to the number of target shares awarded to such recipient. The performance stock units are amortized to expense over the vesting period, and based on the Company’s performance relative to the performance goals, may be adjusted. Changes to the estimated shares expected to vest will result in adjustments to the related share-based compensation expense that will be recorded in the period of change. If the performance goals are not met, no awards are earned and previously recognized compensation expense is reversed. The Company granted performance stock units in 2020, 2019, and 2018. The performance goals for the performance stock units are based on the compound annual growth rate of the Company’s revenue over the three-year performance period and the Company’s return on invested capital (“ROIC”) for the third year of the performance period. Beginning in 2019, the Company included “retirement vesting” provisions in the agreements for its deferred stock awards and performance stock units. These provisions provide that an employee who retires from the Company after attaining age 55 and 10 years of service and who meets certain other requirements, including non-competition and non-solicitation requirements, would be allowed to continue to vest in his or her deferred stock awards for the duration of the vesting periods and would be entitled to receive a pro rata portion of his or her performance stock units based on the period of service elapsed during the performance period. Beginning in 2015, the Company stopped granting stock options as part of its annual equity awards to employees. Previously under the 2004 Stock Incentive Plan, key employees were granted nonqualified stock options to purchase the Company’s Class A common stock. Minimal options remain outstanding, all of which are vested and expire ten years from the date of grant. Options granted under the plan may have exercise prices of not less than 100% of the fair market value of the Class A common stock on the date of grant. The Company’s practice was to grant all options at fair market value on the grant date. Upon exercise of options, the Company issues shares of Class A common stock. The Company also has a Management Stock Purchase Plan that allows for the granting of restricted stock units (RSUs) to key employees. On an annual basis, key employees may elect to receive a portion of their annual incentive compensation in RSUs instead of cash. Participating employees may use up to 50% of their annual incentive bonus to purchase RSUs for a purchase price equal to 80% of the fair market value of the Company’s Class A common stock as of the date of grant. RSUs vest either annually over a three-year period from the grant date or upon the third anniversary of the grant date. Receipt of the shares underlying RSUs is deferred for a minimum of three years, or such greater number of years as is chosen by the employee, from the date of grant. An aggregate of 2,000,000 shares of Class A common stock may be issued under the Management Stock Purchase Plan. At December 31, 2020, 731,163 shares of Class A common stock were authorized for future grants under the Company’s Management Stock Purchase Plan. 2004 Stock Incentive Plan The following is a summary of unvested restricted stock and deferred stock awards activity and related information:
The total fair value of shares vested during 2020, 2019 and 2018 was $8.1 million, $8.4 million and $10.2 million, respectively. At December 31, 2020, total unrecognized compensation cost related to unvested restricted stock and deferred stock awards was approximately $6.9 million with a total weighted average remaining term of 1.48 years. For 2020, 2019 and 2018, the Company recognized compensation costs of $7.7 million, $8.5 million and $7.6 million, respectively. The aggregate intrinsic value of restricted stock and deferred shares granted and outstanding approximated $20.3 million representing the total pre-tax intrinsic value based on the Company’s closing Class A common stock price of $121.70 as of December 31, 2020. The following is a summary of unvested performance stock award activity and related information:
The total fair value of shares vested during 2020, 2019 and 2018 was $10.0 million, $6.3 million and $5.8 million, respectively. At December 31, 2020, total unrecognized compensation cost related to unvested performance stock awards was approximately $5.5 million with a total weighted average remaining term of 1.49 years. For 2020, 2019 and 2018, the Company recognized compensation costs of $4.3 million, $8.5 million and $5.2 million, respectively. The aggregate intrinsic value of performance shares granted and outstanding approximated $25.3 million representing the total pre-tax intrinsic value based on the Company’s closing Class A common stock price of $121.70 as of December 31, 2020. The following is a summary of stock option activity and related information:
For 2020, 2019 and 2018, the Company did not recognize any compensation costs for options. As of December 31, 2020, there was unrecognized compensation cost related to unvested options. As of December 31, 2020, the aggregate intrinsic value of exercisable options was approximately $0.4 million, representing the total pre-tax intrinsic value, based on the Company’s closing Class A common stock price of $121.70 as of December 31, 2020, which would have been received by the option holders had all option holders exercised their options as of that date. The total intrinsic value of options exercised for 2020, 2019 and 2018 was approximately $0.3 million, $1.3 million and $1.2 million, respectively.The following table summarizes information about options outstanding at December 31, 2020:
Management Stock Purchase Plan Total unrecognized compensation cost related to unvested RSUs was approximately $0.8 million at December 31, 2020 with a total weighted average remaining term of 1.39 years. The Company recognized compensation cost of $0.7 million for 2020, $0.8 million for 2019, and $1.0 million in 2018. Dividends declared for RSUs, that are paid to individuals but remain unpaid and accrued at December 31, 2020 totaled approximately $0.1 million. A summary of the Company’s RSU activity and related information is shown in the following table:
As of December 31, 2020, the aggregate intrinsic values of outstanding and vested RSUs were approximately $5.4 million and $1.9 million, respectively, representing the total pre-tax intrinsic value, based on the Company’s closing Class A common stock price of $121.70 as of December 31, 2020, which would have been received by the RSUs holders had all RSUs settled as of that date. The total intrinsic value of RSUs settled for 2020, 2019 and 2018 was approximately $2.3 million, $3.5 million and $1.8 million, respectively. Upon settlement of RSUs, the Company issues shares of Class A common stock. The following table summarizes information about RSUs outstanding at December 31, 2020:
The fair value of each share issued under the Management Stock Purchase Plan is estimated on the date of grant, using the Black-Scholes-Merton Model, based on the following weighted average assumptions:
The risk-free interest rate is based upon the U.S. Treasury yield curve at the time of grant for the respective expected life of the RSUs. The expected life (estimated period of time outstanding) of RSUs and volatility were calculated using historical data. The expected dividend yield of stock is the Company’s best estimate of the expected future dividend yield. The above assumptions were used to determine the weighted average grant-date fair value of RSUs granted of $22.36, $22.16 and $21.80 during 2020, 2019 and 2018, respectively. At December 31, 2020, the Company had total unrecognized compensation costs related to unvested stock-based compensation arrangements of approximately $13.2 million and a total weighted average remaining term of 1.48 years. For 2020, 2019 and 2018, the Company recognized compensation costs related to stock-based programs of $12.7 million, $17.8 million, and $13.8 million, respectively. For 2020, 2019 and 2018, stock compensation expense of $0.9 million was recorded in cost of goods sold and $11.8 million, $16.9 million and $12.9 million, respectively, was recorded in selling, general and administrative expenses. For 2020, 2019 and 2018, the Company recorded $2.1 million, $3.1 million and $2.8 million, respectively, of tax benefit for its other stock-based plans. For 2020, 2019 and 2018, the recognition of total stock-based compensation expense impacted both basic and diluted net income per common share by $0.30, $0.42 and $0.32, respectively. |
Employee Benefit Plans |
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Dec. 31, 2020 | |
Employee Benefit Plans | |
Employee Benefit Plans | (14) Employee Benefit Plans The Company’s domestic employees are eligible to participate in the Company’s 401(k) savings plan. Since January 1, 2012, the Company has provided a base contribution of 2% of an employee’s salary, regardless of whether the employee participates in the plan. Further, the Company matches the contribution of up to 100% of the first 4% of an employee’s contribution. The Company’s match contributions for the years ended December 31, 2020, 2019 and 2018, were $6.7 million, $6.8 million and $6.1 million, respectively. Charges for Europe pension plans approximated $3.4 million, $3.6 million and $3.9 million for the years ended December 31, 2020, 2019 and 2018, respectively. These costs relate to plans administered by certain European subsidiaries, with benefits calculated according to government requirements and paid out to employees upon retirement or change of employment.
