|
April 17, 2008
A. O. Smith reports first quarter earnings of $.72 per share;
revises 2008 forecast to $2.60 - $2.80 per share
Milwaukee, Wis. — A. O. Smith (NYSE:AOS)
today reported first quarter earnings of $21.9 million or $.72 per
share on sales of $571.4 million. Earnings included an after-tax
charge of approximately $2.7 million or $.09 per share associated
with restructuring in its Electrical Products business. First quarter
sales were one percent lower than last year’s first quarter.
Net earnings increased approximately 12 percent over the $19.5 million
or $.63 per share earned during the same period in 2007. First quarter
2007 earnings included an after-tax restructuring charge of $.7
million or $.02 per share.
"We reported higher earnings from continued strength in foreign
operations, particularly China, as well as productivity and margin
enhancement initiatives, in spite of the economic downturn and sharply
rising costs for steel and copper," Paul W. Jones, chairman
and chief executive officer, commented.
"But we are concerned about the dramatic rise in raw material
costs and the prospect that they may persist for the remainder of
the year. As a result, we will look to our customers to absorb the
impact of these increases,” Jones continued.
“In addition, the slowdown in nonresidential construction
we previously forecast for later in the year has already begun.
Accordingly, we are lowering our 2008 earnings forecast to $2.60
to $2.80 per share from the previous estimate of between $2.70 and
$2.90 per share," Jones said.
Water Products Company
Sales of $352.1 million in the Water Products business were slightly
lower than sales of $355.4 million in the first quarter of last
year. Sales growth in China of more than 40 percent and improved
pricing related to higher steel costs were more than offset by significantly
lower residential unit volumes.
Operating profit of $35.9 million was five percent higher than the
same period in 2007 as a result of the growth in China and cost
reduction initiatives. Operating profit margin increased to 10.2
percent in the first quarter from 9.6 percent last year.
Electrical Products Company
Electrical Products reported sales of $220.5 million, slightly lower
than in the first quarter of 2007. Higher sales in China and improved
pricing related to higher raw material costs were more than offset
by weakness in the residential market segment.
Operating profit increased to $11.1 million compared with $10.2
million in the first quarter of 2007. Pretax restructuring charges
of $3.8 million and $1.2 million were included in the first quarters
of 2008 and 2007, respectively.
The improved operating profit in the first quarter of 2008 was the
result of ongoing margin improvement initiatives including repositioning
savings which were partially offset by lower unit volumes. Operating
profit margin improved to 5.0 percent from 4.6 percent last year.
Outlook
"The domestic housing market remains very weak and its outlook
uncertain. We believe the bottom in the new housing construction
market may not arrive until sometime next year. Furthermore, the
decline in the nonresidential market we previously forecast has
already begun and may be steeper in 2008 than originally projected,"
Jones said.
"More troublesome is the escalation of raw material costs.
Steel prices rose sharply during the first quarter and are projected
to remain at record levels for the remainder of the year,”
Jones continued.
“We have been working diligently to offset these cost increases
with productivity and margin enhancement initiatives. In addition
to those efforts we initiated a voluntary salaried workforce reduction
in March. We believe these initiatives will help mitigate the cost
headwinds. However, because of all the uncertainties in the economic
environment, we have decided to lower our forecast for 2008 to $2.60
to $2.80 per share compared with our previous earnings forecast
of $2.70 to $2.90 per share. This estimate includes restructuring
expense of approximately $.25 per share," Jones concluded.
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,” or words of similar
meaning. These 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. Factors that
could cause such a variance include the following: significant volatility
in raw material prices; competitive pressures on the company’s
businesses; instability in the company’s electric motor and
water products markets; weakening in housing construction; expected
restructuring costs and savings realized; or adverse changes in
general economic conditions.
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 2007 sales of $2.3 billion, is a global
leader applying innovative technology and energy-efficient solutions
to products marketed worldwide. The company is one of the world's
leading manufacturers of residential and commercial water heating
equipment, offering a comprehensive product line featuring the best-known
brands in North America and China. A. O. Smith is also one of the
largest manufacturers of electric motors for residential and commercial
applications in North America.
Statement
of Earnings
Balance Sheet
Statement of Cash Flows
Business
Segments
|
