OVERVIEW


Our company is comprised of two reporting segments: North America and Rest of
World. Our Rest of World segment is primarily comprised of China, Europe and
India. Both segments manufacture and market comprehensive lines of residential
and commercial gas and electric water heaters, boilers, tanks, and water
treatment products. Both segments primarily manufacture and market in their
respective region of the world. Our Rest of World segment also manufactures and
markets in-home air purifier products in China.
In January 2020, an outbreak of a novel coronavirus (COVID-19) surfaced in
Wuhan, China. As a result of the outbreak, the Chinese government required
businesses to close and restricted certain travel within the country. In
cooperation with the government authorities, our operations in China closed for
approximately four weeks before resuming production before the end of the first
quarter. In March 2020, COVID-19 was declared a global pandemic and we saw
pressure in our other end markets worldwide. To date, our global manufacturing
operations of essential water heating and water treatment products continue
without material disruption to our operations. As a result of the COVID-19
pandemic and in support of continuing our manufacturing efforts, we have
undertaken numerous and meaningful steps to protect our employees, suppliers,
and customers. These important steps, which in certain cases reduce efficiency,
include continuous communication and training to our employees on living and
working safely in a COVID-19 environment, plant accommodations and
reconfigurations to maintain social distancing, masks for all employees,
implementation of sanitizing stations, temperature taking and regular, proactive
deep cleaning and sanitization of our facilities, among others. As we receive
guidance from governmental authorities, we adjust our safety measures to meet or
exceed those guidelines. The majority of our customers in the U.S. are also
deemed essential under Cybersecurity and Infrastructure Security Agency (CISA)
guidance and are operating their businesses under varying state and local
governmental guidance.
Our global supply chain management team continues to monitor and manage our
ability to operate effectively as COVID-19 cases in the U.S. and elsewhere
surge. To date, we have not seen any material disruptions to our supply chain.
Ongoing communications with our suppliers to identify and mitigate risk of
potential disruptions and to manage inventory levels continue. Our U.S. water
heater manufacturing lead times, which were extended in the second and third
quarters due to self-quarantine absenteeism mandated by our COVID-19 prevention
measures, continue to improve into the fourth quarter of 2020. Adding
manufacturing shifts, hiring temporary workers and shifting some production have
contributed to lead-time improvement.
While we believe our balance sheet and capital position are strong, proactive
management of discretionary spending and cost structure will continue. On May 1,
2020, the members of our Board of Directors voluntarily reduced the cash
component of their board compensation by 25 percent and our chairman and chief
executive officer (CEO) voluntarily reduced his base salary by 25 percent. Our
CEO's staff, which includes our other named executive officers, also volunteered
a 15 percent reduction in base salary. Full compensation of our Board of
Directors, our CEO and our CEO's staff was reinstated on October 1, 2020.
We estimate that between 80 to 85 percent of our water heater and boiler units
sold in the U.S. relate to replacement business. While we expect that our
replacement business in both water heating and boilers will provide a buffer in
any economic downturn resulting from COVID-19 in a similar manner to what we
have seen historically, the impacts of the pandemic on consumer spending are
difficult to predict.
In our North America segment, we expect industry residential water heater
volumes will be up approximately four percent in 2020 compared with 2019, which
we believe is driven by a positive new home and remodel construction environment
and our belief that customers may have added inventory due to industry extended
lead times. We believe that some de-stocking by our customers will occur in the
fourth quarter as our lead times have and continue to improve. We expect sales
of North America water treatment products to increase by 22 to 24 percent in
2020, compared to 2019, primarily due to volume growth and a full year of sales
from our Water-Right, Inc. and its affiliated entities (Water-Right)
acquisition, which we completed in April 2019. We expect higher residential
water heater volumes and water treatment sales will be more than offset by
expected declines in commercial water heater volumes and boiler sales due to
pandemic-impacted businesses, job site disruptions and deferrals of
discretionary replacement installations.
In our Rest of World segment, we expect China sales in 2020 to decline between
18 and 19 percent in local currency compared with 2019, with mid-single digit
growth in the fourth quarter of 2020 due to expected year over year growth in
consumer demand for our products. In addition, we project our mix of products
sold in China is shifting to more mid-price range products from our historical
mix of higher priced products. We also continue to focus on aligning our cost
structure in China through
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headcount reductions, store closures, cuts in advertising and other cost saving
measures. Our headcount reductions and restructuring actions were largely
completed as of the end of the third quarter of 2020.
