What changed in this filing

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Item 1. Financial Statements

2022-10-28 compared with 2022-07-29 · 114 added, 87 removed, 532 unchanged (27% of the section changed)

4 unchanged sentences

Three Months Ended

June 30, Six Months Ended

September 30, Nine Months Ended

September 30,

2022 2021 2022 2021

13 unchanged sentences

Dividends Per Share of Common Stock $ 0.28 $ 0.26 $ 0.84 $ 0.78

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

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

SMITH CORPORATION

2 unchanged sentences

Three Months Ended

June 30, Six Months Ended

September 30, Nine Months Ended

September 30,

2022 2021 2022 2021

11 unchanged sentences

(dollars in millions)

September 30,

Current Assets

42 unchanged sentences

(dollars in millions)

Six Months Ended

Nine Months Ended

September 30,

Operating Activities

19 unchanged sentences

Cash Used in Financing Activities ( 320.1 ) ( 328.5 )

Effect of exchange rate changes on cash and cash equivalents ( 37.4 ) —

Net decrease in cash and cash equivalents ( 84.5 ) ( 87.0 )

6 unchanged sentences

Three Months Ended

June 30, Six Months Ended

September 30, Nine Months Ended

September 30,

2022 2021 2022 2021

18 unchanged sentences

Net earnings 109.8 131.6 355.8 347.5

Cash dividends on stock ( 43.8 ) ( 41.7 ) ( 88.0 ) ( 83.9 )

Dividends on stock ( 43.3 ) ( 41.5 ) ( 131.3 ) ( 125.4 )

Balance at end of period $ 3,051.1 $ 2,731.7 $ 3,051.1 $ 2,731.7

11 unchanged sentences

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

June 30, 2022

September 30, 2022

Basis of Presentation

2 unchanged sentences

In the opinion of management, all adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation have been included.

Operating results for the three and six months ended June 30, 2022 are not necessarily indicative of the results expected for the full year.

Operating results for the three and nine months ended September 30, 2022 are not necessarily indicative of the results expected for the full year.

It is suggested the accompanying condensed consolidated financial statements be read in conjunction with the audited consolidated financial statements and the notes thereto included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2021 filed with the SEC on February 11, 2022.

14 unchanged sentences

The Company’s payment terms for the majority of its customers are 30 to 90 days from shipment.

Additionally, certain customers in China pay the Company prior to the shipment of products resulting in a customer deposits liability of $ 100.7 million and $ 155.2 million at June 30, 2022 and December 31, 2021, respectively.

Additionally, certain customers in China pay the Company prior to the shipment of products resulting in a customer deposits liability of $ 103.8 million and $ 155.2 million at September 30, 2022 and December 31, 2021, respectively.

Customer deposit liabilities are short term in nature, recognized into revenue within one year of receipt, and recorded in Trade payables within the condensed consolidated balance sheets.

2 unchanged sentences

In addition, the Company monitors other risk factors including forward-looking information when establishing adequate allowances for credit losses, which reflects the current estimate of credit losses expected to be incurred over the life of the receivables.

The Company’s allowance for credit losses was $ 10.6 million at June 30, 2022 and $ 9.5 million at December 31, 2021.

The Company’s allowance for credit losses was $ 10.1 million at September 30, 2022 and $ 9.5 million at December 31, 2021.

Rebates and incentives are based on pricing agreements and are tied to sales volume.

8 unchanged sentences

The Rest of World segment is primarily comprised of China, Europe and India.

Both segments manufacture and market comprehensive lines of residential and commercial gas and electric water heaters, boilers, tanks and water treatment products.

Both segments manufacture and market comprehensive lines of residential and commercial gas, heat pump and electric water heaters, boilers, tanks and water treatment products.

Both segments primarily manufacture and market in their respective regions of the world.

22 unchanged sentences

(dollars in millions) Three Months Ended

June 30, Six Months Ended

September 30, Nine Months Ended

September 30,

2022 2021 2022 2021

2 unchanged sentences

Boilers and related parts 75.5 59.6 203.4 161.6

Water treatment products 59.8 50.0 116.6 98.7

Water treatment products and related parts 51.8 49.6 168.4 148.3

Total North America 652.9 658.2 2,127.1 1,814.7

7 unchanged sentences

(Giant), a Canada-based manufacturer of residential and commercial water heaters for $ 198.6 million, net of cash acquired.

