14.

Operations by Segment

The Company is comprised of two reporting segments: North America and Rest of World. The Rest of World segment is primarily comprised of China, Europe and India. Both segments manufacture and market comprehensive lines of residential and commercial gas and electric water heaters, boilers and water treatment products. Both segments primarily manufacture and market in their respective regions of the world. The North America segment also manufactures and markets water system tanks. Our Rest of World segment also manufactures and markets in-home air purification products in China.

The accounting policies of the reportable segments are the same as those described in the “Summary of Significant Accounting Policies” outlined in Note 1. Segment earnings, defined by the Company as earnings before interest, taxes, general corporate and corporate research and development expenses, were used to measure the performance of the segments.


	Net Sales									Earnings
Years ended December 31 (dollars in millions)	2017			2016			2015			2017			2016			2015
North America	$	1,904.8		$	1,743.2		$	1,703.0		$	428.6		$	385.9		$	339.9
Rest of World		1,116.3			965.6			866.1			149.3			129.1			113.0
Inter-segment		(24.4	)		(22.9	)		(32.6	)		—			—			—

Total segments – sales, segment earnings	$	2,996.7		$	2,685.9		$	2,536.5		$	577.9		$	515.0		$	452.9

Corporate expenses											(47.0	)		(45.2	)		(43.0	)
Interest expense											(10.1	)		(7.3	)		(7.4	)

Earnings before income taxes											520.8			462.5			402.5
Provision for income taxes											(224.3	)		(136.0	)		(119.6	)

Net earnings										$	296.5		$	326.5		$	282.9

In 2017, the Company recorded provisional one-time charges of $81.8 million associated with U.S. Tax Reform, primarily related to the repatriation of undistributed foreign earnings.

In 2017, sales to the North America segment’s two largest customers were $361.4 million and $335.2 million which represented 12 percent and 11 percent of the Company’s net sales, respectively. In 2016, sales to the North America segment’s two largest customers were $311.5 million and $280.8 million which represented 12 percent and 11 percent of the Company’s net sales, respectively. In 2015, sales to the North America segment’s two largest customers were $301.7 million and $287.0 million which represented 12 percent and 11 percent of the Company’s net sales, respectively.

Assets, depreciation and capital expenditures by segment


	Total Assets (December 31)						Depreciation and Amortization (Years Ended December 31)						Capital Expenditures (Years Ended December 31)
(dollars in millions)	2017		2016		2015		2017		2016		2015		2017		2016		2015
North America	$	1,592.5	$	1,515.9	$	1,381.1	$	45.1	$	42.9	$	41.9	$	38.5	$	45.9	$	43.5
Rest of World		741.4		584.3		544.2		23.8		21.0		19.8		55.2		34.3		28.4
Corporate		863.4		790.8		703.9		1.2		1.2		1.3		0.5		0.5		0.8

Total	$	3,197.3	$	2,891.0	$	2,629.2	$	70.1	$	65.1	$	63.0	$	94.2	$	80.7	$	72.7

The majority of corporate assets consist of cash, cash equivalents, marketable securities and deferred income taxes.

Net sales and long-lived assets by geographic location

The following data by geographic area includes net sales based on product shipment destination and long-lived assets based on physical location. Long-lived assets include net property, plant and equipment and other long-term assets.


	Long-lived Assets (December 31)						Net Sales (Years Ended December 31)
(dollars in millions)	2017		2016		2015			2017		2016		2015
United States	$	303.0	$	292.4	$	297.8	United States	$	1,698.1	$	1,570.7	$	1,531.4
China		250.8		184.3		157.3	China		1,034.9		887.1		787.1
Canada		3.2		3.1		2.7	Canada		163.7		138.7		129.9
Other Foreign		47.1		48.4		55.2	Other Foreign		100.0		89.4		88.1

Total	$	604.1	$	528.2	$	513.0	Total	$	2,996.7	$	2,685.9	$	2,536.5