Welcome!

News Feed Item

A. O. Smith reports record first quarter sales, China up 25 percent

MILWAUKEE, April 22, 2014 /PRNewswire/ -- Water technology company A. O. Smith Corporation (NYSE-AOS) today announced first quarter net earnings of $46.7 million or $.51 per share on record first quarter sales of $552.2 million.  Net earnings were $39.0 million or $.42 per share in the first quarter last year.  Sales in the first quarter grew over eight percent compared with the same period in 2013 primarily due to higher sales in China. 

A. O. Smith Corporation logo

First quarter 2014 adjusted earnings of $49.7 million or $.54 per share increased approximately 11 percent from first quarter 2013 adjusted earnings of $44.7 million or $.48 per share. A. O. Smith is providing non-GAAP measures (adjusted earnings, adjusted earnings per share, and adjusted segment operating earnings) that exclude certain items as well as non-operating pension costs consisting of interest cost, expected return on plan assets, amortization of actuarial gains (losses), and curtailments.  Prior year results are provided on a comparable basis. Reconciliations to measures on a GAAP basis are provided in the financial information included with this press release.

"Our business in China got off to a strong start this year, with sales growing 25 percent over the same period last year," Ajita G. Rajendra, chairman and chief executive officer, observed.  "The team in China has excelled at innovating, manufacturing and marketing products with features and benefits that meet consumers' needs in that region."

North America segment

First quarter sales for the North America segment, which includes U. S. and Canadian water heaters and boilers, increased to $388.5 million compared with first quarter 2013 sales of $378.7 million.  Higher volumes of residential and commercial water heaters in the U. S. were partially offset by lower Canadian water heater volumes and a weaker currency in Canada. 

Segment operating earnings of $55.3 million were higher than the $54.1 million earned in the first quarter last year.  First quarter adjusted segment operating earnings of $59.1 million were essentially flat compared with the same period last year.  Increased sales volume in the U. S. was offset by higher steel prices, lower volumes in Canada and the weaker Canadian dollar.  The adjusted operating margin of 15.2 percent was lower than the 2013 adjusted operating margin of 15.7 percent. 

Rest of World segment

Sales of this segment, which includes China, India and Europe, increased almost 25 percent in the first quarter to $172.8 million.  Sales in China grew 25 percent primarily due to higher volumes and a higher-priced product mix in the region. 

Operating earnings for this segment increased almost 38 percent to $25.1 million compared with $18.2 million earned in the 2013 first quarter.  The impact from increased volumes and favorable product mix in China were partially offset by sales-related increases in selling and advertising costs and higher operating expenses resulting from the opening of a second water heater plant in China in late 2013.  Segment operating margin of 14.5 percent improved from the first quarter 2013 margin of 13.1 percent, primarily due to improvements in profitability in the water treatment business in China.

Share Repurchase and Other Items

During the first quarter, the company repurchased 446,000 shares of common stock at a total cost of $21.3 million.  Approximately 707,000 shares remained on the existing discretionary authority at the end of the quarter.

After the end of the quarter, the company's Board of Directors approved adding 1.5 million shares to the company's existing discretionary share repurchase authority.  Under the Board's share repurchase authorization, the company may repurchase shares through a combination of a 10b5-1 automatic trading plan and discretionary purchases in accordance with applicable securities laws. The number of shares purchased and the timing of the purchases will depend on a number of factors, including share price, trading volume and general market conditions, as well as working capital requirements, general business conditions and other factors, including alternative investment opportunities.

The company's effective income tax rate of 28.8 percent associated with first quarter 2014 adjusted earnings was approximately one percentage point lower than in the year ago period, providing a $.01 per share benefit to first quarter 2014 adjusted earnings per share compared with the same period last year.  The company's GAAP effective income tax rate in the first quarter of 2014 was 28.0 percent compared with its GAAP effective income tax rate of 31.7 percent in the first quarter of 2013. 

Total debt as of March 31, 2014, was $227.0 million, resulting in leverage of 14.5 percent as measured by the ratio of total debt to total capital.  Cash and investments, located largely outside the U. S., totaled $472.5 million at the end of the quarter. 