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Contingencies and Environmental Remediation |
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Contingencies and Environmental Remediation | |
Contingencies and Environmental Remediation | (15) Contingencies and Environmental Remediation Accrual and Disclosure Policy The Company is a defendant in numerous legal matters arising from its ordinary course of operations, including those involving product liability, environmental matters, and commercial disputes. The Company reviews its lawsuits and other legal proceedings on an ongoing basis and follows appropriate accounting guidance when making accrual and disclosure decisions. The Company establishes accruals for matters when the Company assesses that it is probable that a loss has been incurred and the amount of the loss can be reasonably estimated. The Company does not establish accruals for such matters when the Company does not believe both that it is probable that a loss has been incurred and that the amount of the loss can be reasonably estimated. The Company’s assessment of whether a loss is probable is based on its assessment of the ultimate outcome of the matter following all appeals. Under the FASB-issued ASC 450 “Contingencies”, an event is “reasonably possible” if “the chance of the future event or events occurring is more than remote but less than likely” and an event is “remote” if “the chance of the future event or events occurring is slight”. Thus, references to the upper end of the range of reasonably possible loss for cases in which the Company is able to estimate a range of reasonably possible loss mean the upper end of the range of loss for cases for which the Company believes the risk of loss is more than slight. There may continue to be exposure to loss in excess of any amount accrued. When it is possible to estimate the reasonably possible loss or range of loss above the amount accrued for the matters disclosed, that estimate is aggregated and disclosed. The Company records legal costs associated with its legal contingencies as incurred, except for legal costs associated with product liability claims which are included in the actuarial estimates used in determining the product liability accrual. As of December 31, 2020, the Company estimates that the aggregate amount of reasonably possible loss in excess of the amount accrued for its legal contingencies is approximately $6.2 million pre-tax. With respect to the estimate of reasonably possible loss, management has estimated the reasonably possible loss based on (i) the amount of money damages claimed, where applicable, (ii) the allegations and factual developments to date, (iii) available defenses based on the allegations, and/or (iv) other potentially liable parties. This estimate is based upon currently available information and is subject to significant judgment and a variety of assumptions, and known and unknown uncertainties. The matters underlying the estimate will change from time to time, and actual results may vary significantly from the current estimate. In the event of an unfavorable outcome in one or more of the matters, the ultimate liability may be in excess of amounts currently accrued, if any, and may be material to the Company’s operating results or cash flows for a particular quarterly or annual period. However, based on information currently known to it, management believes that the ultimate outcome of all matters, as they are resolved over time, is not likely to have a material adverse effect on the financial condition of the Company, though the outcome could be material to the Company’s operating results for any particular period depending, in part, upon the operating results for such period. Product Liability The Company is subject to a variety of potential liabilities in connection with product liability cases. For our most significant volume of liability matters, the Company maintains a high self-insured retention limit within its product liability and general liability coverage, which the Company believes to be generally in accordance with industry practices. For product liability cases in the U.S., management establishes its product liability accrual, which includes legal costs associated with accrued claims. For its most significant volume of liability matters, the Company utilizes third-party actuarial valuations which incorporate historical trend factors and the Company’s specific claims experience derived from loss reports provided by third-party claims administrators. The product liability accrual is established after considering any applicable insurance coverage. Changes in the nature of product liability claims or the actual settlement amounts could affect the adequacy of the estimates and require changes to the provisions. Because the liability is an estimate, the ultimate liability may be more or less than reported. Environmental Remediation The Company has been named as a potentially responsible party with respect to a limited number of identified contaminated sites. The levels of contamination vary significantly from site to site as do the related levels of remediation efforts. Environmental liabilities are recorded based on the most probable cost, if known, or on the estimated minimum cost of remediation. Accruals are not discounted to their present value, unless the amount and timing of expenditures are fixed and reliably determinable. The Company accrues estimated environmental liabilities based on assumptions, which are subject to a number of factors and uncertainties. Circumstances that can affect the reliability and precision of these estimates include identification of additional sites, environmental regulations, level of clean-up required, technologies available, number and financial condition of other contributors to remediation and the time period over which remediation may occur. The Company recognizes changes in estimates as new remediation requirements are defined or as new information becomes available. Chemetco, Inc. Superfund Site, Hartford, Illinois In August 2017, Watts Regulator Co. (a wholly-owned subsidiary of the Company) received a “Notice of Environmental Liability” from the Chemetco Site Group (“Group”) alleging that it is a potentially responsible party for the Chemetco, Inc. Superfund Site in Hartford, Illinois (the “Site”) because it arranged for the disposal or treatment of hazardous substances that were contained in materials sent to the Site and that resulted in the release or threat of release of hazardous substances at the Site. The letter offered Watts Regulator Co. the opportunity to join the Group and participate in the Remedial Investigation and Feasibility Study (“RI/FS”) for a portion of the Site. Watts Regulator Co. joined the Group in September 2017 and was added in March 2018 as a signatory, to the Administrative Settlement Agreement and Order on Consent with the United States Environmental Protection Agency (“USEPA”) governing completion of the RI/FS. Based on information currently known to it, management believes that Watts Regulator Co.’s share of the costs of the RI/FS is not likely to have a material adverse effect on the financial condition of the Company, or have a material adverse effect on the Company’s operating results for any particular period. The Company is unable to estimate a range of reasonably possible loss for the above matter in which damages have not been specified because: (i) the RI/FS for the first portion of the Site has not been completed, and the RI/FS process for the remainder of the Site has not yet been initiated, to determine what remediation plans will be implemented and the costs of such plans; (ii) the total amount of material sent to the Site, and the total number of potentially responsible parties who may or may not agree to fund or perform any remediation, have not been determined; (iii) the share contribution for potentially responsible parties to any remediation has not been determined; and (iv) the number of years required to implement a remediation plan acceptable to USEPA is uncertain. Asbestos Litigation The Company is defending approximately 400 lawsuits in different jurisdictions, alleging injury or death as a result of exposure to asbestos. The complaints in these cases typically name a large number of defendants and do not identify any particular Company products as a source of asbestos exposure. To date, discovery has failed to yield evidence of substantial exposure to any Company products and no judgments have been entered against the Company. Other Litigation Other lawsuits and proceedings or claims, arising from the ordinary course of operations, are also pending or threatened against the Company. |
Financial Instruments |
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Financial Instruments and Derivative Instruments | (16) Financial Instruments Fair Value The carrying amounts of cash and cash equivalents, trade receivables and trade payable approximate fair value because of the short maturity of these financial instruments. The fair value of the Company’s variable rate debt under the Revolving Credit Facility approximates its carrying value. Financial Instruments The Company measures certain financial assets and liabilities at fair value on a recurring basis, including deferred compensation plan assets and related liabilities, redeemable financial instruments, and derivatives. The fair values of these certain financial assets and liabilities were determined using the following inputs at December 31, 2020 and December 31, 2019:
The table below provides a summary of the changes in fair value of all financial assets and liabilities measured at fair value on a recurring basis using significant unobservable inputs (Level 3) for the period December 31, 2019 to December 31, 2020.
