Fortune Brands Innovations, Inc.: Form 10-Q for the period ended Sep 30, 2019

MANAGEMENT’S DISCUSSION AND ANALYSIS OF

FINANCIAL CONDITION AND RESULTS OF OPERATIONS.

The following discussion and analysis of our financial condition and results of operations should be read in conjunction with our unaudited condensed consolidated financial statements and the notes thereto, which are included in this report, as well as our audited consolidated financial statements for the year ended December 31, 2018, which are included in our Annual Report on Form 10-K for the year ended December 31, 2018.

This discussion contains forward-looking statements that are made pursuant to the safe harbor provisions of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), regarding expected capital spending, expected pension contributions, the anticipated impact of recently issued accounting standards on our financial statements, planned business strategies, anticipated market potential, future financial performance, impact of acquisitions and other matters. Statements preceded by, followed by or that otherwise include the words “believes,” “expects,” “anticipates,” “intends,” “projects,” “estimates,” “plans” and similar expressions or future or conditional verbs such as “will,” “should,” “would,” “may” and “could” are generally forward-looking in nature and not historical facts. Where, in any forward-looking statement, we express an expectation or belief as to future results or events, such expectation or belief is based on current expectations, estimates, assumptions and projections about our industry, business and future financial results, available at the time this report is filed with the Securities and Exchange Commission. Our actual results could differ materially from the results contemplated by these forward-looking statements due to a number of factors, including but not limited to: (i) our reliance on the North American home improvement, repair and new home construction activity levels, and the North American and global economies generally, (ii) the competitive nature of consumer and trade brand businesses, (iii) our ability to develop new products or processes and improve existing products and processes, (iv) risks associated with our ability to improve organizational productivity and global supply chain efficiency and flexibility, (v) risks associated with global commodity and energy availability and price volatility, as well as the possibility of sustained inflation, (vi) risks associated with doing business internationally, including changes in trade-related tariffs, (vii) changes in government and industry standards, (viii) risks associated with entering into potential strategic acquisitions and integrating acquired property, (ix) our ability to secure and protect our intellectual property rights, (x) our reliance on key customers and suppliers, including wholesale distributors and dealers, (xi) risk of increases in our defined benefit-related costs and funding requirements, (xii) risks associated with the disruption of operations, (xiii) our inability to obtain raw materials and finished goods in a timely and cost-effective manner, (xiv) our ability to attract and retain qualified personnel and other labor constraints, (xv) future tax law changes or the interpretation of existing tax laws, (xvi) potential liabilities and costs from claims and litigation, (xvii) impairments in the carrying value of goodwill or other acquired intangible assets, (xviii) delays or outages in our information technology system or computer networks and (xix) our ability to access the capital markets on terms acceptable to us. These and other factors are discussed in Part I, Item 1A “Risk Factors” of our Annual Report on Form 10-K for the year ended December 31, 2018. We undertake no obligation to, and expressly disclaim any such obligation to, update or clarify any forward-looking statements to reflect changed assumptions, the occurrence of anticipated or unanticipated events, new information or changes to future results over time or otherwise, except as required by law.

OVERVIEW

References to “Fortune Brands,” “the Company,” “we,” “our” and “us” refer to Fortune Brands Home & Security, Inc. and its consolidated subsidiaries as a whole, unless the context otherwise requires. The Company is a leading home and security products company with a portfolio of leading branded products used for residential home repair, remodeling, new construction and security applications.

We believe the Company has certain competitive advantages including market-leading brands, a diversified mix of channels, lean and flexible supply chains, a decentralized business model and a strong capital structure as well as a tradition of strong innovation and customer service. We are focused on outperforming our markets in growth, profitability and returns in order to drive increased shareholder value. We believe the Company’s track record reflects the long-term attractiveness and potential of our categories and our leading brands. We expect the benefits of operating leverage and strategic spending to support increased manufacturing capacity and long-term growth initiatives will help us continue to achieve profitable organic growth.

