A. O. Smith Corp. reported third quarter earnings from continuing operations of $37 million or $0.79 per share on a 12.2% increase in revenue. The company’s 2012 third quarter performance included a full quarter of Lochinvar’s results, which was acquired in late August last year, as well as a non-cash, pre-tax gain of $6.4 million resulting from a change to the company’s estimate of the Lochinvar earn-out, which is based on revenue targets.
Sales for the three-month period ended Sept. 30 were $462.2 million, more than $50 million higher than third quarter 2011 sales of $412.0 million, driven by incremental Lochinvar sales and strong organic growth in China.
“The factors that have been influencing our business throughout 2012 continued during the third quarter,” Chairman and Chief Executive Officer Paul W. Jones commented. “Our A. O. Smith-branded sales in China grew over 20 percent in the quarter driven by new distribution, market share gains and new products, despite the slowdown in that country’s economy.
“The Lochinvar acquisition continues to meet the high end of our profit expectations,” he observed. “Lochinvar’s new line of CREST high-efficiency, higher BTU input condensing boilers, which was introduced last year, has received excellent market acceptance; and we plan to launch new, larger input models of this product later this year.”
North America segmentThird quarter sales of the North America segment, which includes U. S. and Canadian water heaters and boilers, increased to $335.7 million compared with third quarter 2011 sales of $310.2 million. The company benefited from sales of $60.1 million of Lochinvar products, compared with last year’s partial quarter contribution of $20.8 million. Additionally, higher commercial water heater volumes were more than offset by lower residential water heater and tankless volumes.
Operating earnings from the segment of $50.7 million included a gain of $6.4 million related to the adjustment to the company’s estimate of the Lochinvar earn-out, compared with $30.9 million earned during the third quarter of 2011. Profits from the Lochinvar acquisition contributed $14.9 million to quarterly earnings compared with $3 million last year. In addition, the segment benefited from higher commercial volumes and material costs that were lower than their relatively high levels in 2011. These benefits more than offset the volume decline in residential water heaters. As a result, third quarter operating margin of 15.1% was higher than third quarter 2011 margin of 10%.
Source: A. O. Smith