In connection with the immaterial acquisition of AVG completed during the third quarter of 2020, a contingent liability of $2.8 million was recognized as the estimate of the acquisition date fair value of the contingent consideration. This liability was classified as Level 3 under the fair value hierarchy as it was based on the probability of achievement of future performance metrics as of the date of the acquisition, which was not observable in the market. Failure to meet the performance metrics would reduce this liability to zero; while complete achievement would increase the liability to a maximum contingent consideration of $4.7 million. The liability as of December 31, 2020 was $3.2 million. Cash equivalents consist of instruments with remaining maturities of three months or less at the date of purchase and consist primarily of money market funds, for which the carrying amount is a reasonable estimate of fair value. The Company uses financial instruments from time to time to enhance its ability to manage risk, including foreign currency and commodity pricing exposures, which exist as part of its ongoing business operations. The use of derivatives exposes the Company to counterparty credit risk for nonperformance and to market risk related to changes in currency exchange rates and commodity prices. The Company manages its exposure to counterparty credit risk through diversification of counterparties. The Company’s counterparties in derivative transactions are substantial commercial banks with significant experience using such derivative instruments. The impact of market risk on the fair value and cash flows of the Company’s derivative instruments is monitored and the Company restricts the use of derivative financial instruments to hedging activities. The Company does not enter into contracts for trading purposes nor does the Company enter into any contracts for speculative purposes. The use of derivative instruments is approved by senior management under written guidelines. Interest Rate Swaps On February 12, 2016, the Company entered into a Credit Agreement (the “Prior Credit Agreement”) pursuant to which it received a funding commitment under a Term Loan of $300 million, and a Revolving Commitment (“Revolver”) of $500 million. For each facility, the Company could choose either an Adjusted LIBOR or Alternative Base Rate (“ABR”). Accordingly, the Company’s earnings and cash flows were exposed to interest rate risk from changes in Adjusted LIBOR. In order to manage the Company’s exposure to changes in cash flows attributable to fluctuations in LIBOR-indexed interest payments related to the Company’s floating rate debt, the Company entered into two interest rate swaps. For each interest rate swap, the Company received the three-month USD-LIBOR subject to a 0% floor, and paid a fixed rate of 1.31375% on a notional amount of $225.0 million. The swaps were expected to mature on the same date as the Prior Credit Agreement on February 12, 2021, and were designated as cash flow hedges. On April 24, 2020, the Company entered into a New Credit Agreement. The New Credit Agreement amends and restates the Prior Credit Agreement in its entirety while increasing the amount of revolving credit available from $500 million to $800 million, and extending the maturity by one additional year to February 2022. As part of the New Credit Agreement, the LIBOR rate is subject to a 1% floor as opposed to a 0% floor in the Prior Credit Agreement. The change in the LIBOR floor in the New Credit Agreement caused the interest rate swaps to no longer be considered highly effective in offsetting changes in the cash flow of the hedged item, as critical terms of the New Credit Agreement no longer match the hedged item. As a result, the cash flow hedges no longer qualified for hedge accounting as of the date of execution of the New Credit Agreement. The Company subsequently began recognizing the mark-to-market fair value adjustments on a monthly basis in the consolidated statement of operations and continued to do so through the expiration date of the swaps, which was February 12, 2021. The balance outstanding on the Company’s Revolving Credit Facility as of December 31, 2020 was below the notional amount of the interest rate swaps. Therefore, the balance of the previously effective portion of the fair value of the interest rate swaps recorded in other comprehensive income of $1.5 million was reclassified into earnings within interest expense as of December 31, 2020. For the year ended December 31, 2019, a loss of $3.9 million was recorded in Accumulated Other Comprehensive Loss to recognize the effective portion of the fair value of the interest rate swaps that qualified as a cash flow hedge. Designated Foreign Currency Hedges
The Company’s foreign subsidiaries transact most business, including certain intercompany transactions, in foreign currencies. Such transactions are principally purchases or sales of materials. The Company has exposure to a number of foreign currencies, including the Canadian dollar, the euro, and the Chinese yuan. The Company uses a layering methodology, whereby at the end of each quarter, the Company enters into forward exchange contracts hedging Canadian dollar to U.S. dollar, which hedge up to 85% of the forecasted intercompany purchase transactions between one of the Company’s Canadian subsidiaries and the Company’s U.S. operating subsidiaries for the next twelve months. The Company uses a similar layering methodology when entering into forward exchange contracts hedging U.S. dollar to the Chinese yuan, which hedge up to 60% of the forecasted intercompany sales transactions between one of the Company’s Chinese subsidiaries and one of the Company’s U.S. operating subsidiaries for the next twelve months. As of December 31, 2020, all designated foreign exchange hedge contracts were cash flow hedges under ASC 815, Derivatives and Hedging ("ASC 815"). The Company records the effective portion of the designated foreign currency hedge contracts in other comprehensive income until inventory turns and is sold to a third-party. Once the third-party transaction associated with the hedged forecasted transaction occurs, the effective portion of any related gain or loss on the designated foreign currency hedge are reclassified into earnings within cost of goods sold. In the event the notional amount of the derivatives exceeds the forecasted intercompany purchases for a given month, the excess hedge position will be attributed to the following month’s forecasted purchases. However, if the following month’s forecasted purchases cannot absorb the excess hedge position from the current month, the effective portion of the hedge recorded in other comprehensive income will be reclassified to earnings. The notional amounts outstanding as of December 31, 2020 for the Canadian dollar to U.S. dollar contracts and the U.S. dollar to the Chinese yuan contracts were $14.3 million and $5.0 million, respectively. The combined fair value of the Company’s designated foreign currency hedge contracts outstanding as of December 31, 2020 was a liability balance of $0.1 million. As of December 31, 2020, the amount expected to be reclassified into cost of goods sold from other comprehensive income in the next twelve months for both programs is a loss of $0.1 million. |
Segment Information |
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Segment Information | (17) Segment Information The Company operates in three geographic segments: Americas, Europe, and APMEA. Each of these segments sells similar products and has separate financial results that are reviewed by the Company’s chief operating decision-maker. Each segment earns revenue and income almost exclusively from the sale of the Company’s products. The Company sells its products into various end markets around the world with sales by region based upon location of the entity recording the sale. See Note 4 for further detail on the product lines sold into by region. All intercompany sales transactions have been eliminated. The accounting policies for each segment are the same as those described in Note 2 of the Notes to Consolidated Financial Statements. The following is a summary of the Company’s significant accounts and balances by segment, reconciled to its consolidated totals:
* Corporate expenses are primarily for administrative compensation expense, compliance costs, professional fees, including corporate-related legal and audit expenses, shareholder services and benefit administration costs. The following includes U.S. net sales and U.S. property, plant and equipment of the Company’s Americas segment:
The following includes intersegment sales for Americas, Europe and APMEA:
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Accumulated Other Comprehensive Loss |
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Accumulated Other Comprehensive Loss | (18) Accumulated Other Comprehensive Loss Accumulated other comprehensive loss consists of the following:
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Quarterly Financial Information (unaudited) |
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Quarterly Financial Information (unaudited) | (19) Quarterly Financial Information (unaudited)
Note: Four quarters may not sum to full year due to rounding. |
Subsequent Events |
12 Months Ended |
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Subsequent Events | |
Subsequent Events | (20) Subsequent Events On February 8, 2021, the Company declared a quarterly dividend of twenty-three cents ($0.23) per share on each outstanding share of Class A common stock and Class B common stock payable on March 15, 2021 to stockholders of record on March 1, 2021.
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Schedule II-Valuation and Qualifying Accounts |
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Schedule II-Valuation and Qualifying Accounts | Watts Water Technologies, Inc. and Subsidiaries Schedule II—Valuation and Qualifying Accounts (Amounts in millions)
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Accounting Policies (Policies) |
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Accounting Policies | ||||||||||||||||||||||
Principles of Consolidation | Principles of Consolidation The consolidated financial statements include the accounts of the Company and its majority and wholly-owned subsidiaries. Upon consolidation, all intercompany accounts and transactions are eliminated. |
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Cash Equivalents | Cash Equivalents Cash equivalents consist of instruments with remaining maturities of three months or less at the date of purchase and consist primarily of money market funds, for which the carrying amount is a reasonable estimate of fair value. |
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Allowance for Credit Losses | Allowance for Credit Losses The allowance for credit losses is established to represent the Company’s best estimate of the net realizable value of the outstanding amount of receivables that it will be unable to collect. The Company developed financial asset pools that consist of business or legal entities with similar risk and economic characteristics, including types of products and customers, trade receivable characteristics, and history of credit losses on trade receivables. The development of the Company’s allowance for credit losses varies by asset pool but in general is based on a review of past due amounts, historical write-off experience, aging trends affecting specific accounts, changes in customer payment terms, general operational factors affecting all accounts and as applicable current economic conditions and reasonable and supportable forecasted economic conditions that affect collectability. In addition, factors are developed in certain regions utilizing historical trends of sales and returns and allowances and cash discount activities to derive a reserve for returns and allowances and cash discounts. The Company also monitors the creditworthiness of the Company’s largest customers and periodically reviews customer credit limits to reduce risk. The Company’s allowance for credit losses as of December 31, 2020 included an adjustment for the estimated impact of the COVID-19 pandemic on future collectability that was not material to our financial statements. If circumstances relating to specific customers change or unanticipated changes occur in the general business environment, the Company’s estimates of the recoverability of receivables could be further adjusted. |
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Concentration of Credit | Concentration of Credit The Company sells products to a diversified customer base and, therefore, has no significant concentrations of credit risk. In 2020, 2019 and 2018, no customer accounted for 10% or more of the Company’s total sales or accounts receivable. |
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Inventories | Inventories Inventories are stated at the lower of cost or market, using the first-in, first-out method. Market value is determined by replacement cost or net realizable value. The Company utilizes both specific product identification and historical product demand as the basis for determining its excess or obsolete inventory reserve. The Company identifies all inventories that exceed a range of to three years in sales. This is determined by comparing the current inventory balance against unit sales for the trailing twelve months. New products added to inventory within the past twelve months are excluded from this analysis. A portion of the Company’s products contain recoverable materials, therefore the excess and obsolete reserve is established net of any recoverable amounts. Changes in market conditions, lower-than-expected customer demand or changes in technology or features could result in additional obsolete inventory that is not saleable and could require additional inventory reserve provisions. |
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Goodwill and Other Intangible Assets | Goodwill and Other Intangible Assets Goodwill is recorded when the consideration paid for acquisitions exceeds the fair value of net tangible and intangible assets acquired. Goodwill and other intangible assets with indefinite useful lives are not amortized, but rather are tested for impairment at least annually or more frequently if events or circumstances indicate that it is “more likely than not” that they might be impaired, such as from a change in business conditions. The Company performs its annual goodwill and indefinite-lived intangible assets impairment assessment in the fourth quarter of each year. |
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Long-Lived Assets | Long-Lived Assets Intangible assets with estimable lives and other long-lived assets are reviewed for indicators of impairment at least quarterly or more frequently if events or changes in circumstances indicate that the carrying amount of an asset or asset group may not be recoverable. |
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Property, Plant and Equipment | Property, Plant and Equipment Property, plant and equipment are recorded at cost. Depreciation is provided on a straight-line basis over the estimated useful lives of the assets, which range from 10 to 40 years for buildings and improvements and 3 to 15 years for machinery and equipment. Leasehold improvements are depreciated over the lesser of the economic useful life of the asset or the remaining lease term.