"We remain committed to growing our business organically as well as with acquisitions, and our pipeline of potential investments is active," Rajendra continued.  "However, we will remain selective and only make acquisitions that we believe will add long-term value for shareholders.  In addition, the 25 percent increase in our quarterly dividend rate in February and the incremental share repurchase authority demonstrate our commitment to return cash to shareholders."

Outlook for 2014

"Residential construction appears to be improving modestly in the U. S.," Rajendra said.  "Any increase in housing construction should complement our strong replacement water heater business.  As a result of higher steel prices, we announced a mid-single digit price increase in North America which will be effective May 1; this is our first price increase in almost two years."

"Our international business, especially in China, has continued to grow as a result of consumer demand for products with more robust features and benefits.  Our investment in product development continues to play a key role in our success in China."

"As a result of improvement in our full year expectations for China and strength in the U. S. water hear industry, we decided to increase our EPS guidance for 2014.  We believe A. O. Smith Corporation will achieve full-year GAAP earnings of between $2.06 and $2.21 per share, and we believe we will achieve full-year adjusted earnings of between $2.20 and $2.35 per share, neither of which includes the potential impact from future acquisitions."

A. O. Smith will broadcast a live conference call at 10:00 a.m. (Eastern Daylight Time) today.  The call can be heard on the company's web site, www.aosmith.com.  An audio replay of the call will be available on the company's web site after the live event.

Forward-looking statements

This release 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," "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 release.  Important factors that could cause actual results to differ materially from these expectations include, among other things, the following: uncertain costs, savings and timeframes associated with the implementation of the new enterprise resource planning system; potential weakening in the high efficiency boiler segment in the U. S.; the ability to execute our acquisition strategy; significant volatility in raw material prices; competitive pressures on the company's businesses; inability to implement pricing actions; instability in the company's replacement markets; strength or duration of any recoveries in U. S. residential or commercial construction; a further slowdown in the Chinese economy; foreign currency fluctuations;  and adverse general economic conditions and capital market deterioration. Forward-looking statements included in this press release are made only as of the date of this release, 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.

A. O. Smith Corporation, with headquarters in Milwaukee, Wis., is a global leader applying innovative technology and energy-efficient solutions to products manufactured and marketed worldwide.  The company, which is celebrating its 140th anniversary in 2014, is one of the world's leading manufacturers of residential and commercial water heating equipment, as well as a manufacturer of water treatment products.

 

 

A. O.  SMITH CORPORATION

(condensed consolidated financial statements -

dollars in millions, except share data)


Statement of Earnings

(unaudited)











Three Months Ended




March 31,




2014



2013








Net sales

$

552.2


$

509.6

Cost of products sold


356.3



330.3

Gross profit


195.9



179.3








Selling, general and administrative expenses


130.9



120.0

Restructuring, impairment and settlement expenses, net 


-



1.7

Interest expense 


1.4



1.5

Other income


(1.3)



(1.0)

Earnings before provision for income taxes


64.9



57.1

Provision for income taxes


18.2



18.1








Net earnings

$

46.7


$

39.0















Diluted earnings per share of common stock

$

0.51


$

0.42









Average common shares outstanding  (000's omitted)


91,966



93,185

 

 

A. O. SMITH CORPORATION

Balance Sheet

(dollars in millions)




(unaudited)






March 31,


December 31,



2014


2013

ASSETS:














Cash and cash equivalents

$

369.8


$

380.7


Marketable securities


102.7



105.3


Receivables


455.6



458.7


Inventories


197.4



193.4


Deferred income taxes


40.0



40.1


Other current assets


32.7



27.4









   Total Current Assets


1,198.2



1,205.6









Net property, plant and equipment


402.3



391.3


Goodwill and other intangibles


751.9



758.3


Other assets


28.8



36.3









Total Assets

$

2,381.2


$

2,391.5















LIABILITIES AND STOCKHOLDERS' EQUITY:














Trade payables

$

341.4


$

387.1


Accrued payroll and benefits


43.1



61.7


Accrued liabilities


91.8



81.2


Product warranties


46.2



46.7


Long-term debt due within one year


14.0



14.2









   Total Current Liabilities


536.5



590.9









Long-term debt


213.0



177.7


Pension liabilities


108.6



110.7


Other liabilities


179.7



183.5


Stockholders' equity


1,343.4



1,328.7









Total Liabilities and Stockholders' Equity

$

2,381.2


$

2,391.5

 

 

A. O.  SMITH CORPORATION

Statement of Cash Flows

(dollars in millions)

(unaudited)













Three Months Ended





March 31,





2014



2013

Operating Activities   







Net earnings

$

46.7


$

39.0


Adjustments to reconcile net earnings







  to net cash provided by (used in) operating activities:








Depreciation & amortization


14.8



14.1



Pension expense


6.6



6.9



Loss on disposal of assets


0.4



-



Net changes in operating assets and liabilities, 








     net of acquisition:








          Current assets and liabilities


(56.7)



(28.9)



          Noncurrent assets and liabilities


0.5



3.0

Cash Provided by Operating Activities - continuing operations   


12.3



34.1

Cash Used in Operating Activities - discontinued operations   


(0.5)



(0.8)

Cash Provided by Operating Activities   


11.8



33.3









Investing Activities  







Capital expenditures


(25.3)



(18.4)


Acquisition


-



(3.6)


Investment in marketable securities


(33.7)



(31.7)


Net proceeds from sale of marketable securities


33.6



83.0

Cash (Used in) Provided by Investing Activities - continuing operations   

(25.4)



29.3









Financing Activities   







Long-term debt incurred (retired)


36.2



(15.5)


Common stock repurchases


(21.3)



(3.5)


Net proceeds from stock option activity


1.6



5.8


Dividends paid


(13.8)



(9.4)

Cash Provided by (Used in) Financing Activities - continuing operations   

2.7



(22.6)










Net (decrease) increase in cash and cash equivalents


(10.9)



40.0


Cash and cash equivalents - beginning of period


380.7



266.9









Cash and Cash Equivalents - End of Period

$

369.8


$

306.9

 

 

A. O.  SMITH CORPORATION

Business Segments

(dollars in millions)

(unaudited)
















Three Months Ended




March 31,




2014


2013


Net sales







North America

$

388.5

$

378.7



Rest of World


172.8


138.3



Inter-segment sales


(9.1)


(7.4)



$

552.2

$

509.6








Earnings







North America (1) (3) (4)

$

55.3

$

54.1



Rest of World


25.1


18.2




80.4


72.3








Corporate expense (2)


(14.1)


(13.7)


Interest expense


(1.4)


(1.5)








Earnings before income taxes


64.9


57.1








Tax provision


18.2


18.1


Net earnings

$

46.7

$

39.0




















(1)

includes non-operating pension costs of:

$

(3.8)

$

(3.6)









(2)

includes non-operating pension costs of:


(1.0)


(1.2)









(3)

includes restructuring and impairment expenses of:


-


(12.7)









(4)

includes settlement income of:


-


11.0

 



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



March 31,



2014


2013






Net Earnings (GAAP)


$46.7


$39.0

  Non-operating pension costs, before tax


4.8


4.8

  Tax effect of non-operating pension costs


(1.8)


(1.8)

  Restructuring and impairment expenses, before tax


-


12.7

  Tax effect of restructuring and impairment expenses


-


(3.2)

  Settlement income, before tax


-


(11.0)

  Tax effect of settlement income


-


4.2

Adjusted Earnings


$49.7


$44.7






Diluted EPS (GAAP)


$0.51


$0.42

  Non-operating pension costs per diluted share, before tax


0.05


0.05

  Tax effect of non-operating pension costs per diluted share


(0.02)


(0.02)

  Restructuring and impairment expenses per diluted share, before tax


-


0.14

  Tax effect of restructuring and impairment expenses per diluted share


-


(0.04)

  Settlement income per diluted share, before tax


-


(0.12)

  Tax effect of settlement income per diluted share


-


0.05

Adjusted EPS


$0.54


$0.48

 

 