The purchase price increased by $ 2.5 million during the three months ended June 30, 2022 as a result of final working capital adjustments.

The Company paid $ 2.5 million of the purchase price in the second quarter of 2022 as a result of final working capital adjustments.

The Company incurred acquisition costs of approximately $ 1.3 million in 2021.

Under the purchase agreement for the Giant acquisition, an escrow of approximately $ 8 million was set aside from the purchase price to satisfy any potential obligations of the former owners of Giant, should they arise.

Goodwill decreased by $ 2.3 million during the three months ended June 30, 2022 due to the net impact of a measurement period adjustment, primarily related to income tax matters, partially offset by the final working capital adjustment.

Under the Giant purchase agreement, approximately $ 8 million of the purchase price was set aside as an escrow to satisfy any potential obligations of the former owners of Giant, should they arise.

The allocation of the purchase price to goodwill decreased by $ 2.3 million in the second quarter of 2022 due to the net impact of a measurement period adjustment, primarily related to income tax matters, partially offset by the final working capital adjustment.

The purchase price allocation remains preliminary and subject to final valuation adjustments that will be completed within the one year period following the acquisition date.

The addition of Giant increases the Company's North America market penetration, creating additional capacity and enhancing the Company's distribution capabilities.

The addition of Giant increased the Company's North America market penetration, created additional capacity and enhanced the Company's distribution capabilities.

Giant is included in the North America segment.

The following table summarizes the preliminary allocation of fair value of the assets acquired and liabilities assumed at the date of acquisition.

Of the $ 53.8 million of acquired identifiable intangible assets, $ 43.9 million has been assigned to trademarks that are not subject to amortization and $ 9.2 million has been assigned to customer relationships which are amortized over 22 years, and the remaining $ 0.7 million has been assigned to non-compete agreements which are amortized over five years .

Of the $ 53.8 million of acquired identifiable intangible assets, $ 43.9 million was assigned to trademarks that are not subject to amortization and $ 9.2 million was assigned to customer relationships which are amortized over 22 years, and the remaining $ 0.7 million was assigned to non-compete agreements which are amortized over five years .

The excess of the acquisition purchase price over the fair value assigned to the assets acquired and liabilities assumed was recorded as goodwill.

9 unchanged sentences

Net assets acquired $ 198.6

In addition, during the second quarter of 2022, the Company acquired a privately-held water treatment company.

During the second quarter of 2022, the Company acquired a privately-held water treatment company.

The Company paid an aggregate cash purchase price of $ 5.5 million, net of cash acquired.

1 unchanged sentence

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

During the third quarter of 2022, the Company incurred $ 4.3 million of expenses and related income tax benefit of $ 1.1 million associated with a terminated acquisition.

These expenses were related to the due diligence of a prospective acquisition target and recorded within selling, general and administrative expenses in the condensed consolidated statement of operations.

The Company’s lease portfolio consists of operating leases for buildings and equipment, such as forklifts and copiers, primarily in the United States and China.

7 unchanged sentences

Renewal terms can extend the lease term from one to five years and options to terminate can be effective within one year .

The exercise of lease renewal or termination is at the Company’s discretion and when it is determined to be reasonably certain to renew or terminate, the option is reflected in the measurement of lease asset and liability.

The Company’s lease agreements do not contain any material residual value

The exercise of lease renewal or termination is at the

Leases (continued)

guarantees or material restrictive covenants or material subleases.

Company’s discretion and when it is determined to be reasonably certain to renew or terminate, the option is reflected in the measurement of lease asset and liability.

The Company’s lease agreements do not contain any material residual value guarantees or material restrictive covenants or material subleases.

Cash flows associated with leases are materially consistent with the expense recorded in the condensed consolidated statement of earnings.

Supplemental balance sheet information related to leases is as follows:

(dollars in millions) June 30,

(dollars in millions) September 30,

2022 December 31, 2021

4 unchanged sentences

Operating lease assets $ 31.3 $ 32.5

Lease Term and Discount Rate June 30, 2022

Lease Term and Discount Rate September 30, 2022

Weighted-average remaining lease term 6.4 years

2 unchanged sentences

(dollars in millions) Three months ended

September 30,

Lease Expense Classification 2022 (1)

3 unchanged sentences

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

(dollars in millions) Six Months Ended

(dollars in millions) Nine Months Ended

September 30,

Lease Expense Classification 2022 (1)

3 unchanged sentences

(2) 2021 includes short-term and variable lease expenses of $ 1.6 million and $ 1.8 million, respectively.