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Leases | Leases The Company has leases for the following classes of underlying assets: real estate, automobiles, manufacturing equipment, facility equipment, office equipment and certain service arrangements that are dependent on an identified asset. The Company determines if an arrangement qualifies as a lease at its inception. The Company, as the lessee, recognizes in the statement of financial position a liability to make lease payments and a right-of-use asset (“ROU”) representing the right to use the underlying asset for both finance and operating leases with a lease term longer than twelve months. The Company elected the short-term lease recognition exemption for all leases that qualify and does not recognize ROU assets or lease liabilities for short-term leases. The Company recognizes short-term lease payments on a straight-line basis over the lease term in the consolidated statement of operations. The Company determines the initial classification and measurement of its ROU assets and lease liabilities at the lease commencement date and thereafter if modified. For operating leases, the lease liability is initially and subsequently measured at the present value of the unpaid lease payments at the lease commencement date. For finance leases, the lease liability is initially measured in the same manner and date as operating leases and is subsequently measured at amortized cost using the effective interest method. Measuring the lease liability requires certain estimates and judgments. These estimates and judgments include how the Company determines 1) the discount rate it uses to discount the unpaid lease payments to present value; 2) lease term; and 3) lease payments.
The ROU asset is initially measured at cost, which comprises the initial amount of the lease liability adjusted for the lease payments made at or before the lease commencement date, plus any initial direct costs incurred less any lease incentives received. For operating leases, the ROU asset is subsequently measured throughout the lease term at the carrying amount of the lease liability, plus initial direct costs, plus (minus) any prepaid (accrued) lease payments, less the unamortized balance of lease incentives received. Lease expense for operating leases is recognized on a straight-line basis over the reasonably assured lease term based on the total lease payments and is included in cost of goods sold or within selling, general and administrative expenses in the consolidated statements of operations, based on the primary use of the ROU asset. For finance leases, the Company recognizes the amortization of the ROU asset on a straight-line basis from the lease commencement date to the earlier of the end of the useful life or the end of the lease term unless the lease transfers ownership of the underlying asset to the Company or the Company is reasonably certain to exercise an option to purchase the underlying asset. In those cases, the ROU asset is amortized over the useful life of the underlying asset. Amortization of the ROU asset is recognized in depreciation in the consolidated statements of operations. The interest expense related to finance leases is recognized using the effective interest method and is included within interest expense. Variable lease payments associated with the Company’s leases are recognized in the period when the event, activity, or circumstance in the lease agreement on which those payments are assessed occurs and are included in cost of goods sold or within selling, general and administrative expenses in the consolidated statements of operations, based on the primary use of the ROU asset. ROU assets for operating and finance leases are periodically assessed for impairment. The Company uses the long-lived assets impairment guidance in ASC Subtopic 360-10, Property, Plant, and Equipment- Overall, to determine whether an ROU asset is impaired, and if so, the amount of the impairment loss to recognize. The Company monitors for events or changes in circumstances that require a reassessment of one of its leases. When a reassessment results in a remeasurement of a lease liability, a corresponding adjustment is made to the carrying amount of the corresponding ROU asset unless doing so would reduce the carrying amount of the ROU asset to an amount less than zero. In that case, the amount of the adjustment that would result in a negative ROU asset balance is recorded in the statement of operations. |
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Taxes, Other than Income Taxes | Taxes, Other than Income Taxes Taxes assessed by governmental authorities on sale transactions are recorded on a net basis and excluded from sales in the Company’s consolidated statements of operations. |
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Income Taxes | Income Taxes Income taxes are accounted for under the asset and liability method. Deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases and operating loss and tax credit carry forwards. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the enactment date. The Company recognizes tax benefits when the item in question meets the more–likely–than-not (greater than 50% likelihood of being sustained upon examination by the taxing authorities) threshold.
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Foreign Currency Translation | Foreign Currency Translation The functional currency for most of the Company’s foreign subsidiaries is their local currency. For non-U.S. subsidiaries that transact in a functional currency other than the U.S. dollar, assets and liabilities are translated at current rates of exchange at the balance sheet date. Income and expense items are translated at the average foreign currency exchange rates for the period. Adjustments resulting from the translation of the financial statements of foreign operations into U.S. dollars are excluded from the determination of net income and are recorded in accumulated other comprehensive income, a separate component of equity. Transaction gains and losses are included in other (income) expense, net in the consolidated statements of operations. For subsidiaries where the functional currency of the assets and liabilities differs from the local currency, non-monetary assets and liabilities are translated at the rate of exchange in effect on the date assets were acquired while monetary assets and liabilities are translated at current rates of exchange as of the balance sheet date. Income and expense items are translated at the average foreign currency rates for the period. Translation adjustments for these subsidiaries are included in other (income) expense, net in the consolidated statements of operations. |
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Stock-Based Compensation | Stock-Based Compensation The Company records compensation expense in the financial statements for share-based awards based on the grant date fair value of those awards for restricted stock awards and deferred stock awards. Stock-based compensation expense for restricted stock awards and deferred stock awards is recognized over the requisite service periods of the awards on a straight-line basis, which is generally commensurate with the vesting term. The performance stock units offered by the Company to employees are amortized to expense over the vesting period, and based on the Company’s performance relative to the performance goals, may be adjusted. Changes to the estimated shares expected to vest will result in adjustments to the related share-based compensation expense that will be recorded in the period of change. The Company accounts for forfeitures as they occur, rather than estimate expected forfeitures over the vesting period of the respective grant. The Company does not reclassify the benefits associated with tax deductions in excess of recognized compensation cost from operating activities to financing activities in the Consolidated Statement of Cash Flows. |
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Financial Instruments | Financial Instruments In the normal course of business, the Company manages risks associated with commodity prices, foreign exchange rates and interest rates through a variety of strategies, including the use of hedging transactions, executed in accordance with the Company’s policies. The Company’s hedging transactions include, but are not limited to, the use of various derivative financial and commodity instruments. As a matter of policy, the Company does not use derivative instruments unless there is an underlying exposure. Any change in value of the derivative instruments would be substantially offset by an opposite change in the value of the underlying hedged items. The Company does not use derivative instruments for trading or speculative purposes. Derivative instruments may be designated and accounted for as either a hedge of a recognized asset or liability (fair value hedge) or a hedge of a forecasted transaction (cash flow hedge). For a fair value hedge, both the effective and ineffective portions of the change in fair value of the derivative instrument, along with an adjustment to the carrying amount of the hedged item for fair value changes attributable to the hedged risk, are recognized in earnings. For a cash flow hedge, changes in the fair value of the derivative instrument that are highly effective are deferred in accumulated other comprehensive income or loss until the underlying hedged item is recognized in earnings. The Company had two interest rate swaps as of December 31, 2020. Prior to executing the Amended and Restated Credit Agreement (the “New Credit Agreement”) on April 24, 2020, the effective portion of the fair value of these interest rate swaps was recorded to other comprehensive income. As a result of entering the New Credit Agreement the critical terms of the New Credit Agreement no longer matched the hedged item and therefore, these two interest rate swaps no longer qualified for cash flow hedge accounting. The Company subsequently began recognizing the mark-to-market fair value adjustments on a monthly basis into earnings within interest expense. Also, the balance outstanding on the Company’s Revolving Credit Facility as of December 31, 2020 was below the notional amount of the interest rate swaps. Therefore, as of December 31, 2020, the balance of the previously effective portion of the fair value of the interest rate swaps recorded in other comprehensive income was reclassified into earnings within interest expense. These two interest rate swaps were effective cash flow hedges as of December 31, 2019. The Company also has foreign exchange hedges designated as cash flow hedges as of December 31, 2020 and 2019. Refer to Note 16 for further details. If a fair value or cash flow hedge were to cease to qualify for hedge accounting or be terminated, it would continue to be carried on the balance sheet at fair value until settled, but hedge accounting would be discontinued prospectively. If a forecasted transaction were no longer probable of occurring, amounts previously deferred in accumulated other comprehensive income would be recognized immediately in earnings. On occasion, the Company may enter into a derivative instrument that does not qualify for hedge accounting because it is entered into to offset changes in the fair value of an underlying transaction which is required to be recognized in earnings (natural hedge). These instruments are reflected in the Consolidated Balance Sheets at fair value with changes in fair value recognized in earnings.