We believe our most attractive opportunities are to invest in profitable organic growth initiatives. We also believe that we have the potential to generate additional growth from leveraging our cash flow and balance sheet strength by pursuing accretive strategic acquisitions and joint ventures, and by returning cash to shareholders through a combination of dividends and common stock repurchases under our share repurchase program as explained in further detail under “Liquidity and Capital Resources” below.

The U.S. market for our products primarily consists of spending on both new home construction and repair and remodel activities within existing homes, with a majority of the markets we serve consisting of repair and remodel spending. Growth in the U.S. market for our products will largely depend on consumer confidence, employment, home prices, stable mortgage rates and credit availability.

We may be impacted by fluctuations in raw material and transportation costs, changes in foreign exchange and promotional activity among our competitors. We strive to offset the potential unfavorable impact of these items with productivity improvement initiatives and price increases.

In September 2018, we acquired 100% of the membership interests of Fiber Composites, LLC (“Fiberon”), a leading U.S. manufacturer of outdoor performance materials used in decking, railing and fencing products, for a total purchase price of approximately $470 million, subject to certain post-closing adjustments. The acquisition of Fiberon provided category expansion and product extension opportunities into the outdoor living space for our Doors & Security segment. We financed the transaction using cash on hand and borrowings under our revolving credit and term loan facilities. The results of operations are included in the Doors & Security segment from the date of acquisition.

RESULTS OF OPERATIONS

Nine Months Ended September 30, 2019 Compared To Nine Months Ended September 30, 2018

(In millions)

The following discussion of consolidated results of operations and segment results refers to the nine months ended September 30, 2019 compared to the nine months ended September 30, 2018. Consolidated results of operations should be read in conjunction with segment results of operations.

Net sales

Net sales increased by $229.7 million, or 5.7%, due to the benefit from the 2018 Fiberon acquisition in our Doors & Security segment ($139 million), price increases to help mitigate cumulative raw material cost increases and higher sales volume, including growth in China and the absence in 2019 of unfavorable weather related conditions affecting our U.S. market performance. These benefits were partially offset by lower sales unit volume of make-to-order custom and semi-custom cabinetry products, unfavorable promotion and rebate costs, lower sales unit volume in security products, unfavorable mix in our Doors & Security segment, and unfavorable foreign exchange of $27 million.

Cost of products sold

Cost of products sold increased by $166.7 million, or 6.4%, due to the higher net sales and increased commodity costs including the impact of higher tariffs, partially offset by the benefit from productivity improvements and the absence in 2019 of the amortization of the acquisition-related inventory fair value adjustment ($5.0 million of expense in 2018) related to our Victoria+Albert acquisition.

Selling, general and administrative expenses

Selling, general and administrative expenses increased by $11.1 million, or 1.2%, due to higher employee related costs and transportation costs, as well as the impact of expenses associated with the 2018 Fiberon acquisition in our Doors & Security segment.

Amortization of intangible assets

Amortization of intangible assets increased by $4.7 million primarily due to the 2018 Fiberon acquisition in our Doors & Security segment.

Asset impairment charges

The asset impairment charges of $29.5 million in 2019 related to an indefinite-lived tradename within our Cabinets segment. During the third quarter of 2019, we recognized an impairment of $29.5 million related to one tradename, which was primarily the result of a continuing shift in demand from semi-custom cabinetry products to value-priced cabinetry products, which led to consecutive downward adjustments of internal sales forecasts associated with the tradename. Asset impairment charge of $27.1 million for the nine months ended September 30, 2018 related to impairment of an indefinite-lived tradename within our Cabinets segment which was primarily the result of reduced revenue growth expectations associated with operations in Canada, including the announced closure of Company-owned retail locations during the third quarter of 2018.