Leases (continued)

Maturities of lease liabilities were as follows:

(dollars in millions) June 30,

(dollars in millions) September 30,

After 2026 9.3

3 unchanged sentences

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

(dollars in millions) June 30,

(dollars in millions) September 30,

2022 December 31, 2021

4 unchanged sentences

LIFO reserve ( 73.1 ) ( 70.8 )

$ 493.0 $ 447.7

Inventories, at LIFO cost $ 525.6 $ 447.7

Product Warranties

The Company offers warranties on the sales of certain of its products with terms that are consistent with the market and records an accrual for the estimated future claims.

The increase in the reserve for product warranties as of June 30, 2022 compared to June 30, 2021 was primarily due to increased steel prices and the acquisition of Giant.

The increase in the reserve for product warranties as of September 30, 2022 compared to September 30, 2021 was primarily due to increased steel prices and the acquisition of Giant.

Refer to Note 3, "Acquisitions", for additional information regarding the acquisition of Giant.

1 unchanged sentence

(dollars in millions) Three Months Ended

Balance at April 1, $ 182.9 $ 141.6

September 30,

Balance at July 1, $ 180.0 $ 144.9

Expense 14.0 18.5

Claims settled ( 16.8 ) ( 11.9 )

Balance at June 30, $ 180.0 $ 144.9

(dollars in millions) Six Months Ended

Balance at September 30, $ 177.2 $ 151.5

(dollars in millions) Nine Months Ended

September 30,

Balance at January 1, $ 184.4 $ 142.3

1 unchanged sentence

Claims settled ( 49.8 ) ( 37.2 )

Balance at June 30, $ 180.0 $ 144.9

Balance at September 30, $ 177.2 $ 151.5

In 2021, the Company renewed and amended its $ 500 million multi-year multi-currency revolving credit agreement with a new expiration date of April 1, 2026.

1 unchanged sentence

Borrowings under bank credit lines and commercial paper borrowings are supported by a $ 500 million revolving credit agreement.

As a result of the long-term nature of this facility, the Company’s commercial paper and credit line borrowings are classified as long-term debt at June 30, 2022.

As a result of the long-term nature of this facility, the Company’s commercial paper and credit line borrowings are classified as long-term debt at September 30, 2022.

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

The facility requires the Company to maintain two financial covenants, a leverage ratio test and an interest coverage test.

The Company was in compliance with the covenants as of June 30, 2022.

The Company was in compliance with the covenants as of September 30, 2022.

Earnings per Share of Common Stock

2 unchanged sentences

Three Months Ended

June 30, Six Months Ended

September 30, Nine Months Ended

September 30,

2022 2021 2022 2021

8 unchanged sentences

Smith Combined Executive Incentive Compensation Plan which was originally approved by stockholders in 2002.

The number of shares available for granting of options or share units at June 30, 2022 was 7,144,796 .

The number of shares available for granting of options or share units at September 30, 2022 was 7,134,900 .

Upon stock option exercise or share unit vesting, shares are issued from treasury stock.

Total stock based compensation expense recognized in the three months ended June 30, 2022 and 2021 was $ 1.4 million and $ 1.5 million, respectively.

Total stock based compensation expense recognized in the six months ended June 30, 2022 and 2021 was $ 9.0 million and $ 8.9 million, respectively.

Total stock based compensation expense recognized in the three months ended September 30, 2022 and 2021 was $ 1.4 million and $ 1.4 million, respectively.

Total stock based compensation expense recognized in the nine months ended September 30, 2022 and 2021 was $ 10.4 million and $ 10.3 million, respectively.

Stock Options

The stock options granted in the six months ended June 30, 2022 and 2021 have three year pro rata vesting from the date of grant.

The stock options granted in the nine months ended September 30, 2022 and 2021 have three year pro rata vesting from the date of grant.

Stock options are issued at exercise prices equal to the fair value of the Company’s Common Stock on the date of grant.

1 unchanged sentence

The Company’s stock options are expensed ratably over the three year vesting period;

however, included in the stock option expense for the six months ended June 30, 2022 and 2021 was expense associated with the accelerated vesting of stock option awards for certain employees who either are retirement eligible or become retirement eligible during the vesting period.