Combining all of these factors, we expect our consolidated sales to decline
approximately six to seven percent in 2020. Our guidance assumes the conditions
of our business environment and that of our suppliers and customers are similar
for the remainder of the year to what we are experiencing currently and does not
deteriorate as a result of further restrictions or shutdowns due to the COVID-19
pandemic.
RESULTS OF OPERATIONS
THIRD QUARTER AND FIRST NINE MONTHS OF 2020 COMPARED TO 2019
Sales in the third quarter of 2020 were $760 million or approximately four
percent higher than sales of $728 million in the third quarter of 2019. Sales in
the first nine months of 2020 were $2,061 million or approximately eight percent
lower than $2,242 million in the same period last year. Compared to the same
period last year, our sales increase in the third quarter of 2020 was primarily
driven by higher volumes of residential water heaters and sales growth of our
water treatment products in North America, partially offset by lower commercial
water heater volumes and lower boiler sales due to pandemic-impacted businesses,
temporarily closed job sites and deferrals of discretionary replacement
installations. Our sales decline in the first nine months of 2020 compared to
the same period last year was primarily driven by lower sales in China and lower
commercial water heater volumes and lower boiler sales in North America due to
the pandemic impacts mentioned above. The decreased sales in the first nine
months of 2020 compared to the same period of the prior year more than offset
higher water treatment volumes in North America, which included incremental
sales of $16 million from Water-Right, acquired on April 8, 2019.
Gross profit margin in the third quarter of 2020 of 39.1 percent was essentially
the same as gross profit margin in the third quarter of 2019. Gross profit
margin in the first nine months of 2020 of 38.0 percent was lower than the gross
profit margin of 39.5 percent in the first nine months of 2019. The lower gross
profit margin in the first nine months compared to the same period last year was
primarily due to lower sales volumes.
Selling, general and administrative (SG&A) expenses in the third quarter and
first nine months of 2020 decreased by $12.9 million and $46.6 million,
respectively, as compared to the prior year periods. The decrease in SG&A
expenses in the third quarter and first nine months of 2020 was primarily due to
lower selling and advertising expenses in China.
To align our business to current market conditions, during the third quarter and
first nine months of 2020, we recognized $1.6 million and $7.7 million of
pre-tax severance and restructuring expenses, respectively. Charges recognized
during the three months ended September 30, 2020, comprised of $1.6 million
severance costs. Charges recognized during the nine months ended September 30,
2020 comprised of $6.8 million severance costs and $0.9 million of other
restructuring expenses. These activities are reflected in "severance and
restructuring expenses" in the accompanying financial statements.
We are providing non-GAAP measures (adjusted earnings, adjusted earnings per
share, and adjusted segment earnings) that exclude severance and restructuring
expenses. Reconciliations to measures on a GAAP basis are provided later in this
section. We believe that the measures of adjusted earnings, adjusted EPS and
adjusted segment earnings provide useful information to investors about our
performance and allow management and our investors to better compare our
performance period over period.
Interest expense in the third quarter of 2020 was $1.6 million compared to $3.1
million in the same period last year. Interest expense in the first nine months
of 2020 was $6.3 million compared to $8.5 million in the same period last year.
The decrease in interest expense in the third quarter and first nine months of
2020 was primarily due to lower average debt levels and lower interest rates
than the prior year periods.
Other income was $2.8 million in the third quarter of 2020, compared to $4.0
million in the same period last year. Other income in the first nine months of
2020 was $11.0 million compared to $15.1 million in the first nine months of
2019. The decrease in other income in the third quarter and first nine months of
2020 compared to the same periods last year was primarily due to lower interest
income.
Our pension costs and credits are developed from actuarial valuations. The
valuations reflect key assumptions regarding, among other things, discount
rates, expected return on plan assets, retirement ages, and years of service. We
consider current market conditions, including changes in interest rates, in
making these assumptions. Our assumption for the expected rate of return on plan
assets is 6.75 percent in 2020 compared to 7.15 percent in 2019. The discount
rate used to determine net periodic pension costs decreased to 3.18 percent in
2020 from 4.32 percent in 2019. Pension income for the third quarter and first
nine months of 2020 was $1.8 million and $5.9 million, respectively, compared to
$1.7 million and $6.1 million in the third quarter and first nine months of
2019, respectively. The service cost component of our pension income is
reflected in cost of products sold and SG&A expenses. All other components of
our pension income are reflected in other income.
