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A. O. Smith reports second quarter earnings of $0.61 per share
"The second quarter proved to be challenging, largely due to difficult revenue growth comparisons and the overall macroeconomic environment in
"We believe our stable
Second quarter sales for the
Segment earnings of
Rest of World segment
Second quarter sales for the Rest of World segment declined 19 percent to
Segment earnings of
Share repurchases and other items
During the first half of 2019, the Company repurchased approximately 2.8 million shares of common stock at a cost of
Interest costs were higher in the second quarter than a year ago due to the acquisition of Water-Right in early April. For the year, the Company expects interest expense to be approximately
Cash provided by operations was
At the end of June, the Company had cash balances totaling
2019 outlook
"We continue to see prolonged headwinds in the appliance market in China. As a result of weakness in consumer demand and recent communications with key customers in
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," "continue," "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: a further weakening of the Chinese economy and/or a further decline in the growth rate of consumer spending or housing sales in
About
A. O. SMITH CORPORATION |
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Statement of Earnings |
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(condensed consolidated financial statements - |
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dollars in millions, except share data) |
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(unaudited) |
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Three Months Ended |
Six Months Ended |
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June 30, |
June 30, |
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2019 |
2018 |
2019 |
2018 |
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Net sales |
$ |
765.4 |
$ |
833.3 |
$ |
1,513.6 |
$ |
1,621.3 |
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Cost of products sold |
456.7 |
492.3 |
912.1 |
958.8 |
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Gross profit |
308.7 |
341.0 |
601.5 |
662.5 |
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Selling, general and administrative expenses |
178.7 |
197.2 |
363.4 |
390.1 |
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Restructuring and impairment expenses |
- |
- |
- |
6.7 |
||||||||
Interest expense |
3.4 |
2.3 |
5.4 |
4.6 |
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Other income |
(5.6) |
(4.6) |
(11.1) |
(10.4) |
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Earnings before provision for income taxes |
132.2 |
146.1 |
243.8 |
271.5 |
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Provision for income taxes |
30.1 |
31.6 |
52.4 |
58.2 |
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Net earnings |
$ |
102.1 |
$ |
114.5 |
$ |
191.4 |
$ |
213.3 |
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Diluted earnings per share of common stock |
$ |
0.61 |
$ |
0.66 |
$ |
1.14 |
$ |
1.23 |
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Average common shares outstanding (000's omitted) |
168,086 |
172,730 |
168,588 |
173,039 |
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A. O. SMITH CORPORATION |
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Balance Sheet |
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(dollars in millions) |
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(unaudited) |
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June 30, |
December 31, |
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2019 |
2018 |
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ASSETS: |
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Cash and cash equivalents |
$ |
281.6 |
$ |
259.7 |
||
Marketable securities |
296.2 |
385.3 |
||||
Receivables |
634.8 |
647.3 |
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Inventories |
323.1 |
304.7 |
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Other current assets |
60.9 |
41.5 |
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Total Current Assets |
1,596.6 |
1,638.5 |
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Net property, plant and equipment |
553.9 |
540.0 |
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Goodwill and other intangibles |
891.6 |
806.1 |
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Operating lease assets |
48.4 |
- |
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Other assets |
85.1 |
86.9 |
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Total Assets |
$ |
3,175.6 |
$ |
3,071.5 |
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LIABILITIES AND STOCKHOLDERS' EQUITY: |
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Trade payables |
$ |
488.4 |
$ |
543.8 |
||
Accrued payroll and benefits |
55.6 |
79.4 |
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Accrued liabilities |
137.0 |
120.4 |
||||
Product warranties |
42.8 |
41.7 |
||||
Debt due within one year |
6.8 |
- |
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Total Current Liabilities |
730.6 |
785.3 |
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Long-term debt |
351.8 |
221.4 |
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Pension liabilities |
37.0 |
49.4 |
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Operating lease liabilities |
39.9 |
- |
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Other liabilities |
291.2 |
298.4 |
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Stockholders' equity |
1,725.1 |
1,717.0 |
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Total Liabilities and Stockholders' Equity |
$ |
3,175.6 |
$ |
3,071.5 |
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A. O. SMITH CORPORATION |
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Statement of Cash Flows |
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(dollars in millions) |
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(unaudited) |
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Six Months Ended |
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June 30, |
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2019 |
2018 |
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Operating Activities |
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Net earnings |
$ |
191.4 |
$ |
213.3 |
|||
Adjustments to reconcile net earnings to net cash provided by (used in) operating activities: |
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Depreciation & amortization |
38.4 |
35.4 |
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Stock based compensation expense |
10.8 |
7.9 |
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Net changes in operating assets and liabilities: |
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Current assets and liabilities |
(75.9) |
(62.6) |
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Noncurrent assets and liabilities |
(21.0) |
(20.8) |
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Cash Provided by Operating Activities |
143.7 |
173.2 |
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Investing Activities |
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Capital expenditures |
(36.5) |
(39.5) |
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Acquistion |
(107.0) |
- |
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Investment in marketable securities |
(202.3) |
(248.5) |
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Net proceeds from sale of marketable securities |
293.8 |
322.1 |
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Cash (Used in) Provided by Investing Activities |