Stock based compensation expense attributable to stock options in the three months ended June 30, 2022 and 2021 was $ 0.6 million and $ 0.5 million, respectively.

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

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

however, included in the stock option expense for the nine months ended September 30, 2022 and 2021 was expense associated with the accelerated vesting of stock option awards for certain employees who either are retirement eligible or become retirement eligible during the vesting period.

Stock based compensation expense attributable to stock options in the three months ended September 30, 2022 and 2021 was $ 0.5 million and $ 0.5 million, respectively.

Stock based compensation expense attributable to stock options in the nine months ended September 30, 2022 and 2021 was $ 5.0 million and $ 4.6 million, respectively.

Stock Based Compensation (continued)

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

Price Number of

5 unchanged sentences

Forfeited 61.09 ( 17,383 )

Outstanding at June 30, 2022 51.16 2,538,366 7 years $ 19.2

Exercisable at June 30, 2022 46.82 1,716,451 6 years $ 16.0

Stock Based Compensation (continued)

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

Outstanding at September 30, 2022 51.19 2,511,824 7 years $ 9.9

Exercisable at September 30, 2022 46.89 1,703,369 6 years $ 8.4

The weighted-average fair value per option at the date of grant during the nine months ended September 30, 2022 and 2021 using the Black-Scholes option-pricing model was $ 17.57 and $ 14.03 , respectively.

Assumptions were as follows:

Six Months Ended

Nine Months Ended

September 30,

Expected life (years) 5.7 5.8

10 unchanged sentences

Share units vest three years after the date of grant.

The Company granted 93,211 and 100,676 share units under the Incentive Plan in the six months ended June 30, 2022 and 2021, respectively.

The Company granted 94,604 and 104,223 share units under the Incentive Plan in the nine months ended September 30, 2022 and 2021, respectively.

The share units were valued at $ 6.9 million and $ 6.4 million at the date of issuance in 2022 and 2021, respectively, based on the price of the Company’s Common Stock at the date of grant.

The share units are recognized as compensation expense ratably over the three-year vesting period;

however, included in share unit expense in the three and six months ended June 30, 2022 and 2021 was expense associated with accelerated vesting of restricted stock and share unit awards for certain employees who either are retirement eligible or will become retirement eligible during the vesting period.

Stock based compensation expense attributable to share units of $ 0.8 million and $ 1.0 million was recognized in the three months ended June 30, 2022 and 2021, respectively.

Stock based compensation expense attributable to share units of $ 4.5 million and $ 4.8 million was recognized in the six months ended June 30, 2022 and 2021, respectively.

however, included in share unit expense in the three and nine months ended September 30, 2022 and 2021 was expense associated with accelerated vesting of restricted stock and share unit awards for certain employees who either are retirement eligible or will become retirement eligible during the vesting period.

Stock based compensation expense attributable to share units of $ 1.0 million and $ 0.9 million was recognized in the three months ended September 30, 2022 and 2021, respectively.

Stock based compensation expense attributable to share units of $ 5.5 million and $ 5.7 million was recognized in the nine months ended September 30, 2022 and 2021, respectively.

Certain non-U.S.-based employees receive the cash value of the share price at the vesting date in lieu of shares.

Unvested cash-settled awards are remeasured at each reporting period.

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

Stock Based Compensation (continued)

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

Number of Units Weighted-Average

4 unchanged sentences

Forfeited ( 8,439 ) 56.31

Issued and unvested at June 30, 2022 380,941 52.98

Issued and unvested at September 30, 2022 380,672 52.92

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

(dollars in millions) Three Months Ended

June 30, Six Months Ended

September 30, Nine Months Ended

September 30,

2022 2021 2022 2021

21 unchanged sentences

(dollars in millions) Three Months Ended

June 30, Six Months Ended

September 30, Nine Months Ended

September 30,

2022 2021 2022 2021

17 unchanged sentences

$ 2.6 $ ( 2.6 ) $ 7.8 $ ( 7.8 )

(2) includes legal judgment income of:

( 11.5 ) — ( 11.5 ) —

(3) includes terminated acquisition-related expenses of:

(4) includes pension expense (income) of:

10 unchanged sentences

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

Fair Value Measurement Using June 30,

Fair Value Measurement Using September 30,

2022 December 31, 2021

2 unchanged sentences

Items measured at fair value were comprised of the Company’s marketable securities (Level 1) and derivative instruments (Level 2).