Restructuring charges

Restructuring charges of $11.2 million in the nine months ended September 30, 2019 primarily related to severance costs within our Cabinets and Plumbing segments and costs associated with closing facilities within our Plumbing and Doors & Security segments. Restructuring charges of $17.3 million in the nine months ended September 30, 2018 primarily related to severance costs across all segments and our initiatives to consolidate our manufacturing footprint and to discontinue certain product lines in our Cabinets segment.

Operating income

Operating income increased by $50.9 million, or 11.2%, primarily due to higher net sales, productivity improvements, and lower restructuring charges. These benefits were partially offset by unfavorable commodity costs and unfavorable mix.

Interest expense

Interest expense increased by $20.7 million to $71.8 million due to higher average borrowings and higher average interest rates.

Other income, net

Other income, net, was $2.2 million in the nine months ended September 30, 2019, compared to $15.8 million in the nine months ended September 30, 2018. The decrease in other income, net is primarily due to lower defined benefit plan income in 2019 ($7.9 million decrease), the absence of the hedge gains associated with our September 2018 debt issuance and unfavorable foreign currency adjustments.

In future periods the Company may record, within other income and expense, material adjustments associated with actuarial gains and losses arising from periodic remeasurement of our liabilities for defined benefit plans. At a minimum, the Company will remeasure its defined benefit plan liabilities in the fourth quarter of each year. Remeasurements due to plan amendments and settlements may also occur in interim periods during the year. Remeasurement of these liabilities attributable to updating our liability discount rates and expected return on assets may, in particular, result in material income or expense recognition.

Based on current relevant interest rate benchmarks and year-to-date pension asset returns, the Company may incur additional defined benefit plan actuarial losses in the range of $0.09 to $0.13 per share in the fourth quarter of 2019 due to declining discount rates since December 31, 2018, the last remeasurement date. Any actuarial loss incurred in the fourth quarter will be based upon spot discount rates as of December 31, 2019 and our full year 2019 pension asset returns and may differ materially from this estimate. A 50 basis point change in our discount rate impacts our defined benefit plan liabilities by approximately $60 million.

Income taxes

The effective income tax rates for the nine months ended September 30, 2019 and 2018 were 25.0% and 27.4%, respectively. The effective income tax rates in 2019 and 2018 were favorably impacted by a benefit associated with the U.S. research and development credit and unfavorably by state and local taxes and unfavorable tax rates in foreign jurisdictions. Additionally, the 2019 effective income tax rate was favorably impacted by decreases to uncertain tax positions, as a result of audit settlements. The 2018 effective income tax rate was unfavorably impacted by an adjustment to the deemed repatriation tax liability recorded in 2017 under the Tax Cuts and Jobs Act of 2017 and increases to uncertain tax positions.

Net income from continuing operations

Net income from continuing operations was $327.3 million in the nine months ended September 30, 2019 compared to $304.7 million in the nine months ended September 30, 2018. The increase of $22.6 million was due to higher operating income and lower income tax expenses, partly offset by higher interest expense and lower other income.

Results By Segment

Cabinets

Net sales increased by $3.9 million, or 0.2%, predominantly due to price increases to help mitigate cumulative raw material cost increases and higher sales unit volume of stock cabinetry products. These factors were partly offset by lower sales unit volume of make-to-order custom and semi-custom cabinetry products, lower sales in Canada and increased promotional costs. Foreign exchange was unfavorable by approximately $3 million.

Operating income increased by $11.8 million, or 9.7%, due to the benefit from productivity improvements and lower restructuring costs.

Plumbing

Net sales increased by $83.9 million, or 6.0%, due to higher sales volume including growth in China, price increases to help mitigate tariffs and cumulative raw material cost increases, and the absence in 2019 of unfavorable weather-related conditions affecting our U.S. market performance. These benefits were partially offset by lower sales volume in Canada and luxury-branded products and higher rebates costs as well as unfavorable foreign exchange of approximately $20 million.