Portions of the Company’s outstanding debt are exposed to interest rate risks. The Company monitors its interest rate exposures on an ongoing basis to maximize the overall effectiveness of its interest rates. |
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Fair value Measurements | Fair Value Measurements Fair value is defined as the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. An entity is required to maximize the use of observable inputs, where available, and minimize the use of unobservable inputs when measuring fair value. The Company has certain financial assets and liabilities that are measured at fair value on a recurring basis and certain nonfinancial assets and liabilities that may be measured at fair value on a nonrecurring basis. The fair value disclosures of these assets and liabilities are based on a three-level hierarchy, which is defined as follows:
Assets and liabilities subject to this hierarchy are classified in their entirety based on the lowest level of input that is significant to the fair value measurement. The Company’s assessment of the significance of a particular input to the fair value measurement in its entirety requires judgment and considers factors specific to the asset or liability. Refer to Note 16 for further details. |
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Shipping and Handling | Shipping and Handling Shipping and handling costs included in selling, general and administrative expense amounted to $55.0 million, $57.6 million and $56.3 million for the years ended December 31, 2020, 2019 and 2018, respectively. |
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Research and Development | Research and Development Research and development costs included in selling, general, and administrative expense amounted to $42.2 million, $39.6 million and $34.5 million for the years ended December 31, 2020, 2019 and 2018, respectively. |
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Revenue Recognition | Revenue Recognition The Company recognizes revenue under the core principle to depict the transfer of control to the Company’s customers in an amount reflecting the consideration to which the Company expects to be entitled. In order to achieve that core principle, the Company applies the following five-step approach: (1) identify the contract with a customer, (2) identify the performance obligations in the contract, (3) determine the transaction price, (4) allocate the transaction price to the performance obligations in the contract, and (5) recognize revenue when a performance obligation is satisfied. The Company’s revenue for product sales is recognized on a point in time model, at the point control transfers to the customer, which is generally when products are shipped from the Company’s manufacturing or distribution facilities or when delivered to the customer’s named location. Sales tax, value-added tax, or other taxes collected concurrent with revenue producing activities are excluded from revenue. Freight costs billed to customers for shipping and handling activities are included in revenue with the related cost included in selling, general and administrative expenses. See Note 4 for further disclosures and detail regarding revenue recognition. |
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Estimates | Estimates The preparation of financial statements in conformity with accounting principles generally accepted in the United States requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. The worldwide spread of COVID-19 has created significant uncertainty in the global economy. There have been no comparable recent events that provide guidance as to the effect COVID-19 as a global pandemic may have, and, as a result, the ultimate impact of COVID-19 and the extent to which COVID-19 continues to impact the Company’s business, results of operations and financial condition will depend on future developments, which are highly uncertain and difficult to predict. The use of estimates in specific accounting policies is described further below as appropriate. Actual results could differ from those estimates.
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Recently Adopted Accounting Standards | Recently Adopted Accounting Standards In August 2018, the Financial Accounting Standards Board (“FASB”) issued ASU 2018-15, “Intangibles-Goodwill and Other-Internal-Use Software (Subtopic 350-40)-Customer’s Accounting for Implementation Costs Incurred in a Cloud Computing Arrangement that is a Service Contract.” ASU 2018-15 aligns the requirements for capitalizing implementation costs incurred in a hosting arrangement that is a service contract with the requirements for capitalizing implementation costs incurred to develop or obtain internal-use software. This guidance requires an entity in a hosting arrangement that is a service contract to follow the guidance in Subtopic 350-40 to determine which implementation costs to capitalize as an asset related to the service contract and which costs to expense. This standard is effective for fiscal years beginning after December 15, 2019, including interim periods within that reporting period. The Company adopted this standard in the first quarter of 2020, and it did not have a material impact on the Company’s financial statements. In August 2018, the FASB issued ASU 2018-13, “Fair Value Measurement (Topic 820)-Disclosure Framework- Changes to the Disclosure Requirements for Fair Value Measurement.” ASU 2018-13 modifies the disclosure requirements on fair value measurements under Topic 820. This standard is effective for fiscal years beginning after December 15, 2019, including interim periods within that reporting period. The Company adopted this standard in the first quarter of 2020, and it did not have a material impact on the Company’s financial statements. In June 2016, the FASB issued ASU 2016-13, “Financial Instruments - Credit Losses (Topic 326).” ASU 2016-13 replaces the incurred loss impairment methodology under previous United States Generally Accepted Accounting Principles (“GAAP”) with a methodology that reflects expected credit losses and requires the use of a forward-looking expected credit loss model for accounts receivable, loans, and other financial instruments. The financial assets for which this standard is applicable on the Company’s balance sheet are accounts receivable and contract assets. The standard requires the Company to pool financial assets based on similar risk and economic characteristics and estimate expected credit losses over the contractual life of the asset. This standard is effective for reporting periods beginning after December 15, 2019. The standard requires a modified retrospective approach through a cumulative-effect adjustment to retained earnings as of the beginning of the first reporting period in which the guidance is effective. The Company adopted this standard in the first quarter of 2020, and it did not have a material impact on the Company’s financial statements. In February 2016, the FASB issued ASU 2016-02, “Leases (Topic 842).” ASU 2016-02 requires a lessee to recognize in the statement of financial position a liability to make lease payments and an ROU asset representing the right to use the underlying asset for the lease term for both finance and operating leases with a term longer than twelve months. Topic 842 was subsequently amended by ASU 2018-01, “Land Easement Practical Expedient for Transition to Topic 842,” ASU 2018-10, “Codification Improvements to Topic 842, Leases,” and ASU 2018-11 “Targeted Improvements.” ASU 2016-02 was effective for financial statements issued for fiscal years beginning after December 15, 2018, including interim periods within those fiscal years. Under ASC 842, leases are classified as finance or operating, with the classification determining the pattern and classification of expense recognition in the income statement. A modified retrospective transition approach was required, applying the new standard to all leases existing at the date of initial application. The Company could choose to use either 1) the effective date of the standard or 2) the beginning of the earliest comparable period presented in the financial statements as the date of initial application. The Company adopted the new standard on January 1, 2019 and used the effective date of the standard as the date of the Company’s initial application. Under this approach, the financial information and the disclosures required under the new standard are not provided for dates and periods before January 1, 2019. The Company designed the necessary changes to its existing processes and configured all system requirements that were necessary to implement this new standard.