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Our effective income tax rates for the third quarter and first nine months of
2020 were 23.2 percent and 23.0 percent, respectively. Our effective income tax
rates for the third quarter and first nine months of 2019 were 22.6 percent and
21.8 percent, respectively. Our effective income tax rate in the first nine
months of 2020 was higher than the effective income tax rate in the same period
of 2019 primarily due to a change in geographic earnings mix. We estimate that
our annual effective income tax rate for the full year 2020 will be between 23.0
and 23.5 percent.
North America
Sales in the North America segment were $544 million in the third quarter of
2020 or six percent higher than sales of $515 million in the third quarter of
2019. Sales for the first nine months of 2020 were $1,557 million compared to
sales of $1,560 million in the same period last year. Compared to the prior-year
period, the increase in sales in the third quarter of 2020 was primarily due to
higher volumes of residential water heaters and a 19 percent increase in water
treatment product sales, partially offset by lower commercial water heater
volumes and lower boiler sales due to pandemic-impacted businesses, temporarily
closed job sites and deferrals of discretionary replacement installations. The
sales decline in the nine months ended 2020 compared to the same period in 2019
was primarily the result of lower commercial water heater volumes and lower
boiler sales due to pandemic impacts mentioned above, and a water heater sales
mix composed of more electric models that have a lower selling price. The sales
decline in nine months ended 2020 compared to last year was largely offset by
the sales growth of approximately 33 percent in our North America water
treatment products, which included $16 million of incremental sales from
Water-Right.
North America segment earnings were $133.1 million in the third quarter of 2020
or approximately nine percent higher than segment earnings of $121.6 million in
the same period of 2019. Segment earnings in the first nine months of 2020 were
$365.6 million or approximately one percent higher than segment earnings of
$360.5 million in the first nine months of 2019. Segment margin of 24.5 percent
in the third quarter of 2020 was higher than 23.6 percent in the same period
last year. Segment margin of 23.5 percent in the first nine months of 2020 was
higher than 23.1 percent in the same period the previous year. Adjusted segment
earnings and adjusted segment margin in the third quarter of 2020 were $133.6
million and 24.6 percent, respectively. Adjusted segment earnings and adjusted
segment margin in the first nine months of 2020 were $368.3 million and 23.6
percent, respectively. Increased segment earnings and segment margin in the
third quarter of 2020 compared to the third quarter of 2019 were primarily
driven by higher residential water heater volumes, higher water treatment
product sales, and lower material costs, partially offset by lower volumes of
commercial water heaters and lower boiler sales. Higher segment earnings and
segment margin in the first nine months of 2020 were primarily driven by the
factors identified above, including incremental profit from Water-Right. During
the three and nine months ended 2020, segment earnings and margin were adversely
impacted by certain costs related to the pandemic. These costs included
temporarily moving production from Mexico to the U.S., paying employees during
temporary plant shutdowns, proactively deep cleaning facilities, paying benefits
during employee furloughs, and other costs, which were approximately $1.1
million and $6.6 million for the three and nine months ended 2020, respectively.
We expect full year segment margin to be between 23.0 and 23.5 percent in 2020.
In the third quarter and first nine months ended 2020, adjusted segment earnings
and adjusted segment margin in 2020 exclude $0.5 million and $2.7 million of
pre-tax severance and restructuring expenses, respectively. These expenses are
associated with an initiative to align our business to current market
conditions.
Rest of World
Sales in the Rest of World segment were $221 million in the third quarter of
2020 and were essentially flat compared to sales of $220 million in the third
quarter of 2019. Sales in the first nine months of 2020 were $521 million or
$181 million lower than sales of $702 million in the first nine months of 2019.
Our sales in China decreased by 27 percent in U.S. dollar terms and 26 percent
in local currency in the first nine months of 2020, compared to the same period
last year. Flat China sales in the third quarter of 2020, compared to the same
period last year, was the result of higher consumer demand, offset by a higher
mix of mid-price products which have a lower selling price. The decrease in Rest
of World sales in the first nine months of 2020 was primarily due to COVID-19
pandemic-related weak consumer demand, a higher sales mix of mid-price products,
and further reductions in customer inventory levels in China. In addition, our
China sales were favorably impacted by currency translation of approximately $4
million in the third quarter of 2020 and adversely impacted by currency
translation of approximately $6 million in the first nine months of 2020,
compared to the same periods of the previous year.