Operating income increased by $34.8 million, or 12.7%, due to higher net sales, the benefit from productivity improvements and the absence in 2019 of the amortization of the acquisition-related inventory fair value adjustment ($5.0 million of expense in 2018) related to our Victoria+Albert acquisition. These benefits were partially offset by commodity cost inflation including the impact of higher tariffs, and unfavorable channel mix. Foreign exchange was unfavorable by approximately $9 million.

Doors & Security

Net sales increased by $141.9 million, or 16.2%, due to the benefit from the 2018 Fiberon acquisition ($139 million) and price increases to help mitigate tariffs and cumulative raw material cost increases. These benefits were partially offset by lower sales unit volume in security products, higher customer program costs, and unfavorable mix. Foreign exchange was unfavorable by approximately $4 million.

Operating income increased by $0.8 million, or 0.7%, due to the higher sales including the benefit from the 2018 Fiberon acquisition. These factors were partially offset by commodity cost inflation, Fiberon’s inventory fair value adjustments ($1.8 million in 2019) and an expense due to a fair value adjustment associated with an idle manufacturing facility ($1.7 million in 2019).

Corporate

Corporate expenses decreased by $3.5 million, or 5.7%, due to lower employee related costs.

Three Months Ended September 30, 2019 Compared To Three Months Ended September 30, 2018

(In millions)

The following discussion of consolidated results of operations and segment results refers to the three months ended September 30, 2019 compared to the three months ended September 30, 2018. Consolidated results of operations should be read in conjunction with segment results of operations.

Net sales

Net sales increased by $78.2 million, or 5.7%, due to price increases to help mitigate tariffs and cumulative raw material cost increases, higher sales unit volume in Plumbing, including international growth in China, the benefit from the 2018 Fiberon acquisition in our Doors & Security segment ($42 million) and the absence in 2019 of unfavorable weather related conditions affecting our U.S. market performance. These benefits were partially offset by lower sales unit volume of make-to-order custom and semi-custom cabinetry products, higher customer rebates and promotion costs, and lower sales unit volume in security and doors products, unfavorable foreign exchange of $6 million.

Cost of products sold

Cost of products sold increased by $47.9 million, or 5.4%, due to higher net sales and increased commodity costs including the impact of higher tariffs, partially offset by the benefit of productivity improvements.

Selling, general and administrative expenses

Selling, general and administrative expenses increased by $6.2 million, or 2.0%, due to higher employee related costs and transportation costs as well as the impact of expenses associated with the 2018 Fiberon acquisition in our Doors & Security segment.

Amortization of intangible assets

Amortization of intangible assets increased by $1.0 million primarily due to the 2018 Fiberon acquisition in our Doors & Security segment.

Asset impairment charges

The asset impairment charges of $29.5 million in 2019 related to an indefinite-lived tradename within our Cabinets segment. During the third quarter of 2019, we recognized an impairment of $29.5 million related to one tradename, which was primarily the result of a continuing shift in demand from semi-custom cabinetry products to value-priced cabinetry products, which led to consecutive downward adjustments of internal sales forecasts associated with the tradename. Asset impairment charge of $27.1 million, during the third quarter of 2018, related to impairment of an indefinite-lived tradename within our Cabinets segment which was primarily the result of reduced revenue growth expectations associated with operations in Canada, including the announced closure of Company-owned retail locations.

Restructuring charges

Restructuring charges of $5.5 million in the three months ended September 30, 2019 primarily related to severance costs within our Cabinets and Doors & Security segments. Restructuring charges of $5.7 million in the three months ended September 30, 2018 primarily related to severance costs within our Cabinets and Doors & Security segments and our initiatives to consolidate our manufacturing footprint and to discontinue certain product lines in our Cabinets segment.

Operating income

Operating income increased by $20.9 million, or 14.2%, primarily due to higher net sales including the benefit from the 2018 Fiberon acquisition in our Doors & Security segment, productivity improvements and lower restructuring charges. These benefits were partially offset by unfavorable commodity costs, and unfavorable foreign exchange of $3 million.