 A. O. SMITH CORPORATION 

 Adjusted Segment Operating Earnings 

 (dollars in millions) 

 (unaudited) 


The following is a reconciliation of reported segment operating earnings to adjusted segment operating earnings (non-GAAP):




 Three Months Ended 



 March 31, 



2014


2013

 Segment Operating Earnings (GAAP) 





    North America 


$55.3


$54.1

    Rest of World 


25.1


18.2

 Total Segment Operating Earnings (GAAP) 


$80.4


$72.3






 Adjustments: 





    North America 


$  3.8


$  5.3

    Rest of World 


-


-

 Total Adjustments 


$  3.8


$  5.3






 Adjusted Segment Operating Earnings 





    North America 


$59.1


$59.4

    Rest of World 


25.1


18.2

 Total Adjusted Segment Operating Earnings 


$84.2


$77.6











 Additional Information: 







 Three Months Ended 



 March 31, 



2014


2013

 Adjustments: North America Segment 





    Non-operating pension costs 


$  3.8


$  3.6

    Restructuring and impairment expenses 


-


12.7

    Settlement income 


-


(11.0)

 Total North America Segment Adjustments 


$  3.8


$  5.3

 

 

A. O. SMITH CORPORATION

Adjusted 2014 EPS Guidance and Adjusted 2013 EPS

(unaudited)


The following is a reconciliation of diluted EPS to adjusted EPS (non-GAAP) (all items are net of tax):
















2014






Guidance


2013







Diluted EPS (GAAP)


 $ 2.06 - 2.21 


$1.83


Non-operating pension costs per diluted share


0.14


0.13


Restructuring and impairment expenses per diluted share


-


0.17


Settlement income per diluted share


-


(0.07)

Adjusted EPS


 $ 2.20 - 2.35 


$2.06

Logo - http://photos.prnewswire.com/prnh/20130724/CG52107LOGO

SOURCE A. O. Smith Corporation

More Stories By PR Newswire

Copyright © 2007 PR Newswire. All rights reserved. Republication or redistribution of PRNewswire content is expressly prohibited without the prior written consent of PRNewswire. PRNewswire shall not be liable for any errors or delays in the content, or for any actions taken in reliance thereon.