There were no changes in the Company’s valuation techniques used to measure fair values on a recurring basis during the six months ended June 30, 2022.

There were no changes in the Company’s valuation techniques used to measure fair values on a recurring basis during the nine months ended September 30, 2022.

Derivative Instruments

15 unchanged sentences

The majority of the amounts in accumulated other comprehensive loss for cash flow hedges are expected to be reclassified into earnings within one year.

Derivative Instruments (continued)

The following table summarizes, by currency, the contractual amounts of the Company’s foreign currency forward contracts that are designated as cash flow hedges:

(dollars in millions) June 30, 2022 December 31, 2021

(dollars in millions) September 30, 2022 December 31, 2021

Buy Sell Buy Sell

9 unchanged sentences

These hedges are determined to be effective.

The Company recognized $ 1.7 million and $ 1.4 million of after-tax gains associated with hedges of net investments in non-U.S.

subsidiaries in currency translation adjustment in other comprehensive loss in the three and six months ended June 30, 2022, respectively.

The Company recognized $( 0.1 ) million of after-tax losses associated with hedges of a net investment in non-U.S.

subsidiaries in currency translation adjustment in other comprehensive loss in both the three and six months ended June 30, 2021.

The contractual amount of the Company's foreign currency forward contracts that are designated as net investment hedges is $ — million as of June 30, 2022.

The Company recognized zero and $ 1.4 million of after-tax gains associated with hedges of net investments in non-U.S.

subsidiaries in currency translation adjustment in other comprehensive loss in the three and nine months ended September 30, 2022, respectively.

The Company recognized zero and $( 0.1 ) million of after-tax losses associated with hedges of a net investment in non-U.S.

subsidiaries in currency translation adjustment in other comprehensive loss in both the three and nine months ended September 30, 2021, respectively.

The contractual amount of the Company's foreign currency forward contracts that are designated as net investment hedges is zero as of September 30, 2022.

Derivative Instruments (continued)

The following tables present the impact of derivative contracts on the Company’s financial statements.

Fair value of derivatives designated as hedging instruments under ASC 815:

(dollars in millions) Balance Sheet Location June 30,

(dollars in millions) Balance Sheet Location September 30,

2022 December 31,

3 unchanged sentences

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

Three Months Ended June 30 (dollars in millions):

Three Months Ended September 30 (dollars in millions):

Derivatives in ASC 815 cash flow hedging relationships Amount of gain recognized in other

comprehensive

loss on derivatives Location of gain (loss)

loss on derivatives Location of gain

reclassified from

1 unchanged sentence

comprehensive loss

into earnings Amount of gain (loss)

into earnings Amount of gain

reclassified from

4 unchanged sentences

Foreign currency contracts $ 5.7 $ 0.6 Cost of products sold $ 1.0 $ 0.2

Derivative Instruments (continued)

Six Months Ended June 30 (dollars in millions):

Nine Months Ended September 30 (dollars in millions):

Derivatives in ASC 815 cash flow hedging relationships Amount of gain (loss) recognized in other

15 unchanged sentences

These foreign exchange contracts did not qualify for hedge accounting in accordance with ASC 815 and as such were marked to market through earnings.

The fair value of the foreign exchange contracts was a liability of $ 0.2 million as of June 30, 2022.

The fair value of the foreign exchange contracts was an asset of $ 0.4 million as of September 30, 2022.

The fair value of the foreign exchange contracts was a liability of $ 0.8 million as of December 31, 2021 and recorded in Accrued liabilities within the consolidated balance sheet.

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

(dollars in millions) June 30, 2022 December 31, 2021

(dollars in millions) September 30, 2022 December 31, 2021

Buy Sell Buy Sell

Canadian dollar $ — $ 96.2 $ — $ 125.6

Derivative Instruments (continued)

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

Three Months Ended June 30 (dollars in millions):

Three Months Ended September 30 (dollars in millions):

Derivatives not designated as hedging instruments:

Location of loss within the consolidated statements of earnings

Foreign exchange contracts Other (income) expense - net $ ( 0.2 ) $ —

Six Months Ended June 30 (dollars in millions):

Foreign exchange contracts Other expense (income) - net $ 0.4 $ —

Nine Months Ended September 30 (dollars in millions):

Derivatives not designated as hedging instruments:

1 unchanged sentence

Foreign exchange contracts Other expense (income) - net $ 1.5 $ —

The Company’s effective income tax rate for the three and six months ended June 30, 2022 was 23.7 percent and 23.6 percent, respectively.