Interest expense

Interest expense increased by $4.6 million to $23.6 million due to higher average borrowings and higher average interest rates.

Other income, net

Other income, net, was $0.3 million in the three months ended September 30, 2019, compared to $9.6 million in the three months ended September 30, 2018. The decrease in other income, net is primarily due to the absence of the hedge gains associated with our September 2018 debt issuance, lower foreign currency adjustments and lower defined benefit plan income in 2019 ($3.9 million decrease).

Income taxes

The effective income tax rates for the three months ended September 30, 2019 and 2018 were 27.0% and 27.5%, respectively. The effective income tax rates in 2019 and 2018 were favorably impacted by a benefit associated with the U.S. research and development credit and unfavorably impacted by state and local taxes, unfavorable tax rates in foreign jurisdictions and increases to uncertain tax positions.

Net income from continuing operations

Net income from continuing operations was $105.7 million in the three months ended September 30, 2019 compared to $99.9 million in the three months ended September 30, 2018. The increase of $5.8 million was due to higher operating income and lower income tax expenses, partly offset by higher interest expense and lower other income.

Results By Segment

Cabinets

Net sales decreased by $9.3 million, or 1.6%, predominantly due to lower sales unit volume of make-to-order custom and semi-custom cabinetry products, lower sales in Canada and increased promotional costs. These factors were partly offset by price increases to help mitigate cumulative raw material cost increases, and higher sales unit volume of stock cabinetry products.

Operating income decreased by $3.6 million, or 12.5%, due to lower sales unit volume of make-to-order custom and semi-custom cabinetry products, raw material cost increases, salaries and benefits inflation and production inefficiencies associated with production transitioning. These factors were partly offset by the benefit from productivity improvements, lower restructuring and other charges, and higher sales unit volume of stock cabinetry products.

Plumbing

Net sales increased by $52.6 million, or 11.4% due to higher sales unit volume including growth in China, the absence in 2019 of unfavorable weather-related conditions affecting our U.S. market performance, and price increases to help mitigate tariffs and cumulative raw material cost increases. These benefits were partially offset by higher rebates costs as well as unfavorable foreign exchange of approximately $5 million.

Operating income increased by $22.6 million, or 25.3%, due to higher sales and the benefit from productivity improvements. These benefits were partially offset by commodity cost inflation including the impact of higher tariffs, and unfavorable foreign exchange of approximately $3 million.

Doors & Security

Net sales increased by $34.9 million, or 10.9%, principally due to the benefit from the Fiberon acquisition ($42 million) and price increases to help mitigate tariffs and cumulative raw material cost increases. These benefits were partially offset by lower sales unit volume. Foreign exchange was unfavorable by approximately $1 million.

Operating income increased by $1.9 million, or 3.9%, due to higher sales including the benefit from the Fiberon acquisition, partly offset by commodity cost inflation and higher employee related costs.

Corporate

Corporate expenses are consistent with the prior year.

LIQUIDITY AND CAPITAL RESOURCES

Our principal sources of liquidity are cash on hand, cash flows from operating activities, cash borrowed under our credit facility and cash from debt issuances in the capital markets. Our operating income is generated by our subsidiaries. We believe our operating cash flows, including funds available under the credit facility and access to capital markets, provide sufficient liquidity to support the Company’s liquidity and financing needs, which are to support working capital requirements, fund capital expenditures and service indebtedness, as well as to finance acquisitions, repurchase shares of our common stock and pay dividends to stockholders, as the Board of Directors deems appropriate.

Our cash flows from operations, borrowing availability and overall liquidity are subject to certain risks and uncertainties, including those described in the section of our Annual Report on Form 10-K for the year-ended December 31, 2018 entitled “Item 1A. Risk Factors.” In addition, we cannot predict whether or when we may enter into acquisitions, joint ventures or dispositions, make any purchases of shares of our common stock under our share repurchase programs, or pay dividends, or what impact any such transactions could have on our results of operations, cash flows or financial condition, whether as a result of the issuance of debt or equity securities, or otherwise.