Latest Stories
Everything run by electricity will eventually be connected to the Internet. Get ahead of the Internet of Things revolution and join Akvelon expert and IoT industry leader, Sergey Grebnov, in his session at @ThingsExpo, for an educational dive into the world of managing your home, workplace and all the devices they contain with the power of machine-based AI and intelligent Bot services for a completely streamlined experience.
Because IoT devices are deployed in mission-critical environments more than ever before, it’s increasingly imperative they be truly smart. IoT sensors simply stockpiling data isn’t useful. IoT must be artificially and naturally intelligent in order to provide more value In his session at @ThingsExpo, John Crupi, Vice President and Engineering System Architect at Greenwave Systems, will discuss how IoT artificial intelligence (AI) can be carried out via edge analytics and machine learning techn...
FinTechs use the cloud to operate at the speed and scale of digital financial activity, but are often hindered by the complexity of managing security and compliance in the cloud. In his session at 20th Cloud Expo, Sesh Murthy, co-founder and CTO of Cloud Raxak, showed how proactive and automated cloud security enables FinTechs to leverage the cloud to achieve their business goals. Through business-driven cloud security, FinTechs can speed time-to-market, diminish risk and costs, maintain continu...
When shopping for a new data processing platform for IoT solutions, many development teams want to be able to test-drive options before making a choice. Yet when evaluating an IoT solution, it’s simply not feasible to do so at scale with physical devices. Building a sensor simulator is the next best choice; however, generating a realistic simulation at very high TPS with ease of configurability is a formidable challenge. When dealing with multiple application or transport protocols, you would be...
Existing Big Data solutions are mainly focused on the discovery and analysis of data. The solutions are scalable and highly available but tedious when swapping in and swapping out occurs in disarray and thrashing takes place. The resolution for thrashing through machine learning algorithms and support nomenclature is through simple techniques. Organizations that have been collecting large customer data are increasingly seeing the need to use the data for swapping in and out and thrashing occurs ...
SYS-CON Events announced today that Datera, that offers a radically new data management architecture, has been named "Exhibitor" of SYS-CON's 21st International Cloud Expo ®, which will take place on Oct 31 - Nov 2, 2017, at the Santa Clara Convention Center in Santa Clara, CA. Datera is transforming the traditional datacenter model through modern cloud simplicity. The technology industry is at another major inflection point. The rise of mobile, the Internet of Things, data storage and Big...
When you focus on a journey from up-close, you look at your own technical and cultural history and how you changed it for the benefit of the customer. This was our starting point: too many integration issues, 13 SWP days and very long cycles. It was evident that in this fast-paced industry we could no longer afford this reality. We needed something that would take us beyond reducing the development lifecycles, CI and Agile methodologies. We made a fundamental difference, even changed our culture...
As many know, the first generation of Cloud Management Platform (CMP) solutions were designed for managing virtual infrastructure (IaaS) and traditional applications. But that’s no longer enough to satisfy evolving and complex business requirements. In his session at 21st Cloud Expo, Scott Davis, Embotics CTO, will explore how next-generation CMPs ensure organizations can manage cloud-native and microservice-based application architectures, while also facilitating agile DevOps methodology. He wi...
SYS-CON Events announced today that GrapeUp, the leading provider of rapid product development at the speed of business, will exhibit at SYS-CON's 21st International Cloud Expo®, which will take place October 31-November 2, 2017, at the Santa Clara Convention Center in Santa Clara, CA. Grape Up is a software company, specialized in cloud native application development and professional services related to Cloud Foundry PaaS. With five expert teams that operate in various sectors of the market acr...
In the enterprise today, connected IoT devices are everywhere – both inside and outside corporate environments. The need to identify, manage, control and secure a quickly growing web of connections and outside devices is making the already challenging task of security even more important, and onerous. In his session at @ThingsExpo, Rich Boyer, CISO and Chief Architect for Security at NTT i3, discussed new ways of thinking and the approaches needed to address the emerging challenges of security i...
Blockchain is a shared, secure record of exchange that establishes trust, accountability and transparency across business networks. Supported by the Linux Foundation's open source, open-standards based Hyperledger Project, Blockchain has the potential to improve regulatory compliance, reduce cost as well as advance trade. Are you curious about how Blockchain is built for business? In her session at 21st Cloud Expo, René Bostic, Technical VP of the IBM Cloud Unit in North America, will discuss th...
In his opening keynote at 20th Cloud Expo, Michael Maximilien, Research Scientist, Architect, and Engineer at IBM, discussed the full potential of the cloud and social data requires artificial intelligence. By mixing Cloud Foundry and the rich set of Watson services, IBM's Bluemix is the best cloud operating system for enterprises today, providing rapid development and deployment of applications that can take advantage of the rich catalog of Watson services to help drive insights from the vast t...
Docker containers have brought great opportunities to shorten the deployment process through continuous integration and the delivery of applications and microservices. This applies equally to enterprise data centers as well as the cloud. In his session at 20th Cloud Expo, Jari Kolehmainen, founder and CTO of Kontena, discussed solutions and benefits of a deeply integrated deployment pipeline using technologies such as container management platforms, Docker containers, and the drone.io Cl tool. H...
SYS-CON Events announced today that CA Technologies has been named "Platinum Sponsor" of SYS-CON's 21st International Cloud Expo®, which will take place October 31-November 2, 2017, at the Santa Clara Convention Center in Santa Clara, CA. CA Technologies helps customers succeed in a future where every business - from apparel to energy - is being rewritten by software. From planning to development to management to security, CA creates software that fuels transformation for companies in the applic...
There is only one world-class Cloud event on earth, and that is Cloud Expo – which returns to Silicon Valley for the 21st Cloud Expo at the Santa Clara Convention Center, October 31 - November 2, 2017. Every Global 2000 enterprise in the world is now integrating cloud computing in some form into its IT development and operations. Midsize and small businesses are also migrating to the cloud in increasing numbers. Companies are each developing their unique mix of cloud technologies and service...