Rest of World segment earnings were $16.7 million in the third quarter of 2020,
compared to earnings of $4.1 million in the third quarter of 2019. Segment
losses in the first nine months of 2020 were $31.3 million, compared to earnings
of $38.8 million in the same period of 2019. Segment margin of 7.5 percent was
higher in the third quarter of 2020 compared with 1.9 percent in the same period
last year. Adjusted segment earnings and adjusted segment margin in the third
quarter of 2020 were $17.8 million and 8.0 percent, respectively. Segment margin
was (6.0) percent in the first nine months of 2020 compared to 5.5 percent in
the first nine months of 2019. Adjusted segment losses in the first nine months
of 2020 were $26.3 million. Higher segment earnings and segment margin in the
third quarter of 2020 compared to the prior-year period were primarily driven by
higher sales volumes in China and a reduction in selling, advertising, and
administrative costs and temporary social insurance
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exemptions, were partially offset by a higher mix of mid-price products, which
have lower margins. Compared to the same period last year, segment losses in the
first nine months of 2020 was driven by the unfavorable impact from lower China
sales and a higher mix of mid-price products, which have lower margins than our
historical mix of higher-priced products, and partially offset by the benefits
from lower selling, advertising, and administrative costs and temporary social
insurance exemptions. We expect full year segment margin to be between (2.0)
percent and (1.0) percent in 2020.
In the third quarter and first nine months ended 2020, adjusted segment earnings
and adjusted segment margin in 2020 exclude $1.1 million and $5.0 million of
pre-tax severance and restructuring expenses, respectively. These expenses are
associated with an initiative to align our business to current market
conditions.
Outlook
We project consolidated sales will decline by approximately six to seven percent
in 2020 compared to 2019 due to declines in sales in China in the first-half of
2020, as well as lower commercial water heater volumes and boiler sales in the
U.S. which will more than offset an expected 22 to 24 percent sales growth in
North America water treatment products and expected four percent increase in
U.S. residential water heater industry volumes. We believe we will achieve
full-year earnings of between $1.91 and $1.94 per share, which excludes the
potential impact from future acquisitions. We believe we will achieve full-year
adjusted earnings of between $1.95 and $1.98 per share, which excludes severance
and restructuring expenses and the potential impact from future acquisitions.
Our guidance assumes the conditions of our business environment and that of our
suppliers and customers are similar for the remainder of the year to what we are
experiencing currently and does not deteriorate as a result of further
restrictions or shutdowns due to the COVID-19 pandemic.
Liquidity & Capital Resources
Working capital of $624.4 million at September 30, 2020, was $109.5 million
lower than December 31, 2019. Lower cash, cash equivalents, and marketable
securities balances primarily resulted from approximately $178 million in cash
we repatriated to the U.S in the first nine months of 2020, which was primarily
utilized to repay floating rate debt. The reduction in cash was partially offset
by lower sales-related accounts receivable balances and higher liabilities for
accounts payable, payroll taxes, and income taxes. As of September 30, 2020,
approximately $410 million of our $509 million of cash, cash equivalents, and
marketable securities was held by our foreign subsidiaries.
Cash provided by operations in the first nine months of 2020 was $330.4 million
compared with $280.0 million provided during the same period last year. Lower
investments in working capital compared with the same period in 2019, partially
offset by lower earnings, resulted in higher cash provided by operations. We
continue to monitor developments on an on-going basis and have taken proactive
measures to focus on cash, manage working capital, and reduce costs. For the
full year 2020, we expect cash provided by operating activities will be
approximately $400 million, compared with $456.2 million in 2019.
Capital expenditures totaled $36.7 million in the nine months of 2020, compared
with $50.3 million in the year ago period. We project our 2020 capital
expenditures to be between $50 and $55 million, lower than our approximately $80
million average annual spending in the last three years. We expect full year
depreciation and amortization will be approximately $80 million.