The new standard provides a number of optional practical expedients throughout the transition. The Company elected the “package of practical expedients,” which permitted the Company to not reassess under the new standard the Company’s prior conclusions about lease identification, lease classification, and initial direct costs. The Company did not elect the use-of-hindsight or the practical expedient pertaining to land easements, the latter not being applicable to the Company. The Company also elected the practical expedient to not separate lease and non-lease components for all of the Company’s leases. As a result of adopting ASC 842, the Company recorded operating ROU assets of $33.6 million and operating lease liabilities of $33.9 million as of January 1, 2019 on the consolidated balance sheet. The difference between the ROU assets and lease liabilities related to the impact of eliminating deferred and prepaid lease payments recognized under the previous lease accounting standard. The Company’s adoption of ASC 842 did not result in a change to the Company’s recognition of its existing finance leases as of January 1, 2019. The adoption of the new lease accounting standard did not have a material impact on either the consolidated statement of operations or the consolidated statement of cash flows. However, ASU 2016-02 has significantly affected the Company’s disclosures about noncash activities related to leases. See Note 5 to the consolidated financial statements. Accounting Standards Updates In March 2020, the FASB issued ASU 2020-04, "Reference Rate Reform (Topic 848): Facilitation of the Effects of Reference Rate Reform on Financial Reporting." The amendments provide optional guidance for a limited time to ease the potential burden in accounting for reference rate reform. The new guidance provides optional expedients and exceptions for applying GAAP to contracts, hedging relationships and other transactions affected by reference rate reform if certain criteria are met. The amendments apply only to contracts and hedging relationships that reference LIBOR or another reference rate expected to be discontinued due to reference rate reform. These amendments are effective immediately and may be applied prospectively to contract modifications made and hedging relationships entered into or evaluated on or before December 31, 2022. The Company is currently evaluating its contracts and the optional expedients provided by the new standard. In December 2019, the FASB issued ASU No. 2019-12, "Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes.” This ASU simplifies the accounting for income taxes by clarifying and amending existing guidance related to the recognition of franchise tax, the evaluation of a step up in the tax basis of goodwill, and the effects of enacted changes in tax laws or rates in the effective tax rate computation, among other clarifications. The effective date for adoption of this ASU is the calendar year beginning January 1, 2021 with early adoption permitted. The Company is currently evaluating the impact of this guidance on the Company’s financial statements, and does not expect the adoption of this guidance to have a material impact on the Company’s financial statements. |
Restructuring and Other Charges, Net (Tables) |
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Summary of the pre-tax cost by restructuring programs |
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Summary of recorded pre-tax restructuring costs by business segment |
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Summary of total expected, incurred and remaining pre-tax restructuring costs |
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Revenue Recognition (Tables) |
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Schedule of disaggregation of revenue |
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Schedule of contract assets and contract liabilities |
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Leases (Tables) |
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Schedule of right-of-use asset amounts reported in consolidated balance sheet |
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Schedule of maturity of operating and finance lease liabilities |
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Schedule of total lease cost and cash flows related to operating and finance leases | The total lease cost consisted of the following amounts:
The following information represents supplemental disclosure for the statement of cash flows related to operating and finance leases:
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Schedule of additional information associated with leases |
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Goodwill & Intangibles (Tables) |
12 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Dec. 31, 2020 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Goodwill & Intangibles | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Changes in the carrying amount of goodwill by geographic segment |
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Schedule of Intangible assets |
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Inventories, net (Tables) |
12 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Dec. 31, 2020 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Inventories, net | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of inventories |
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Property, Plant and Equipment (Tables) |
12 Months Ended | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Dec. 31, 2020 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Property, Plant and Equipment | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of Property, plant and equipment |
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Income Taxes (Tables) |
12 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Dec. 31, 2020 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Income Taxes | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of significant components of the Company's deferred income tax liabilities and assets |
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Schedule of pre-tax income upon which provision for income taxes from continuing operations is based |
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Schedule of provision for income taxes from continuing operations |
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Reconciliation of federal statutory taxes to actual income taxes reported from continuing operations |
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Reconciliation of the beginning and ending amount of unrecognized tax benefits |
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Accrued Expenses and Other Liabilities (Tables) |
12 Months Ended | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Dec. 31, 2020 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Accrued Expenses and Other Liabilities | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of accrued expenses and other liabilities |
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Financing Arrangements (Tables) |
12 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Dec. 31, 2020 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Financing Arrangements | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of long-term debt |
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Earnings per Share and Stock Repurchase Program (Tables) |
12 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Dec. 31, 2020 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Earnings per Share and Stock Repurchase Program | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Summary of reconciliation of the calculation of earnings per share |
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Summary of the cost and number of Class A common stock repurchased |
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Stock-Based Compensation (Tables) |
12 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Dec. 31, 2020 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of nonvested restricted stock and deferred shares activity and related information |
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Schedule of stock-based compensation fair value assumptions |
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Schedule of stock option activity and related information |
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Schedule of information about options outstanding | The following table summarizes information about options outstanding at December 31, 2020:
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Schedule of the Company's RSU activity and related information |
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Restricted stock and deferred shares | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of information about RSUs outstanding | The following table summarizes information about RSUs outstanding at December 31, 2020:
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Performance stock units | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of unvested performance shares activity and related information |
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Financial Instruments (Tables) |
12 Months Ended | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Dec. 31, 2020 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of fair value of financial assets and liabilities |
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Significant Unobservable Inputs (Level 3) | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Summary of the changes in fair value of all financial assets and liabilities measured at fair value on a recurring basis using significant unobservable inputs (Level 3) |
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Segment Information (Tables) |
12 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Segment Information | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Summary of the Company's significant accounts and balances by segment, reconciled to the consolidated totals |
* Corporate expenses are primarily for administrative compensation expense, compliance costs, professional fees, including corporate-related legal and audit expenses, shareholder services and benefit administration costs. |
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Schedule of U.S. net sales of the Company's Americas segment |
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Schedule of intersegment sales for Americas, EMEA and Asia-Pacific |
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Accumulated Other Comprehensive Loss (Tables) |
12 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Accumulated Other Comprehensive Loss | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of amounts recognized in accumulated other comprehensive income (loss) |
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Quarterly Financial Information (unaudited) (Tables) |
12 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Quarterly Financial Information (unaudited) | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of Quarterly Financial Information |
Note: Four quarters may not sum to full year due to rounding. |
Description of Business (Details) |
12 Months Ended |
---|---|
Dec. 31, 2020 | |
Minimum | |
Length of time the business has been in operation | 140 years |
Accounting Policies - Inventory, PP&E and Other (Details) |
12 Months Ended |
---|---|
Dec. 31, 2020 | |
Inventory Adjustments [Abstract] | |
Trailing period used for sales | 12 months |
Minimum | |
Inventory Adjustments [Abstract] | |
Number of years of sales on hand for inventories | 1 year |
Maximum | |
Inventory Adjustments [Abstract] | |
Number of years of sales on hand for inventories | 3 years |
Buildings and improvements | Minimum | |
Property, plant and equipment | |
Estimated useful lives of the assets | 10 years |
Buildings and improvements | Maximum | |
Property, plant and equipment | |
Estimated useful lives of the assets | 40 years |
Machinery and equipment | Minimum | |
Property, plant and equipment | |
Estimated useful lives of the assets | 3 years |
Machinery and equipment | Maximum | |
Property, plant and equipment | |
Estimated useful lives of the assets | 15 years |
Accounting Policies - Financial Instruments (Details) - item |
Dec. 31, 2020 |
Dec. 31, 2019 |
---|---|---|
Cash Flow Hedging | Designated | Interest Rate Swaps | ||
Derivative [Line Items] | ||
Number of swaps | 2 | 2 |
Accounting Policies - Shipping and Handling, Revenue Recognition (Details) - USD ($) $ in Millions |
12 Months Ended | ||
---|---|---|---|
Dec. 31, 2020 |
Dec. 31, 2019 |
Dec. 31, 2018 |
|
Shipping and Handling | |||
Shipping and handling | $ 55.0 | $ 57.6 | $ 56.3 |
Research and Development | |||
Research and development costs included in selling, general, and administrative expense | $ 42.2 | $ 39.6 | $ 34.5 |
Accounting Policies - Recently Adopted Accounting Standards (Details) - USD ($) $ in Millions |
Dec. 31, 2020 |
Dec. 31, 2019 |
Jan. 01, 2019 |
---|---|---|---|
New Accounting Pronouncements | |||
Operating right-of-use assets | $ 52.6 | $ 39.1 | |
Operating lease liability | $ 56.0 | ||
ASU 2016-02 | |||
New Accounting Pronouncements | |||
Operating right-of-use assets | $ 33.6 | ||
Operating lease liability | $ 33.9 |
Revenue Recognition - Performance obligation (Details) - Revenue, Remaining Performance Obligation, Expected Timing of Satisfaction, Start Date [Axis]: 2020-01-01 |
Dec. 31, 2020 |
---|---|
Minimum | |
Revenue, Remaining Performance Obligation, Expected Timing of Satisfaction [Line Items] | |
Revenue, Remaining Performance Obligation, Expected Timing of Satisfaction, Period | 1 year |
Maximum | |
Revenue, Remaining Performance Obligation, Expected Timing of Satisfaction [Line Items] | |
Revenue, Remaining Performance Obligation, Expected Timing of Satisfaction, Period | 3 years |
Revenue Recognition - Contract Liabilities (Details) - USD ($) $ in Millions |
3 Months Ended | 12 Months Ended | |||||||||
---|---|---|---|---|---|---|---|---|---|---|---|
Dec. 31, 2020 |
Sep. 27, 2020 |
Jun. 28, 2020 |
Mar. 29, 2020 |
Dec. 31, 2019 |
Sep. 29, 2019 |
Jun. 30, 2019 |
Mar. 31, 2019 |
Dec. 31, 2020 |
Dec. 31, 2019 |
Dec. 31, 2018 |
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Contract with Customer, Asset | |||||||||||
Contract Assets | $ 0.3 | $ 0.3 | $ 0.4 | $ 0.1 | $ 0.1 | $ 0.3 | $ 0.4 | $ 1.0 | |||
Change in period | $ (0.3) | (0.1) | 0.3 | (0.2) | (0.7) | ||||||
Contract Liabilities | |||||||||||
Contract Liabilities - Current | $ 13.5 | 12.8 | 11.7 | 11.7 | 11.5 | 11.8 | 12.1 | 11.4 | $ 13.5 | 11.5 | 11.3 |
Increase (decrease) - Current Liabilities | 0.7 | 1.1 | 0.2 | (0.3) | (0.3) | 0.7 | 0.1 | ||||
Contract Liabilities - Noncurrent | 2.5 | $ 2.7 | 2.7 | 2.8 | 2.9 | 3.0 | 2.8 | $ 2.7 | 2.5 | 2.9 | $ 2.7 |
Increase (decrease) - Noncurrent Liabilities | $ (0.2) | $ (0.1) | $ (0.1) | $ (0.1) | $ 0.2 | $ 0.1 | |||||
Revenue recognized, contract liability | 9.9 | 11.8 | |||||||||
Impairment loss related to Contract Assets | $ 0.0 | $ 0.0 |
Leases - Lease Cost (Details) - USD ($) $ in Millions |
12 Months Ended | |
---|---|---|
Dec. 31, 2020 |
Dec. 31, 2019 |
|
Lease cost | ||
Operating lease cost | $ 12.1 | $ 11.9 |
Finance lease cost: | ||
Amortization of right-of-use assets | 1.5 | 1.2 |
Interest on finance lease liabilities | 0.2 | 0.2 |
Short-term lease cost | 0.1 | |
Sublease (income) | 0.2 | |
Variable lease cost | 2.6 | 3.1 |
Total lease cost | $ 16.3 | $ 16.4 |
Leases - Cash flows (Details) - USD ($) $ in Millions |
12 Months Ended | |
---|---|---|
Dec. 31, 2020 |
Dec. 31, 2019 |
|
Leases | ||
Operating cash flows from operating leases | $ 11.8 | $ 11.4 |
Operating cash flows from finance leases | 0.2 | 0.2 |
Financing cash flows from finance leases | 2.1 | 1.7 |
Total cash paid for amounts included in the measurement of lease liabilities | 14.1 | 13.3 |
Finance lease liabilities arising from obtaining right-of-use assets | 2.1 | 1.4 |
Operating lease liabilities arising from obtaining right-of-use assets | $ 24.7 | $ 19.8 |
Leases - Additional information (Details) |
Dec. 31, 2020 |
Dec. 31, 2019 |
---|---|---|
Leases | ||
Weighted-average remaining lease term - finance leases | 3 years 4 months 24 days | 2 years 9 months 18 days |
Weighted-average remaining lease term - operating leases | 9 years | 9 years 1 month 6 days |
Weighted-average discount rate - finance leases | 3.50% | 3.80% |
Weighted-average discount rate - operating leases | 3.60% | 3.70% |
Inventories, net (Details) - USD ($) $ in Millions |
Dec. 31, 2020 |
Dec. 31, 2019 |
---|---|---|
Inventories | ||
Raw materials | $ 79.6 | $ 83.4 |
Work in process | 16.1 | 15.5 |
Finished goods | 167.9 | 171.2 |
Total Inventories | 263.6 | 270.1 |
Valuation reserves | 37.3 | 27.9 |
Finished goods consigned | $ 16.3 | $ 16.7 |
Property, Plant and Equipment (Details) - USD ($) $ in Millions |
Dec. 31, 2020 |
Dec. 31, 2019 |
Dec. 31, 2018 |
---|---|---|---|
Property, plant and equipment | |||
Property, plant and equipment, at cost | $ 608.6 | $ 557.9 | |
Accumulated depreciation | (396.3) | (357.9) | |