(52.0) |
34.1 |
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Financing Activities |
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Long-term debt incurred (repaid) |
137.3 |
(162.3) |
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Common stock repurchases |
(132.6) |
(69.7) |
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Net payments from stock option activity |
(0.5) |
(0.1) |
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Dividends paid |
(74.0) |
(61.8) |
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Cash Used In Financing Activities |
(69.8) |
(293.9) |
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Net increase (decrease) in cash and cash equivalents |
21.9 |
(86.6) |
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Cash and cash equivalents - beginning of period |
259.7 |
346.6 |
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Cash and Cash Equivalents - End of Period |
$ |
281.6 |
$ |
260.0 |
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A. O. SMITH CORPORATION |
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Business Segments |
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(dollars in millions) |
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(unaudited) |
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Three Months Ended |
Six Months Ended |
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June 30, |
June 30, |
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2019 |
2018 |
2019 |
2018 |
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Net sales |
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North America |
$ |
524.0 |
$ |
534.2 |
$ |
1,045.8 |
$ |
1,035.9 |
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Rest of World |
249.1 |
308.1 |
481.2 |
601.9 |
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Inter-segment sales |
(7.7) |
(9.0) |
(13.4) |
(16.5) |
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$ |
765.4 |
$ |
833.3 |
$ |
1,513.6 |
$ |
1,621.3 |
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Earnings |
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North America (1) |
$ |
122.9 |
$ |
124.9 |
$ |
238.9 |
$ |
230.9 |
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Rest of World |
22.4 |
34.7 |
34.7 |
70.7 |
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Inter-segment earnings elimination |
(0.1) |
- |
(0.1) |
- |
|||||||||
145.2 |
159.6 |
273.5 |
301.6 |
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Corporate expense |
(9.6) |
(11.2) |
(24.3) |
(25.5) |
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Interest expense |
(3.4) |
(2.3) |
(5.4) |
(4.6) |
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Earnings before income taxes |
132.2 |
146.1 |
243.8 |
271.5 |
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Tax provision |
30.1 |
31.6 |
52.4 |
58.2 |
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Net earnings |
$ |
102.1 |
$ |
114.5 |
$ |
191.4 |
$ |
213.3 |
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(1) |
includes restructuring and impairment expenses of: |
$ |
- |
$ |
- |
$ |
- |
$ |
6.7 |
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A. O. SMITH CORPORATION |
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Adjusted Earnings and Adjusted EPS |
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(dollars in millions, except per share data) |
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(unaudited) |
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The following is a reconciliation of net earnings and diluted EPS to adjusted earnings (non-GAAP) and adjusted EPS (non-GAAP): |
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Three Months Ended |
Six Months Ended |
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June 30, |
June 30, |
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2019 |
2018 |
2019 |
2018 |
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Net Earnings (GAAP) |
$102.1 |
$114.5 |
$191.4 |
$213.3 |
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Restructuring and impairment expenses, before tax |
- |
- |
- |
6.7 |
||||||||
Tax effect of restructuring and impairment expenses |
- |
- |
- |
(1.7) |
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Adjusted Earnings |
$102.1 |
$114.5 |
$191.4 |
$218.3 |
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Diluted EPS (GAAP) |
$ 0.61 |
$ 0.66 |
$ 1.14 |
$ 1.23 |
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Restructuring and impairment expenses per diluted share, before tax |
- |
- |
- |
0.04 |
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Tax effect of restructuring and impairment expenses per diluted share |
- |
- |
- |
(0.01) |
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Adjusted EPS |
$ 0.61 |
$ 0.66 |
$ 1.14 |
$ 1.26 |
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A. O. SMITH CORPORATION |
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Adjusted Segment Earnings |
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(dollars in millions) |
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(unaudited) |
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The following is a reconciliation of reported segment earnings to adjusted segment earnings (non-GAAP): |
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Three Months Ended |
Six Months Ended, |
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June 30, |
June 30, |
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2019 |
2018 |
2019 |
2018 |
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Segment Earnings (GAAP) |
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North America |
$122.9 |
$124.9 |
$238.9 |
$230.9 |
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Rest of World |
22.4 |
34.7 |
34.7 |
70.7 |
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Inter-segment earnings elimination |
(0.1) |
- |
(0.1) |
- |
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Total Segment Earnings (GAAP) |
$145.2 |
$159.6 |
$273.5 |
$301.6 |
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Adjustments: |
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North America restructuring and impairment expenses |
$ - |
$ - |
$ - |
$ 6.7 |
|||
Rest of World |
- |
- |
- |
- |
|||
Inter-segment earnings elimination |
- |
- |
- |
- |
|||
Total Adjustments |
$ - |
$ - |
$ - |
$ 6.7 |
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Adjusted Segment Earnings |
|||||||
North America |
$122.9 |
$124.9 |
$238.9 |
$237.6 |
|||
Rest of World |
22.4 |
34.7 |
34.7 |
70.7 |
|||
Inter-segment earnings elimination |
(0.1) |
- |
(0.1) |
- |
|||
Total Adjusted Segment Earnings |
$145.2 |
$159.6 |
$273.5 |
$308.3 |
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A. O. SMITH CORPORATION |
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2019 EPS Guidance and Adjusted 2018 EPS |
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(unaudited) |
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The following is a reconciliation of diluted EPS to adjusted EPS (non-GAAP) (all items are net of tax): |
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2019 |
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Guidance |
2018 |
|||
Diluted EPS (GAAP) |
$ 2.35 - 2.41 |
$2.58 |
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Restructuring and impairment expenses per diluted share |
- |
0.03 |
||
Adjusted EPS |
$ 2.35 - 2.41 |
$2.61 |
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SOURCE
Media, Mark Petrarca, 414-359-4100, mpetrarca@aosmith.com, or Investor Relations, Patricia K. Ackerman, 414-359-4130, packerman@aosmith.com, both of A. O. Smith Corporation