The Company’s effective income tax rate for the three and nine months ended September 30, 2022 was 24.1 percent and 23.7 percent, respectively.

The Company estimates that its annual effective income tax rate for the full year 2022 will be between approximately 23.5 and 24.0 percent.

The effective income tax rate for the three and six months ended June 30, 2021 was 21.9 percent and 22.2 percent, respectively.

The change in the effective income tax rate for the six months ended June 30, 2022 compared to the effective income tax rate for the six months ended June 30, 2021 was primarily due to a change in geographical earnings mix.

As of June 30, 2022, the Company had $ 14.3 million of unrecognized tax benefits of which $ 0.5 million would affect its effective income tax rate if recognized.

The effective income tax rate for the three and nine months ended September 30, 2021 was 20.9 percent and 21.7 percent, respectively.

The change in the effective income tax rate for the three and nine months ended September 30, 2022 compared to the effective income tax rate for the three and nine months ended September 30, 2021 was primarily due to a non-recurring favorable tax impact recorded in 2021 of $ 4.2 million related to amending a previously filed tax return and a change in geographical earnings mix.

As of September 30, 2022, the Company had $ 14.3 million of unrecognized tax benefits of which $ 0.5 million would affect its effective income tax rate if recognized.

The Company recognizes potential interest and penalties related to unrecognized tax benefits as a component of income tax expense.

11 unchanged sentences

Potential losses under the repurchase arrangements represent the difference between the repurchase price and net proceeds from the resale of product plus costs incurred in the process, less related distributor rebates.

Before considering any reduction of distributor rebate accruals of $ 2.5 million and $ 3.9 million as of June 30, 2022 and December 31, 2021, respectively, and from the resale of the related inventory, the gross amount the Company would be obligated to repurchase, which would be contingent on the default of all of the outstanding loans, was approximately $ 3.5 million as of June 30, 2022 and $ 7.2 million as of December 31, 2021.

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

Before considering any reduction of distributor rebate accruals of $ 1.4 million and $ 3.9 million as of September 30, 2022 and December 31, 2021, respectively, and from the resale of the related inventory, the gross amount the Company would be obligated to repurchase, which would be contingent on the default of all of the outstanding loans, was approximately $ 2.4 million as of September 30, 2022 and $ 7.2 million as of December 31, 2021.

The Company’s reserves for estimated losses under repurchase arrangements were immaterial as of September 30, 2022 and December 31, 2021.

On September 28, 2022, the Company received a cash judgment of $ 11.5 million from a competitor of our North America segment related to its infringement of one of the Company’s patents.

The terms of the judgment resulted in pre-tax income of $ 11.5 million that is recorded as an offset to selling, general and administrative expenses and a related tax expense of $ 2.9 million.

Changes in Accumulated Other Comprehensive Loss by Component

1 unchanged sentence

(dollars in millions) Three Months Ended

September 30,

Cumulative foreign currency translation

Balance at beginning of period $ ( 68.7 ) $ ( 44.6 )

Other comprehensive income before reclassifications ( 24.6 ) 4.9

Other comprehensive loss before reclassifications ( 28.9 ) ( 2.4 )

Balance at end of period ( 97.6 ) ( 47.0 )

2 unchanged sentences

Other comprehensive gain before reclassifications 4.3 0.5

Realized (gains) losses on derivatives reclassified to cost of products sold (net of income tax provision (benefit) of $ 0.2 and ($ 0.2 ) in 2022 and 2021, respectively)

Realized gains on derivatives reclassified to cost of products sold (net of income tax provision of $ 0.2 and $ 0.1 in 2022 and 2021, respectively)

( 0.8 ) ( 0.1 )

Balance at end of period 5.6 ( 0.1 )

13 unchanged sentences

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

(dollars in millions) Six Months Ended

(dollars in millions) Nine Months Ended

September 30,

Cumulative foreign currency translation

Balance at beginning of period $ ( 44.7 ) $ ( 48.1 )

Other comprehensive income before reclassifications ( 24.0 ) 3.5

Other comprehensive (loss) income before reclassifications ( 52.9 ) 1.1

Balance at end of period ( 97.6 ) ( 47.0 )

17 unchanged sentences

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-Q

Item 1. Financial Statements