We have a $500 million multi-currency credit facility with a group of nine
banks, which expires in December 2021. The facility has an accordion provision,
which allows us to increase it up to $700 million if certain conditions
(including lender approval) are satisfied. Borrowing rates under the facility
are determined by our leverage ratio. The facility requires us to maintain two
financial covenants, a leverage ratio test and an interest coverage test, and we
were in compliance with the covenants as of September 30, 2020.
The facility backs up commercial paper and credit line borrowings. As a result
of the long-term nature of this facility, our commercial paper and credit line
borrowings, as well as drawings under the facility, are classified as long-term
debt. At September 30, 2020, we had an available borrowing capacity of $500
million under this facility. We believe the combination of available borrowing
capacity and operating cash flows will provide sufficient funds to finance our
existing operations for the foreseeable future.
Our total debt declined from $284.0 million at December 31, 2019, to $113.9
million at September 30, 2020. Our leverage, as measured by the ratio of total
debt to total capitalization, calculated excluding operating lease liabilities,
was 6.1 percent at the end of the third quarter in 2020, compared with 14.6
percent at the end of last year.
Our pension plan continues to meet all funding requirements under ERISA
regulations. We are not required to make a contribution, and we do not plan to
make any voluntary contributions to the plan in 2020.
In the second quarter of 2019, our Board of Directors approved adding three
million shares of Common Stock to an existing discretionary share repurchase
authority. Under the share repurchase program, our common stock may be purchased
through a combination of a Rule10b5-1 automatic trading plan and discretionary
purchases in accordance with applicable securities laws.
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The stock repurchase authorization remains effective until terminated by our
Board of Directors, which may occur at any time, subject to the parameters of
any Rule10b5-1automatic trading plan that we may then have in effect. During the
first nine months of 2020, we repurchased 1,348,391 shares of our stock at a
total cost of $56.7 million. At September 30, 2020, we had 1,613,824 million
shares remaining on the board share repurchase authority. Due to the uncertainty
surrounding the impact of the global COVID-19 pandemic, we suspended our share
repurchases on March 18, 2020.
On October 12, 2020, our Board of Directors increased the rate of our quarterly
cash dividend to $0.26 per share on our Common Stock and Class A common stock,
representing an increase of eight percent. The five-year compound annual growth
rate of our quarterly dividend rate is more than 22 percent. The dividend is
payable on November 16, 2020, to shareholders of record on October 31, 2020.

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Non-GAAP Financial Information
We provide non-GAAP measures (adjusted earnings, adjusted earnings per share
(EPS) and adjusted segment earnings) that exclude severance and restructuring
expenses in 2020. We believe that the measures of adjusted earnings, adjusted
EPS and adjusted segment earnings provide useful information to investors about
our performance and allow management and our investors to better compare our
performance period over period.
                            A. O. SMITH CORPORATION
                       Adjusted Earnings and Adjusted EPS
                  (dollars in millions, except per share data)
                                  (unaudited)

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


                                                       Three Months Ended                       Nine Months Ended
                                                         September 30,                            September 30,
                                                     2020                 2019               2020               2019
Net Earnings (GAAP)                           $     105.4              $   87.3          $    224.9          $  278.7
Severance and restructuring expenses, before
tax                                                   1.6                     -                 7.7                 -
Tax effect of severance and restructuring
expenses                                             (0.3)                    -                (1.4)                -
Adjusted Earnings                             $     106.7              $   87.3          $    231.2          $  278.7

Diluted EPS (GAAP)                            $      0.65              $   0.53          $     1.38          $   1.66
Severance and restructuring expenses, per
diluted share                                        0.01              $      -                0.05                 -
Tax effect of severance and restructuring
expenses per diluted share                              -              $      -               (0.01)                -
Adjusted EPS                                  $      0.66              $   0.53          $     1.42          $   1.66


                            A. O. SMITH CORPORATION
                           Adjusted Segment Earnings
                             (dollars in millions)
                                  (unaudited)
The following is a reconciliation of reported segment earnings to adjusted
segment earnings (non-GAAP):
                                            Three Months Ended              Nine Months Ended
                                               September 30,                  September 30,
                                             2020            2019           2020          2019
Segment Earnings (GAAP)
North America                          $    133.1          $ 121.6      $    365.6      $ 360.5
Rest of World                                16.7              4.1           (31.3)        38.8
Inter-segment earnings elimination              -                -            (0.3)        (0.1)
Total Segment Earnings (GAAP)          $    149.8          $ 125.7      $    334.0      $ 399.2
Adjustments
North America(1)                       $      0.5          $     -      $      2.7      $     -
Rest of World(2)                              1.1                -             5.0            -
Inter-segment earnings elimination              -                -               -            -
Total Adjustments                      $      1.6          $     -      $      7.7      $     -
Adjusted Segment Earnings
North America                          $    133.6          $ 121.6      $    368.3      $ 360.5
Rest of World                                17.8              4.1           (26.3)        38.8
Inter-segment earnings elimination              -                -            (0.3)        (0.1)
Total Adjusted Segment Earnings        $    151.4          $ 125.7      $   

341.7 $ 399.2




(1)In the third quarter and nine months of 2020, we recognized $0.5 million and
$2.7 million of severance and restructuring expenses, respectively. For
additional information, see Note 4 of the notes to the financial statements.