Property, plant and equipment, net | 212.3 | 200.0 | $ 201.9 |
Land | |||
Property, plant and equipment | |||
Property, plant and equipment, at cost | 13.2 | 13.9 | |
Buildings and improvements | |||
Property, plant and equipment | |||
Property, plant and equipment, at cost | 194.3 | 175.8 | |
Machinery and equipment | |||
Property, plant and equipment | |||
Property, plant and equipment, at cost | 386.6 | 354.7 | |
Construction in progress | |||
Property, plant and equipment | |||
Property, plant and equipment, at cost | $ 14.5 | $ 13.5 |
Income Taxes - Operating loss carry forwards (Details) - USD ($) $ in Millions |
12 Months Ended | |
---|---|---|
Dec. 31, 2020 |
Dec. 31, 2019 |
|
Net operating loss carry forwards | ||
Net operating loss carry forward | $ 7.5 | $ 6.4 |
Valuation allowance | 42.1 | 28.6 |
increase in valuation allowance | 12.1 | |
Foreign | ||
Net operating loss carry forwards | ||
Net operating loss carryforward, not subject to expiration | 27.2 | |
Net operating loss carryforward, subject to expiration | 1.3 | |
Operating loss carryforward | 27.2 | |
Tax credit carryforward | 34.4 | $ 32.7 |
Austrian Operations | ||
Net operating loss carry forwards | ||
Operating loss carryforward | 27.2 | |
Korean Operations | ||
Net operating loss carry forwards | ||
Operating loss carryforward | 3.8 | |
U.S. | ||
Net operating loss carry forwards | ||
Capital loss carry forward | 1.0 | |
Domestic | ||
Net operating loss carry forwards | ||
Net operating loss carryforward, subject to expiration | 2.5 | |
Operating loss carryforward | 3.8 | |
Capital loss carry forward | $ 1.0 |
Income Taxes - Valuation allowance (Details) - USD ($) $ in Millions |
Dec. 31, 2020 |
Dec. 31, 2019 |
---|---|---|
Valuation allowance | ||
Valuation allowance | $ 42.1 | $ 28.6 |
Foreign Tax Credits | ||
Valuation allowance | ||
Valuation allowance | 34.4 | 22.3 |
Foreign | Operating Losses | ||
Valuation allowance | ||
Valuation allowance | $ 6.7 | $ 6.3 |
Accrued Expenses and Other Liabilities (Details) - USD ($) $ in Millions |
Dec. 31, 2020 |
Dec. 31, 2019 |
---|---|---|
Accrued Expenses and Other Liabilities | ||
Commissions and sales incentives payable | $ 44.6 | $ 43.7 |
Product liability | 22.1 | 22.2 |
Other | 62.8 | 58.7 |
Income taxes payable | 7.9 | 8.8 |
Accrued expenses and other liabilities | $ 137.4 | $ 133.4 |
Financing Arrangements - Long-term debt (Details) - USD ($) $ in Millions |
12 Months Ended | |
---|---|---|
Dec. 31, 2020 |
Dec. 31, 2019 |
|
Financing Arrangements | ||
Total debt | $ 200.0 | $ 310.0 |
Less debt issuance costs (deduction from liability) | (1.8) | (0.8) |
Less current maturities | (105.0) | |
Total long-term debt | 198.2 | $ 204.2 |
Principal payments during each of the next five years and thereafter | ||
2021 | 0.0 | |
2022 | 200.0 | |
5.05% Senior notes due 2020 | ||
Financing Arrangements | ||
Interest rate (as a percent) | 5.05% | |
Total debt | $ 75.0 | |
Term Loan due February 2021 | ||
Financing Arrangements | ||
Total debt | 225.0 | |
Line of Credit matures February 2021 | ||
Financing Arrangements | ||
Total debt | 10.0 | |
Line of Credit matures February 2022 | ||
Financing Arrangements | ||
Total debt | $ 200.0 | |
Letters of credit | ||
Financing Arrangements | ||
Term of letters of credit from the date of issuance | 1 year | |
Principal payments during each of the next five years and thereafter | ||
Letters of credit outstanding | $ 16.2 | $ 25.8 |
Employee Benefit Plans - 401K Contribution and Supplemental Compensation agreement (Details) - USD ($) $ in Millions |
12 Months Ended | ||
---|---|---|---|
Dec. 31, 2020 |
Dec. 31, 2019 |
Dec. 31, 2018 |
|
Employee Benefit Plans | |||
Base contribution as a percentage of employee gross pay (as a percent) | 2.00% | ||
Employer maximum match of an employee's contributions of first 4% of eligible compensation (as a percent) | 100.00% | ||
Percentage of eligible compensation, matched 100% by employer | 4.00% | ||
Company's matching contributions under certain 401(k) savings plans | $ 6.7 | $ 6.8 | $ 6.1 |
Foreign pension plans | |||
Employee Benefit Plans | |||
Charges for pension plans | $ 3.4 | $ 3.6 | $ 3.9 |
Contingencies and Environmental Remediation (Details) $ in Millions |
12 Months Ended |
---|---|
Dec. 31, 2020
USD ($)
item
| |
Maximum | |
Litigation contingencies | |
Possible loss | $ | $ 6.2 |
Asbestos Litigation | |
Litigation contingencies | |
Number of lawsuits the entity is defending in different jurisdictions | 400 |
Number of judgements | 0 |
Accumulated Other Comprehensive Loss (Details) - USD ($) $ in Millions |
3 Months Ended | |||||||
---|---|---|---|---|---|---|---|---|
Dec. 31, 2020 |
Sep. 27, 2020 |
Jun. 28, 2020 |
Mar. 29, 2020 |
Dec. 31, 2019 |
Sep. 29, 2019 |
Jun. 30, 2019 |
Mar. 31, 2019 |
|
Changes in accumulated other comprehensive income (loss) | ||||||||
Balance at the beginning of the period | $ (130.8) | |||||||
Balance at the end of the period | $ (100.0) | $ (130.8) | ||||||
Foreign Currency Translation | ||||||||
Changes in accumulated other comprehensive income (loss) | ||||||||
Balance at the beginning of the period | (123.5) | $ (137.8) | $ (147.8) | (131.3) | (143.2) | $ (127.4) | $ (130.9) | $ (126.3) |
Change in period | 23.6 | 14.3 | 10.0 | (16.5) | 11.9 | (15.8) | 3.5 | (4.6) |
Balance at the end of the period | (99.9) | (123.5) | (137.8) | (147.8) | (131.3) | (143.2) | (127.4) | (130.9) |
Cash Flow Hedge | ||||||||
Changes in accumulated other comprehensive income (loss) | ||||||||
Balance at the beginning of the period | (0.6) | (0.7) | (0.4) | 0.5 | 1.0 | 1.5 | 3.9 | 5.2 |
Change in period | 0.5 | 0.1 | (0.3) | (0.9) | (0.5) | (0.5) | (2.4) | (1.3) |
Balance at the end of the period | (0.1) | (0.6) | (0.7) | (0.4) | 0.5 | 1.0 | 1.5 | 3.9 |
Accumulated Other Comprehensive Income (Loss) | ||||||||
Changes in accumulated other comprehensive income (loss) | ||||||||
Balance at the beginning of the period | (124.1) | (138.5) | (148.2) | (130.8) | (142.2) | (125.9) | (127.0) | (121.1) |
Change in period | 24.1 | 14.4 | 9.7 | (17.4) | 11.4 | (16.3) | 1.1 | (5.9) |
Balance at the end of the period | $ (100.0) | $ (124.1) | $ (138.5) | $ (148.2) | $ (130.8) | $ (142.2) | $ (125.9) | $ (127.0) |
Quarterly Financial Information (unaudited) (Details) - USD ($) $ / shares in Units, $ in Millions |
3 Months Ended | 12 Months Ended | |||||||||
---|---|---|---|---|---|---|---|---|---|---|---|
Dec. 31, 2020 |
Sep. 27, 2020 |
Jun. 28, 2020 |
Mar. 29, 2020 |
Dec. 31, 2019 |
Sep. 29, 2019 |
Jun. 30, 2019 |
Mar. 31, 2019 |
Dec. 31, 2020 |
Dec. 31, 2019 |
Dec. 31, 2018 |
|
Quarterly Financial Information (unaudited) | |||||||||||
Net sales | $ 403.4 | $ 383.9 | $ 338.7 | $ 382.6 | $ 400.3 | $ 394.7 | $ 416.8 | $ 388.7 | $ 1,508.6 | $ 1,600.5 | $ 1,564.9 |
Gross profit | 169.2 | 158.5 | 134.9 | 162.8 | 170.1 | 168.6 | 174.6 | 164.2 | 625.4 | 677.5 | 656.5 |
Net income | $ 29.2 | $ 32.9 | $ 20.2 | $ 32.0 | $ 31.8 | $ 32.3 | $ 36.4 | $ 31.0 | $ 114.3 | $ 131.5 | $ 128.0 |
Basic EPS | |||||||||||
Net income (in dollars per share) | $ 0.86 | $ 0.97 | $ 0.60 | $ 0.94 | $ 0.94 | $ 0.95 | $ 1.06 | $ 0.91 | $ 3.37 | $ 3.86 | $ 3.73 |
Diluted EPS | |||||||||||
Net income (in dollars per share) | 0.86 | 0.97 | 0.59 | 0.94 | 0.93 | 0.94 | 1.06 | 0.91 | 3.36 | 3.85 | 3.73 |
Dividends declared per common share (in dollars per share) | $ 0.23 | $ 0.23 | $ 0.23 | $ 0.23 | $ 0.23 | $ 0.23 | $ 0.23 | $ 0.21 | $ 0.92 | $ 0.90 | $ 0.82 |
Subsequent Events (Details) - Subsequent event |
Feb. 08, 2021
$ / shares
|
---|---|
Class A | |
Subsequent events | |
Quarterly dividend payable (in dollars per share) | $ 0.23 |
Class B | |
Subsequent events | |
Quarterly dividend payable (in dollars per share) | $ 0.23 |
Schedule II-Valuation and Qualifying Accounts (Details) - USD ($) $ in Millions |
12 Months Ended | ||
---|---|---|---|
Dec. 31, 2020 |
Dec. 31, 2019 |
Dec. 31, 2018 |
|
Accounts Receivable Reserve Allowances | |||
Changes in valuation and qualifying accounts | |||
Balance At Beginning of Period | $ 14.3 | $ 15.0 | $ 14.3 |
Additions Charged To Expense | 1.1 | 2.2 | 3.3 |
Additions Charged To Other Accounts | 0.9 | (0.2) | |
Deductions | (5.2) | (2.9) | (2.4) |
Balance At End of Period | 11.1 | 14.3 | 15.0 |
Reserve for excess and obsolete inventories | |||
Changes in valuation and qualifying accounts | |||
Balance At Beginning of Period | 25.0 | 24.4 | 25.4 |
Additions Charged To Expense | 13.3 | 6.6 | 7.7 |
Additions Charged To Other Accounts | 1.4 | (0.1) | (0.7) |
Deductions | (6.3) | (5.9) | (8.0) |
Balance At End of Period | $ 33.4 | $ 25.0 | $ 24.4 |