Long-Term Debt

At September 30, 2019, the Company had aggregate outstanding notes in the amount of $2.2 billion, with varying maturities (the “Notes”). The Notes are unsecured senior obligations of the Company. The following table provides a summary of the Company’s outstanding Notes, including the net carrying value of the Notes, net of underwriting commissions, price discounts and debt issuance costs as of September 30, 2019 and December 31, 2018:

(in millions)

The proceeds from the Notes issued in 2015 and the Notes issued in 2018 were used to pay down outstanding debt and for general corporate purposes.

In September 2019, the Company issued $700 million of unsecured senior notes (“2019 Senior Notes”) in a registered public offering. The 2019 Senior Notes are due in 2029 with a coupon rate of 3.25%. The Company used the proceeds from the 2019 Senior Notes offering to repay in full the Company’s $350 million term loan and to pay down outstanding balances under our revolving credit facility.

Credit Facilities

In September 2019, the Company entered into a second amended and restated $1.25 billion revolving credit facility (the “2019 Credit Agreement”), and borrowings thereunder will be used for general corporate purposes. The terms and conditions of the 2019 Revolving Credit Agreement, including the total commitment amount, essentially remained the same as the previous revolving credit facility, except that the maturity date was extended to September 2024. Interest rates under the 2019 Credit Agreement are variable based on LIBOR at the time of the borrowing and the Company’s long-term credit rating and can range from LIBOR + 0.91% to LIBOR + 1.4%. Borrowings amounting to $165.0 million were rolled over from the prior revolving credit facility into the 2019 Revolving Credit Agreement. This amendment and restatement of the credit agreement was a non-cash transaction for the Company. On September 30, 2019 and December 31, 2018, our outstanding borrowings under this facility were $165.0 million and $320.0 million, respectively. As of September 30, 2019, we were in compliance with all covenants under this facility.

In March 2018, the Company entered into a term loan (the “Term Loan”) and borrowings thereunder were used for general corporate purposes. The Term Loan was amended in August 2018 to increase the borrowings to $525 million and further amended in March 2019 to decrease the borrowings to $350 million and extend the maturity date to March 2020. In September 2019, the Company repaid in full the outstanding balance on the Term Loan with the proceeds from the 2019 Senior Notes. At September 30, 2019 and December 31, 2018, amounts due under the Term Loan were zero and $525.0 million, respectively, which is included within Short term debt in the condensed consolidated balance sheets.

Cash and Seasonality

On September 30, 2019, we had cash and cash equivalents of $336.2 million, of which $277.8 million was held at non-U.S. subsidiaries. We manage our global cash requirements considering (i) available funds among the subsidiaries through which we conduct business, (ii) the geographic location of our liquidity needs, and (iii) the cost to access international cash balances. The repatriation of non-U.S. cash balances from certain subsidiaries could have adverse tax consequences as we may be required to pay and record tax expense on those funds that are repatriated.

Our operating cash flows are significantly impacted by the seasonality of our business. We typically generate most of our operating cash flow in the third and fourth quarters of each year. We use operating cash in the first quarter of the year.

Share Repurchases

In the first nine months of 2019, we repurchased 2.0 million shares of our outstanding common stock under the Company’s share repurchase programs for $100.0 million. As of September 30, 2019, the Company’s total remaining share repurchase authorization under the remaining program was approximately $314 million. The share repurchase program does not obligate the Company to repurchase any specific dollar amount or number of shares and may be suspended or discontinued at any time.

Dividends

In the first nine months of 2019, we paid dividends in the amount of $92.3 million to the Company’s shareholders. Our Board of Directors will continue to evaluate dividend payment opportunities on a quarterly basis. There can be no assurance as to when and if future dividends will be paid, and at what level, because the payment of dividends is dependent on our financial condition, results of operations, cash flows, capital requirements and other factors deemed relevant by our Board of Directors. There are no restrictions on the ability of our subsidiaries to pay dividends or make other distributions to Fortune Brands.