(2)In the third quarter and nine months of 2020, we recognized $1.1 million and
$5.0 million of severance and restructuring expenses, respectively. For
additional information, see Note 4 of the notes to the financial statements.
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                            A. O. SMITH CORPORATION
                    Adjusted EPS and Adjusted 2020 Guidance
                                  (unaudited)
The following is a reconciliation of diluted EPS to adjusted EPS (non-GAAP):
                                                                     2020 Guidance               2019
Diluted EPS (GAAP)                                                        $1.91 - 1.94       $     2.22
Severance and restructuring expenses per diluted share, net of
tax                                                                        0.04                       -
Adjusted EPS                                                              $1.95 - 1.98       $     2.22


Critical Accounting Policies
Our consolidated financial statements are prepared in conformity with accounting
principles generally accepted in the U.S., which requires the use of estimates
and assumptions about future events that affect the amounts reported in the
financial statements and accompanying notes. Future events and their effects
cannot be determined with absolute certainty. Therefore, the determination of
estimates requires the exercise of judgment. Actual results inevitably will
differ from those estimates, and such differences may be material to the
financial statements. The critical accounting policies that we believe could
have the most significant effect on our reported results or require complex
judgment by management are contained in Item 7, Management's Discussion and
Analysis of Financial Condition and Results of Operations, of our Annual Report
on Form 10-K for the year ended December 31, 2019. We believe that at
September 30, 2020, there has been no material change to this information.
Recent Accounting Pronouncements
Refer to Recent Accounting Pronouncements in Note 1 - Basis of Presentation in
the notes to our condensed consolidated financial statements included in Part 1
Financial Information.
Forward Looking Statements
This filing contains statements that the Company believes are "forward-looking
statements" within the meaning of the Private Securities Litigation Reform Act
of 1995. Forward-looking statements generally can be identified by the use of
words such as "may," "will," "expect," "intend," "estimate," "anticipate,"
"believe," "forecast," "continue," "guidance" or words of similar meaning. All
forward-looking statements are subject to risks and uncertainties that could
cause actual results to differ materially from those anticipated as of the date
of this filing. Important factors that could cause actual results to differ
materially from these expectations include, among other things, the following:
negative impacts to the Company's businesses, including demand for its products
particularly commercial products, operations and work-force dislocation and
disruption, supply chain disruption and liquidity as a result of the severity
and duration of the COVID-19 pandemic; a failure to recover or a further
weakening of the Chinese economy and/or a failure to recover or a further
decline in the growth rate of consumer spending or housing sales in China;
negative impact to the Company's businesses from international tariffs and trade
disputes; potential further weakening in the high efficiency boiler segment in
the U.S.; significant volatility in raw material availability and prices;
inability of the Company to implement or maintain pricing actions; a failure to
recover or further weakening in U.S. residential or commercial construction or
instability in the Company's replacement markets; foreign currency fluctuations;
the Company's inability to successfully integrate or achieve its strategic
objectives resulting from acquisitions; competitive pressures on the Company's
businesses; the impact of potential information technology or data security
breaches; changes in government regulations or regulatory requirements; and
adverse developments in general economic, political and business conditions in
key regions of the world. Forward-looking statements included in this filing are
made only as of the date of this filing, and the Company is under no obligation
to update these statements to reflect subsequent events or circumstances. All
subsequent written and oral forward-looking statements attributed to the
Company, or persons acting on its behalf, are qualified entirely by these
cautionary statements.

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