Acquisitions

We periodically review our portfolio of brands and evaluate potential strategic transactions and other capital initiatives to increase shareholder value. In September 2018, we acquired 100% of the membership interests of Fiberon, a leading U.S. manufacturer of outdoor performance materials used in decking, railing and fencing products, for a total purchase price of approximately $470 million, subject to certain post-closing adjustments. The acquisition of Fiberon provided category expansion and product extension opportunities into the outdoor living space for our Doors & Security segment. We financed the transaction using cash on hand and borrowings under our revolving credit and term loan facilities. The results of operations are included in the Doors & Security segment from the date of acquisition.

Cash Flows

Below is a summary of cash flows for the nine months ended September 30, 2019 and 2018.

(In millions)

31

Net cash provided by operating activities was $353.8 million in the nine months ended September 30, 2019, compared to net cash provided by operating activities of $343.7 million in the nine months ended September 30, 2018. The increase in cash provided of $10.1 million was primarily due to increases in net income, increases in accrued taxes related to estimated tax payments and increases in other current liabilities, partially offset by higher working capital requirements.

Net cash used in investing activities was $78.1 million in the nine months ended September 30, 2019, compared to net cash used in investing activities of $568.4 million in the nine months ended September 30, 2018. The decrease in cash used of $490.3 million was primarily due to lower cost of acquisitions of $466.0 million and $24.1 million of lower capital spending.

Net cash used in financing activities was $201.9 million in the nine months ended September 30, 2019, compared to cash provided by financing activities of $307.4 million in the nine months ended September 30, 2018. The increase in cash used of $509.3 million was primarily due to lower net borrowings in 2019 compared to 2018 ($991.9 million decrease) and deferred acquisition payments during 2019 ($19.0 million), partly offset by lower share repurchases in 2019 compared to 2018 ($502.7 million decrease).

Pension Plans

Subsidiaries of Fortune Brands sponsor their respective defined benefit pension plans that are funded by a portfolio of investments maintained within our benefit plan trust. As of December 31, 2018, the fair value of our total pension plan assets was $599.6 million, representing 79% of the accumulated benefit obligation liability. During 2019, we have made pension contributions of $10 million. For the foreseeable future, we believe that we have sufficient liquidity to meet the minimum funding that may be required by the Pension Protection Act of 2006.

Foreign Exchange

We have operations in various foreign countries, principally Canada, China, Mexico, the United Kingdom, France, Australia, Japan and South Africa. Therefore, changes in the value of the related currencies affect our financial statements when translated into U.S. dollars.

RECENTLY ISSUED ACCOUNTING STANDARDS

The adoption of recent accounting standards, as discussed in Note 2, “Recently Issued Accounting Standards,” to our Consolidated Financial Statements, has not had and is not expected to have a significant impact on our revenue, earnings or liquidity.

There have been no material changes in the information provided in the section entitled “Quantitative and Qualitative Disclosures about Market Risk” in our Annual Report on Form 10-K for the year ended December 31, 2018.

(a) Evaluation of Disclosure Controls and Procedures.

The Company’s management has evaluated, with the participation of the Company’s Chief Executive Officer and Chief Financial Officer, the effectiveness of the Company's disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act) as of the end of the period covered by this report. Based on that evaluation, the Chief Executive Officer and the Chief Financial Officer have concluded that the Company's disclosure controls and procedures were effective as of the end of the period covered by this report.

(b) Changes in Internal Control Over Financial Reporting.

There have not been any changes in the Company's internal control over financial reporting that occurred during the fiscal quarter ended September 30, 2019 that have materially affected, or are reasonably likely to materially affect, the Company's internal control over financial reporting.

There have been no material changes to the risk factors previously disclosed in our Annual Report on Form 10-K for the year ended December 31, 2018 in the section entitled “Risk Factors.”